You're reading: Russian Railways reportedly eyeing freight subsidiary of Bulgarian Railways

MOSCOW - Russian Railways (RZD) is interested in the freight subsidiary of Bulgarian State Railways (BDZ), local media reported, citing sources in the transport sector.

Other suitors for the BDZ freight subsidiary, which is expected to be privatized in 2012, include Romania’s Grup Feroviar Roman, France’s SNCF and Turkish State Railways.

The Bulgarian freight company is strategically important for those who want to use the Thessalonica port, a vital gateway for Chinese goods destined for Europe, the media reports said.

BDZ, which is plagued with debt problems, carried out a number of reforms in 2011, including in the area of passenger services and personnel, sparking protests among railroad workers. The company’s freight services, however, are profitable.

However, an official at RZD told Interfax on April 18 that the "issue of a purchase is not on the agenda" of the company, because "railroad assets in Bulgaria have not been offered for sale yet." RZD currently works with BDZ, including within the context of the International Union of Railways and other organizations, he said.

Representatives of RZD said earlier that the company is interested in a number of rail freight operators in Eastern Europe. Owning European carriers would make it possible to attract additional freight to the broad-gauge mainline in Central Europe, RZD vice president Salman Babayev said earlier.

RZD has been negotiating the laying of the line with railways in Slovakia, Austria and Ukraine since 2010. The project calls for the construction of a 450-km rail line with Russian-standard broad gauge (1,520 mm as opposed to the European 1,485 mm) from Kosice (Slovakia) to Bratislava (Slovakia) and Vienna (Austria).

The line would be a continuation of the existing broad-gauge line from Uzhgorod, Ukraine to Kosice, and would make it possible to link Central Europe’s railroad network to the regions of the Trans-Siberian railroad, attracting freight traffic on transit routes to Asia and boosting the competitiveness of railroad transport compared to marine and truck transport, the company expects. The broad-gauge line would also eliminate overloading of break-of-gauge stations, where European lines meet the broad-gauge lines used in countries of the former Soviet Union.

Babayev also said at the time that RZD was interested in a controlling stake in Zeleznicna Spolocnost Cargo Slovakia (ZSSK Cargo), which was spun off from Slovak Railways (unlike in Russia, in Europe companies that carry rail freight own both railcars and locomotives). RZD’s appraisal of this company takes into account the location of industrial assets along waterways, which gives rise to stiff competition from marine and river transport.

Babayev also said that RZD had already made a bid to buy a controlling stake in PKP Cargo, which was spun off from Polish Railways. The Polish side is considering the bid, but there has not been any movement on the issue yet, he said. RZD is also interested in PKP Cargo in terms of transhipments to and from European countries. The company’s privatization was planned in 2011.

"If there is a main artery, it makes sense to bring freight there," Babayev said, referring to a broad-gauge line to Vienna. "These companies (ZSSK Cargo and PKP Cargo) would be the companies that bring additional freight to this major transit line," he said.

The Vienna line, as a transport corridor, could generate 15 million tonnes of freight, and would pay for itself in 12-15 years, Babayev said. The estimated cost of building the broad-gauge line to Vienna was previously reported at 6.3 billion euros.

In the middle of April, it was also reported that RZD had made an offer to buy a stake in a Greek rail carrier.