The activities carried out and the financial performance in 2018 suggest that “Latvijas dzelzceļš” has proven its ability to overcome difficult economic times, while achieving favourable operational results and creating a new vision for the future development.
In the beginning of the year, not only the railway and logistics industries, but also the companies operating in ports experienced challenging times due to declining freight volumes caused by the global political situation. However, already in the first few months of the year, transit cargo volumes from foreign countries began to rise, with the volumes continuing to rise until the end of 2018. Compared with the previous year, cargo volumes increased by 12%. Passenger transport volumes also increased. That enabled VAS “Latvijas dzelzceļš” not only to maintain its financial stability but also carry out various activities aimed at the development of the activities of the Group.
The year 2018 also marked a significant milestone in the history of LDz – during this year, the Government’s vision of the development of the railway infrastructure was formalised (on 6 November, the Cabinet approved “The Indicative Railway Infrastructure Development Plan for 2018-2022”), whereas the company approved and for the first time publicly declared its future vision, introducing the new brand of LDz among other things.
Thus, the past year can be summed up by highlighting three key areas where changes have occurred.
According to the Government’s vision laid down in “The Indicative Railway Infrastructure Development Plan” and the related multiannual agreement entered into by and between the Ministry of Transport and LDz, over a period of the five years, the existing infrastructure volume, quality and capacity will be maintained and a number of significant investment projects aimed at improving competitiveness would be implemented.
These documents also provide for the commitment on the part of the Government to ensure the financial equilibrium of the infrastructure manager (LDz) in case the costs of implementing the tasks provided for in the plan exceed the revenue earned by it due to the circumstances prevailing in the market. At the same time, by entering into the multiannual agreement, LDz has committed itself to ensure a stable infrastructure charge to carriers, thereby guaranteeing predictable conditions for market operators, insofar as the growth of transport volumes depends on the charges for the use of rail infrastructure. In other words, in its field of activity, LDz has committed to ensure stable operating conditions as well as a consistent quality of services for the transport and logistics industry.
In 2018, in addition to the said documents which capture the requirements and commitments defined by the Government, the Council of LDz approved the Medium-Term Operational Strategy for 2017-2022 of VAS “Latvijas dzelzceļš”, which sets out the company’s operational directions, development prospects and risk analysis. The strategy served as a basis for the development of the company’s operational development plan. In 2019, much effort is being put into the development of the long-term strategy of “Latvijas dzelzceļš” Group.
The basis for the long-term vision was laid down when developing the concept on the Group's strategic positioning, which is based not only on the analysis of the existing activities and development trends but also on the global and domestic development trends in the transport and tourism sectors. Based on the vision, it has been identified that the development path of LDz would be heading in the direction towards a full-fledged and well-managed group of transport, logistics and technology companies, in which the existing activities – ensuring of the infrastructure and the provision of transport services – are complemented by a dynamic cross-border cooperation aimed at the development of new logistics services as well as technology-based traffic control, safety, logistics and other solutions.
This vision has been boiled down to the new brand and motto of LDz, i.e., which is “Never too far!” Looking from this perspective, LDz has every opportunity to reach the farthest continents of the world, create unprecedented effective and competitive technological solutions, thus ensuring the reputation for Latvia of being the regional logistics excellence centre.
However, achievements arise from hard work, and it is not uncommon that maintaining the achieved results turns out to be more difficult than getting the first success. That is why we believe that continuous active effort, high efficiency and targeted cooperation on external markets are of decisive importance.
Although VAS “Latvijas dzelzceļš” is the infrastructure manager in Latvia, the success of the group of companies managed by it as well as that of the broader transport and logistics industry depends on how convincing and proactive we appear to be outside Latvia. In many places, especially in the Asian region, state-owned companies are treated differently from private-capital market players. Therefore, in 2018, together with the managements of all of the largest ports in Latvia, the Riga Airport and Latvijas Pasts, we continued to take part in the international marketing events held in Russia, Belarus, China, Kazakhstan, Uzbekistan, India, and other countries, presenting the opportunities and benefits offered by the Latvian transit corridor.
Many of these visits do not produce immediate results, and the positive effect thereof would be visible only in the longer term. Sometimes, however, there are exceptions – such as taking part in the Chinese Top500 company forum held in September 2018. During the forum, the strategic cooperation agreement with the Xi'an International Trade and Logistics Park was signed, and two months later, the first container train from this Chinese city arrived at the Riga Port.
The year 2018 has been successful also in regard to the cooperation with closer markets. For example, the Minsk-Riga freight express train that was established in February 2018 had carried 180 train stocks by the end of the year. In addition, in close cooperation with Belarus Railways, an agreement was reached that each journey will last a little over 20 hours rather than the originally planned 28 hours.
The development of this as well as other international projects requires a competitive infrastructure. It should be underlined that the key objective is to build a modern, eco-friendly, all-electric rail infrastructure, gradually replacing diesel-powered trains with electricity-powered locomotives. In 2018, significant steps forward have been taken to implement the Latvian railway network electrification project previously approved by the Cabinet. A favourable opinion has been received from the Central Finance and Contracting Agency, and the consulting body of the European Commission JASPERS IQR, as well as a procurement procedure was started so that when the final decision on the implementation of the project from the European Commission is received, the implementation of the project would be started without any delay.
For the implementation of electrification, ensuring of the long-term competitiveness of Latvian transit corridor is of major importance. The experience of other countries suggests not only the favorable impact on the environment, but also the reduction of transport costs. In addition, many large companies that require transportation of their goods, have laid down the following principle in their strategic documents – given equal opportunities, circumstances and costs to deliver cargoes using various transport corridors, preference should be given to green corridors with reduced harmful emissions, which significantly affects the amount of the overall harmful emissions arising from their activity.
Looking forward: in 2019, we will continue to actively work at improving our business processes, acting both as the infrastructure manager and as the Group as a whole. With the improvement of internal processes, we have identified the challenges related to the strategic development in the field of digitalization, implementation of innovations as well as in the field of modernization of technologies.
And last but not least – I am convinced that the strategic vision developed by VAS “Latvijas dzelzceļš”, the work we have started, the transformation of the implemented business model that is producing great results, increasing our efficiency and the team of professional employees will help “Latvijas dzelzceļš” Group to achieve the set objectives. Moreover, everyone will benefit – each and every employee of the Group, their families and the Latvian economy as a whole!