Estonia to upgrade rail infrastructure with €45 million EIB loan

• EIB lends €45 million to help build sections of Estonia’s electrified rail network
• Loan to Estonian railway infrastructure manager Eesti Raudtee is to support countrywide upgrades to network
• Project to make passenger and freight services in Estonia faster, cleaner and safer

The European Investment Bank (EIB) and Estonian national railway infrastructure manager AS Eesti Raudtee have signed a €45 million loan agreement to accelerate the country’s transition to sustainable transport. The company will use the EIB financing to upgrade the rail network and the associated infrastructure, increasing the share of the country’s rail network powered by electricity at the expense of existing diesel traction. This shift will help reduce greenhouse gas emissions that contribute to climate change.

The planned works, which cover key sections of Estonia’s rail network, will also improve the safety and punctuality of train services and develop a transport management system that complies with European Union requirements. The upgrades are due to be completed by 2030.

“This investment is a strategic boost for Estonia’s rail infrastructure, making transport faster, cleaner, safer and more efficient,” said EIB Vice-President Karl Nehammer, who took office on 1 September 2025 and is responsible for operations in Estonia. “The loan agreement with Eesti Raudtee reflects how EIB financing drives climate action, strengthens regional connectivity and supports long-term resilience in cohesion regions.”

The project will improve rail connectivity for passengers across Estonia and green freight transport in the country. In addition to reducing emissions and bolstering safety, it will cut noise pollution.

The project is part of a key EU transport route known as the North Sea–Baltic TEN-T Corridor. It supports regional development and EU climate goals.

“We have launched a very ambitious investment plan until 2030, which will take the quality and safety of our railways to a new level and help make rail transport even more environmentally friendly,” said Kaido Zimmermann, chairman of the Management Board of Eesti Raudtee. “The EIB has been a good partner in achieving this goal and the new loan agreement will help us implement these plans even better.”

The electrification of the final section near Tallinn — supported by the EIB loan — will enable Eesti Raudtee to complete its national electrification programme. Once finished, a total of 600 kilometres of railway, representing 50% of the network, will be electrified.

The EIB financing complements EU and national grants and offers flexible terms to accelerate implementation. It builds on a €113.5 million EIB loan signed in 2020, bringing the bank’s total support for Estonia’s railway modernisation to nearly €160 million.

Background information

The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. Built around eight core priorities, the EIB finances investments that contribute to EU policy objectives by bolstering climate action and the environment, digitalisation and technological innovation, security and defence, cohesion, agriculture and the bioeconomy, social infrastructure, the capital markets union and a stronger Europe in a more peaceful and prosperous world.  The EIB Group, which also includes the European Investment Fund (EIF), signed nearly €89 billion in new financing for over 900 high-impact projects in 2024, boosting Europe’s competitiveness and security.   

Over the past five years, the EIB has invested around €1.4 billion in Estonia, supporting transport, infrastructure, and technology. In 2024, nearly €500 million was committed to new projects, including green tech startup UP Catalyst and government loans. This year, the Bank backed clean energy again with support for Sunly’s Risti solar park.

Eesti Raudtee (Estonian Railways Ltd) is a state-owned company operating since 1870 that ensures smooth operation, management and maintenance of the railway infrastructure and efficient traffic management. As the owner of the railway infrastructure, Estonian Railways Ltd holds a central role in functioning of the transit sector and responsibility for maintaining a functioning competitive situation both in passenger and cargo transport. The company develops and maintains 1186 km of railroad, 61 stations and 135 railway platforms.