The Latvian government on Thursday set a maximum cost ceiling of 20 million euros per kilometre for the Rail Baltica railway project, Prime Minister Andris Kulbergs (United List) said following an extraordinary Cabinet meeting.
He explained that, based on a study by independent consultants, the government had decided that costs must not exceed 20 million euros per kilometre. This figure does not include “major structures”, but covers tracks, electrification and signalling needed for “a train to physically run along the main line”.
“These are the costs of the main line; trains are not included,” Kulbergs stressed. According to him, the cost per kilometre had so far ranged from 28 million to 32 million euros.
The Prime Minister said a budget ceiling per kilometre should have been established as early as 2015. Because no such limit was set, the project had entered a “fluid reality”. Changes to technical specifications were allowed, which contributed to the significant increase in the project’s costs, he said.
Kulbergs also said that
while the airBaltic issue is already extremely costly and complicated, Rail Baltica is “even worse”.
Under the existing contractual terms, he said, costs have increased by 450 million euros in order to fulfil commitments made when Connecting Europe Facility (CEF) funding was received.
He added that, with the involvement of a consultant, the Ministry of Transport will have to develop a minimum project scenario by December, at which point the actual cost of the first phase should also become clear.
“We need to understand how, with the minimum possible resources, we can achieve a functional railway,” he said.
Kulbergs also stressed that the government had approved the scope of the first phase, which envisages construction of the main-line embankment for a single track, with the possibility of adding a second track in the future, as well as no more than four regional stations.
He also stressed that the main-line construction
contract signed by Latvia with the E.R.B. Rail JV consortium in December 2023 is highly disadvantageous
because compensation must be paid even when no construction is taking place, while downtime and cost increases continue.
Kulbergs said someone must be held accountable for the contract.
He argued that the biggest problem with the main-line contract was that professionals capable of defending the state’s interests had not been involved.
“We were simply taken for a ride,” the Prime Minister said.
Kulbergs noted that Estonia and Lithuania had divided their main-line contracts into sections and allowed local construction companies to participate, thereby obtaining lower prices through competitive tenders.
Commenting on possible solutions, he said
the choices are difficult and negotiations are under way.
The state must hire professionals to represent its interests and assess the best possible solution, he stressed.
Transport Minister Rihards Kozlovskis (New Unity) said that when the contract was signed, funding was requested at a time when it was not yet clear how much money would actually be needed.
He stressed that there is insufficient justification for Latvia to cover all the obligations stipulated in the contract, as the country considers a number of cost items disproportionate and inconsistent with the actual situation. It is also necessary to assess how these costs arose.
The minister said specialists and consultants would be sought to prepare the project scope at the minimum technical level.
“Based on the target that has been set – 20 million euros per kilometre –
it will be possible to determine fairly precise costs, as well as the timeframe within which it can be implemented,”
Kozlovskis said.
According to the Transport Minister, regardless of future decisions, there is insufficient justification for Latvia to cover all obligations undertaken under the 2023 contract because, in the government’s view, several items are disproportionate and do not correspond to the actual situation.
“And then it must be assessed how they arose – whether this was purely a civil transaction or whether there was some deliberate action that led us to such costs,” Kozlovskis said.
The Prime Minister also said the Baltic states had reached a common position on jointly arriving at the technically minimum solution needed to make the railway functional and “reduce its costs by billions”.
LETA previously reported that in December 2023, Eiropas dzelzceļa līnijas (EDzL) and the E.R.B. Rail JV consortium signed a 3.7 billion euro contract for construction of the Rail Baltica main line.
The E.R.B. Rail JV consortium consists of France’s Eiffage Génie Civil, Poland’s Budimex and Italy’s Rizzani de Eccher.
Main-line construction covers the Rail Baltica route outside the city limits of Riga. The contractor is responsible for building approximately 200 kilometres of Rail Baltica main-line infrastructure, including track substructures and superstructures, earthworks, embankments, railway bridges, roads, underpasses and overpasses, relocation of utility networks, and installation of rails and ballast.
LETA has also reported that the Baltic states have agreed to extend the deadline for the first phase of the Rail Baltica railway project until 2034.
Kulbergs previously said the Baltic states had prepared a final document notifying the European Commission (EC) of their joint agreement on how the Rail Baltica project should proceed.
According to Kulbergs,
the key elements of the notification include a common agreement on the further implementation of the first phase,
as well as a joint position on when and how the project should be completed.
“In Brussels, the Baltic states will emphasise that the next funding envelope must include 10 billion euros in European funding for the three Baltic states if this project is to be implemented at all under the current circumstances,” Kulbergs said.
He stressed that the Baltic states need European Union funding because the project cannot be financed from national budgets at a time when the Baltic countries are allocating substantial resources to strengthening the EU’s external border.
It has also been reported that the first phase of the Rail Baltica main line in Latvia is planned within the existing scope, which envisages establishing a cross-border Rail Baltica connection from Lithuania to the Estonian border, as well as completing construction work at Riga Airport and the southern section of Riga Central Station to enable Rail Baltica to connect with the existing railway network.
The first phase of Rail Baltica could cost 14.3 billion euros across the Baltic states,
including 5.5 billion euros in Latvia. However, after indexation, Latvia’s share could rise to six billion euros.
According to the project’s cost-benefit analysis, the total cost of Rail Baltica across the Baltic states could reach 23.8 billion euros. The previous cost-benefit analysis, conducted in 2017, estimated the total project cost at 5.8 billion euros.
Rail Baltica is intended to establish a European-standard-gauge railway line from Tallinn to the Lithuanian-Polish border, connecting the Baltic states by rail with the rest of Europe.
The project envisages the construction of a new 870-kilometre European-standard-gauge (1,435 mm) railway line across the Baltic states, with trains capable of reaching a maximum speed of 240 kilometres per hour.