Latvia’s contract for the construction of the mainline section of the Rail Baltica railway project with the consortium E.R.B. Rail JV is exceptionally expensive, according to Matīss Paegle, Chairman of the Supervisory Board of the Baltic joint venture RB Rail.
Paegle explained that RB Rail has compared the unit costs of railway embankment construction contracts in Latvia, Lithuania, and Estonia to obtain directly comparable figures.
According to Paegle, the cost per kilometre for the Misa–Latvia/Lithuania Border section (DS4) in Latvia is approximately 16.3 million euros, which is 2.3 times higher than the normalized Estonian figure and around 66% higher than in Lithuania.
“Clearly, the unit prices in Latvia’s contract for crushed stone, soil, and other basic construction materials are extremely high, and the state cannot afford them,” Paegle said.
He stressed that the government now faces a strategic decision on how to proceed.
The first option would be to redesign the southern section of the mainline project, a process that would take approximately one and a half years. While redesigning would cost around 8 million euros, it could potentially generate savings of between 100 million euros and 200 million euros.
“However, if a new procurement process is launched two or three years from now, there is no guarantee that inflation will not result in even higher bids,” Paegle cautioned.
The second option, in his view, would be to sit down with the contractor, E.R.B. Rail JV, and seek explanations as to why materials such as gravel, crushed stone, and other key inputs are priced so disproportionately high compared with neighbouring countries. He argued that negotiations should aim to achieve reasonable reductions in unit prices, potentially generating similar or even greater savings.
According to an information report from the Ministry of Transport (MoT), which the government reviewed on the 26th of May,
Latvia currently has 603 million euros available for mainline construction works from a total funding envelope
of just under 700 million euros, which also includes construction supervision and project management costs.
With the currently available financing, approximately 52.66 kilometres of railway embankment can be constructed. This translates into an average cost of around 11.45 million euros per kilometre for the embankment alone, excluding tracks, signalling systems, and stations.
The report states that since July 2025, the Minister of Transport has been directly involved in negotiations with the mainline contractor ERB, pressing for cost reductions and faster project implementation. As a result, works worth 110 million euros were authorised in 2025, while Eiropas dzelzceļa līnijas (EDzL) has reported that between 125 million euros and 175 million euros worth of works are expected to be authorised in 2026.
The ministry further noted that on the 20th of May this year, ERB presented the results of its adaptation and optimisation efforts to the Minister of Transport. Under the current contract unit prices, construction costs for the DS4 section amount to 686 million euros, including 487 million euros available through the Connecting Europe Facility (CEF) programme.
Calculations completed during the first stage of the adaptation process indicate costs of 465 million euros,
equivalent to 16.3 million euros per kilometre.
The Ministry of Transport continues to work on refining cost-per-kilometre calculations, adapting the project to available financing, and ensuring compliance with the conditions attached to CEF funding agreements.
As previously reported, EDzL and the consortium E.R.B. Rail JV signed the contract for the construction of the Rail Baltica mainline in December 2023.
The consortium consists of France’s Eiffage Génie Civil, Poland’s Budimex, and Italy’s Rizzani de Eccher, which won the international tender.
The mainline construction works cover the Rail Baltica route outside the city limits of Riga. The contractor is responsible for delivering approximately 200 kilometres of railway infrastructure, including earthworks, embankments, railway bridges, roads, underpasses, overpasses, utility relocations, and the installation of tracks and ballast.
It has also been reported that
the first phase of Rail Baltica could cost as much as 14.3 billion euros across the Baltic states,
including 5.5 billion euros in Latvia alone. Following indexation adjustments, Latvia’s share could rise to approximately 6 billion euros.
According to the latest cost-benefit analysis, the total cost of the Rail Baltica project across the Baltics could reach 23.8 billion euros. In comparison, the 2017 cost-benefit analysis estimated the entire project would cost 5.8 billion euros.
The Rail Baltica project aims to create a European-standard railway corridor connecting Tallinn with the Lithuanian–Polish border, thereby linking the Baltic states directly to the wider European rail network. The project includes the construction of a new 870-kilometre railway line using the European standard gauge of 1,435 mm, designed for trains operating at speeds of up to 240 kilometres per hour.
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