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MINISTRY SAYS 100 PERCENT RAILWAY COMPANY PRIVATIZATION STILL ON TRACK

Snowstorm delays sale of Cargo Slovakia

A MAJOR snowstorm several days before the New Year not only brought road traffic in Slovakia to a halt - it even held up the privatization sale of a railway company, Cargo Slovakia.

A MAJOR snowstorm several days before the New Year not only brought road traffic in Slovakia to a halt - it even held up the privatization sale of a railway company, Cargo Slovakia.

In agreeing to push back the deadline for the submission of binding offers for Cargo Slovakia from the original January 20 to January 31, the Ministry of Transport acceded to somewhat unorthodox requests by bidders for more time.

"Several bidders asked for the postponement. They specified , time pressure, Christmas and the snowstorm as the reason," Transport Ministry spokesman Tomáš Šarluška told The Slovak Spectator.

Adding to the bidders' problems, President Ivan Gašparovič on January 4 refused to sign an amendment to the Act on Electronic Communications, which needs to be changed to allow the state to sell more than 49 percent in Cargo Slovakia.

Under Slovak law, the bill will become valid after parliament approves it a second time, even without the president's signature. According to Šarluška, this means a minor delay, not a serious hurdle.

The winner of the tender should still be known in the first quarter of 2006.

The amendment was supposed to have changed a law requiring the state to keep majority ownership of Cargo Slovakia. In explaining his decision not to sign it, the president said only that he did not fully agree with the change.

Šarluška said the president's refusal would not prevent the 100 percent privatisation of Cargo Slovakia from going ahead.

"Some time ago, parliament approved a special law on privatization allowing the sale of 100 percent stakes in some companies, Cargo Slovakia among them. However, I don't rule out the possibility that parliament will have to pass the proposed amendment to the Act on Electronic Communications a second time," he said.

The proposed sale of 100 percent of Cargo Slovakia has raised doubts in the past. Some parties of the political opposition believe that the state should keep at least some influence in the firm, since it has a strategic importance for the Slovak economy.

Šarluška argued that a private company fully in the hands of a major international transport player would be more prepared for competition after the Slovak transport market is fully liberalised.

"Liberalisation means that foreign players can be present on the Slovak market under the same conditions as Slovak companies. If Cargo were not privatized, these strong foreign players would eliminate it from the Slovak market, which would have negative consequences such as job losses and so on," the spokesman said.

Šarluška added that neighbouring countries such as the Czech Republic and Hungary have started to consider privatizing their railway cargo transporters according to the Slovak model.

The Transport Ministry has not disclosed the identities of the potential bidders. Based on leaked information, the Slovak press has identified the bidders as: Cargo Central Europe (including Slovakia's Penta Investments, Railworld, and MID Europe Partners); the German Deutsche Bahn AG through its daughter company, Railion; the Austrian ÖBB through daughter company Rail Cargo Austria; the Cargo Cooperation Consortium (the Hungarian MÁV and Slovakia's Slavia Capital); the Polish PKP; and the American Genesee & Wyoming.

The bidders have refused to comment on the tender postponement or the wider privatization process.

"Due to the fact that this is a current issue, we will not comment on it," Thomas Altmann, spokesman for Railion Deutschland, wrote in a statement to The Slovak Spectator.

Andreas Rinofner, spokesman for Rail Cargo Austria, wrote: "The privatization of Cargo Slovakia is confidential, so we can not give out any information."

The Transport Ministry's criteria for assessing the bids submitted gives 85 percent weighting to price and 15 percent to the industry experience of the bidder.

The ministry expects to get about Sk15 to Sk20 billion (€390 to €530 million) from the sale of Cargo Slovakia. The money will be used to pay off the debts of other railway companies such as the passenger railway transporter ŽSSK (Železničná spoločnosť Slovensko) and railway infrastructure administrator Železnice SR (ŽSR).

The debts of these companies amount to about Sk15 billion (€390 million).

Cargo Slovakia was formed on January 1, 2005 by splitting Železničná spoločnosť into two companies. Cargo Slovakia took over its former parent's railway cargo transport business.

Cargo Slovakia reported a loss of Sk178.5 million (€4.7 million) over nine months of last year, compared to an expected loss of Sk117 million (€3.08 million). Company spokesman Maroš Čikovský said the loss was actually about Sk377 million (€9.93 million), as invoices for supplier services were expected to arrive later.

The volume of cargo transported by Cargo Slovakia reached 35.1 million tonnes from January to September 2005, some 1.7 million tonnes behind the business plan and 2 million tonnes less than in the same period in 2004.

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