Romet.Kreek@aripaev.ee

In the last year, ESTEVE Terminal operating in Paldiski South Harbour increased its turnover by 56 % and profit by more than four times. The Estonian owners expect similar rapid development in this year as well.

ESTEVE Terminal uses more than half of the total territory of Paldiski South Harbour. The lines of business of the company owned by Estonian capital include loading and unloading ships, storage and restacking of goods, customs warehouse services, ships’ agency and other services. While the neighbouring Alexela Terminal processes only oil products, ESTEVE can handle all other types of cargo – from timber and peat to large agricultural equipment. A good indicator of their efficiency is the rate of return on operating assets, which was more than 68 % in the last year!

According to Üllar Raad, Chairman of the Management Board of ESTEVE, they started to provide stevedore services in Paldiski South Harbour in 1997. Back then, the main cargo articles included scrap metal from EMEX (currently called Kuusakoski and still operating in Paldiski – editor) and timber from various forestry companies. An important step was made in 2002 with the changes in the circle of owners of the company and introduction of cargo handling facilities for ro-ro ships. Mann Lines, a company operating the Bremenhaven–Harwich–Cuxhawn–Paldiski–Turu line, significantly increased and diversified the cargo flow passing through the harbour. A new closed warehouse was built and additional people were employed for that purpose. The volume of goods has risen from 460,000 tons in 2003 to 870,000 tons in the last year, while as much as 1.2 million tons of different products are expected in the current year. Investments have been made in both the warehouses and technology. The extent of investments in the last year was nearly 20m kroons.

Scrap metal is the largest cargo article by some margin; it may come in a shredded, pressed or cut-to-size form. According to Raad, Paldiski is certainly the largest scrap metal transhipment port in Estonia, but maybe even in all three Baltic countries. Most of the scrap metal originates from Estonia, but the relative importance of transit from Russia and Finland is growing fast. While the Russian scrap metal arrives traditionally by the railway, the cargo from Finland is transported to Paldiski on small ships. It is then reloaded here on large ships that can carry up to 45,000 tons and then forwarded to China, Korea and elsewhere. ‘This is a sign that the speed and efficiency of our loading is on par with the Finnish ports,’ said Raad. Three portal cranes and five mobile cranes are used for unloading and loading the ships. In addition, the company has a number of smaller loaders and hoists. A single large mobile crane alone costs about 10m kroons.

The timber processed comes mainly from Estonia’s own export; the importance of Russian transit has decreased in recent years. Other types of cargo to be loaded include peat, gravel and other bulk goods. Module houses shipped mainly to Norway by AS Kodumaja constitute another noteworthy export article. The newest line of activity for ESTEVE is the loading of large and heavy equipment heading for CIS countries. Securing combine harvesters or tanks on rail carriages is a complicated process and is done nowhere else in Estonia in such great quantities. Previously, these items were transported through Finland. ‘We have managed to get hold of a fairly large portion of this cargo group,’ said Raad.

An important article, which has gradually gained importance in the activities of ESTEVE, is passenger cars. More than 15,000 cars were processed in Paldiski in the last year, but according to Üllar Raad, their capacity would enable to receive and dispatch up to 40,000 cars in a year. We are currently in negotiations with potential partners to build a car terminal. The future plans envisage Paldiski South Harbour as the largest car transhipment centre in the Baltic countries. This should then provide competition to the Hanko port in Finland that currently processes the majority of passenger cars coming to the Baltic countries.

According to Raad, ESTEVE is not yet prepared to list its shares on the stock exchange and there have been no discussions on this subject with the owners. ‘Firstly, our company would not be very attractive to many people and, secondly, there are always some risks in our work. A good deal of our business depends on Russia and an investor coming from another branch of activity might not dare to put his money in this business.’ As an example, Raad cites a case from five years ago when Russia imposed a ban on the transport of scrap metal through Estonia. This meant an immediate setback for the local transit. The ban was lifted a year ago and the volume of scrap metal processed in Paldiski has increased considerably. As ESTEVE has been developing rapidly, the company has not been experiencing any financing difficulties. ‘We have managed so far and hopefully will continue to do so in the future,’ said Raad.

In the assessment of Toivo Promm, Chairman of the Management Board of KS Stivideerimise AS, a stevedore company operating in Paljassaare Harbour, Paldiski Harbour is competitive and has a great potential for development. He believes that the management of ESTEVE is highly experienced and very professional. ‘They have been operating at Muuga and in the Old City Harbour and they know their business,’ he added.

Hallar Pärss, Chairman of the Management Board of AS Stivis, a company operating in Muuga Harbour, said that Estonian port operators have divided most of the cargo groups between them to prevent internal competition. The real competitors for cargo flows are the Latvians, Lithuanians, Finns and Russians. According to Pärss, Stivis has good working relations with the managers of ESTEVE. He did not want to comment on the activities of the competitors bud said that much will depend on how the Port of Tallinn decides to develop its infrastructure, as well as the tariff policies of the port and railway companies. ‘Compared with Muuga, Paldiski is still in a stage of development and it also has good conditions for navigation,’ he said. However, Pärss believes that much of the success of stevedore companies depends on external factors and situation in neighbouring countries. ‘It is a difficult line of business where you can do only very little to influence the results,’ he said.

Romet Kreek

Analyst

I have to admit I had never heard anything about ESTEVE Terminal. However, looking at the growth of the company, I at least would be interested in ESTEVE – why would one not want to belong to the group of owners of a fast-developing company?

The only question would be, whether ESTEVE would be included in the main list or I-list according to the Listing Rules of the Tallinn Stock Exchange. This would largely depend on the length of the good growth period of the company and maintaining the return on equity. These indicators are used to calculate the market value of a company. Inclusion in I-list requires that at least 15 % of the shares should be held by investors who belong to public and the respective requirement for the main list is 25 % of the shares.