Bulgaria Hopes for BGN 100 M from Railway Freight Services Sale

Business | December 23, 2011, Friday // 17:52
Bulgaria: Bulgaria Hopes for BGN 100 M from Railway Freight Services Sale Bulgaria's Transport Minister Moskovski claims the only way out of the crisis in BDZ is to sell its frieght division. Photo by BGNES

Bulgaria's government hopes to make over BGN 100 M from the sale of BDZ Freight Services, the cargo subdivision of the troubled Bulgarian State Railways (BDZ), according to Transport Minister Ivaylo Moskovski.

Moskovski has recently engineered and defended the plan to sell BDZ Freight Services, whose assets are worth BGN 300-320 M, in order to raise cash as a guarantee for an expected World Bank loan of BGN 460 M for the Bulgarian state railway company. BDZ's total debts amounted to BGN 771 M as of October 2011.

Moskovski refuted Friday the allegations that the conditions set by the Bulgarian Privatization and Post-privatization Control Agency favor certain types of candidates.

"We want the buyer to be financially stable and to have a long-term strategy for the development of the companies. We have set clear criteria. I don't think that the smaller investors are in an unfavorable position because they can bids in the form of a consortium," the Transport Minister told the Sega daily.

"The doubts regarding the privatization procedure are that our condition have left the door open only for the Chinese, the Russians, and the Turks, which is not the case. I have personally insisted that the criteria admit financially stable and strategic investors," he elaborated.

Asked why the government is to sell BDZ Freight Services even when it thinks that the company can be profitable, Moskovski has defended the sale as the only way out to reduce the debts of BDZ.

"The company has registered losses, and it could be profitable in the long run if it is managed in a certain way, and receives investments. Privatization is the only way to pour "living" money into the system of the railways. If we sign the loan with the World Bank, BDZ itself will be supposed to provide co-funding of its own amounting to 50% of the credit. That's why the state has an interest in a strong strategic investor. This operator will have to pay infrastructure fees. We care about the fees because the infrastructure is state-owned," the Transport Minister explained.

In his words, the sale of BDZ Freight Services will allow the management of the state company to focus on making BDZ Passenger Services sound, and on purchase new trains with EU funding.

Moskovski revealed that no bidders have formally declared interest into buying BDZ Freight Services yet.

"During our talks, ambassadors have mentioned that local companies are interested. Regardless of the crisis, Bulgaria has 5 transport corridors going through it. Its geographical location makes it attractive," he said.

Moskoski comments about the sale of BDZ Freight Services come after earlier this week the syndicates wrapped up a general strike in the Bulgarian State Railways that was caused by the government plan to lay off 2 000 out of some 13 000 workers at the state company, and to terminate the operation of 150 trains.

Even though BDZ's debts were estimated to total BGN 771 M as of early October 2011, Bulgarian syndicates have been adamantly opposed to the sale of BDZ Freight Services because - even though it has been registering losses the past few years - the company is supposed to have the potential to be highly profitable, with Bulgarian governments usually milking its revenues to sustain BDZ Passenger Services, which has been registering major losses for the past 20 years.

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Tags: Ivaylo Moskovski, Transport Minister, Bulgarian State Railways, Bulgarian Railways Company, BDZ, Bulgarian State Railroad Company, BDZ Freight Services, freight transportation, freight, privatizaiton, Privatization and post-Privatization Control Agency, Privatization Agency, syndicates, railway workers, Strike
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