The cost of constructing the main Rail Baltica line in Latvia has turned out to be significantly higher than in Lithuania and Estonia. The company RB Rail believes that the government will have to either revise the project or negotiate lower prices from the contractor.
The management of the Rail Baltica joint venture openly stated that the contract signed by Latvia for the construction of the main railway line is too expensive. According to the chairman of the RB Rail board, Matis Paegle, a comparison conducted revealed a significant gap between construction costs in the Baltic countries.
On the section from Misa to the Lithuanian border, the cost of one kilometer of the track in Latvia is estimated at approximately 10.3 million euros. This is more than double the comparable figure in Estonia and about two-thirds higher than in Lithuania.
According to Paegle, one of the reasons is the unusually high prices for key construction materials — gravel, soil, and other components included in the contract. In fact, this concerns not the entire railway with tracks and stations, but only the construction of the embankment and basic infrastructure.
What is important to understand is that with the current funding, Latvia can only build about 53 kilometers of embankment. The cost of one kilometer without tracks, signaling, and stations already reaches approximately 11.5 million euros.
RB Rail sees two possible ways to address the issue.
The first option is to redesign the southern section of the route. This process would take about two and a half years and cost approximately 8 million euros, but the potential savings could amount to between 100 and 200 million euros. However, there are no guarantees. Over the years, construction costs may rise to the point that part of the potential savings will be lost due to inflation.
The second option is to try to negotiate with the contractor to revise the prices. According to Paegle, it is necessary to find out why the cost of materials in Latvia differs so much from neighboring countries and to achieve more favorable conditions.
For now, the government is focusing on negotiations.
The Ministry of Transport reports that since last year it has been working to reduce costs and adapt the project to real financial capabilities. After adjusting the project, the estimated cost of the Misa — Lithuanian border section decreased from 686 to 465 million euros.
However, even after this, the cost remains one of the highest in the region.
The story of the rising costs of Rail Baltica has long gone beyond individual contracts. While in 2017 the entire project was estimated at about 5.8 billion euros, the total cost now could reach almost 24 billion euros.
Latvia accounts for about 5.5 billion euros of this amount, and with indexing, expenses could approach 6 billion.
Despite the rising costs, the project remains one of the largest infrastructure projects in the history of the Baltics. The new European gauge railway line is expected to connect Tallinn, Riga, Kaunas, and the Polish border, ensuring faster communication between the Baltic countries and the rest of Europe.
In the coming months, one of the key questions will be not so much the construction of Rail Baltica, but finding a way to keep the project's cost within the limits of available funding.
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