City to sell off public transport holdings
Warsaw city officials are planning intensive restructuring of public transportation in a bid to control spending and improve efficiency in the $175 million transport network and find cash for more than $650 million in much-needed improvements, officials said.
The plan is two-fold and will involve turning transport agencies into commercial companies in the run up to share sales and outsourcing operations to make current operations more efficient, officials said.
Currently the city runs public transport services through agencies including the City Transport Board (ZTM), which oversees operations, the tram system called Tramwaje Warszawskie and the Municipal Bus Company (MZA). But city transport costs $175 million a year to operate, of which ticket sales cover only 57% of operating costs. That means the city has to come up with $75 million a year just to make the current system run.
To control those costs and find new capital, the city is looking at selling up to 67% of shares in transport agencies to private investors, officials said. The first to go in part or full is likely the bus company, officials said.
"We expect that at least in the second part of next year," said Warsaw Vice-Mayor Olgierd Dziekonski, about the sale of MZA bus services. Dziekonski oversees city transport issues.
The grand plan calls for sale of shares in bus, tram and rail services to strategic investors with an additional tranche of shares in the network sold over-the-counter (OTC) to Warsaw residents. The city will maintain a controlling 33% stake in the near term to maintain strategic control of city transport, officials said.
"The general intention at least for the first few years is to maintain the 33% stake" as part of ZTM, Dziekonski said, adding that ZTM would eventually considering selling out its stake.
The city is looking to modernize its network, which transports 900,000 persons or 57% of the city's population. But officials said the upgrade would cost $650 million, or almost nine times its current outlay for keeping the system running.
"The rolling stock is very typical for Central European cities," Dziekonski said, and the transport network is "in a difficult situation."
A major portion of investment needs involves completion of the Warsaw Metro, where zl. 1.9 billion ($475 million) is necessary to lay rails and open stations on the northern extension of the underground as well as replace the current stock of Russian-built, outdated and maintenance intensive metro cars. Privatization of the single-line Warsaw Metro is also envisioned and will be discussed in more detail at a later date, officials said. In addition, the city is currently scouting investor interest in construction and financing of a second, 24-kilometer metro line run from Bemowo in northwestern Warsaw, through the city center to Praga and the residential district of Tarchomin.
"The idea is to use as many private funds as possible," said Stefan Awietjan, chief specialist for Warsaw Metro commercialization. He did not exclude the possibility of public financing in the metro project. Factors such as the time frame and costs are currently unknown.
City officials said they still needed to resolve issues concerning assets for sale. "It's a subject for discussion, but probably it will cover all the assets," Dziekonski said. Concerning bus lines, this would mean city garages and buses. Bus stops, however, will remain city property.
Privatization of city transport is nothing new in Poland and abroad. But it's the first time it's underway on such a wide scale, according to Kazimierz Kulig, ZTM director. Other European cities, however, have moved in this direction, such as in London, which is in the process of semi-privatizing its metro system, and Stockholm, Sweden, which privatized its bus network in the mid '90s and last July sold 60% of its metro operations to CGEA Transport.
As a pilot project in Warsaw transport restructuring, the city was scheduled last week to launch a tender to operate several bus lines within Warsaw for up to 50 new buses. The tender also calls for about zl. 20 million ($4.75 million) in investments, officials said. CGEA is interested, the French firm said. A decision on the operator is expected before year's end.
After privatization of the city's bus network, officials will move to privatize the city's 120-kilometer tramway operation, likely not before 2001, officials said. Difficulties lie in how, if at all, to transfer ownership in fixed assets such as tracks and signals, officials said.
"The issue has to be deliberated very carefully," Dziekonski said. And questions, such as whether to sell parts of the tram infrastructure at a later date, remain open. Unions have expressed concern over privatization of the network, with worry primarily about job security and conditions, something Dziekonski called "quite logical."
"They understand that some reduction of staff is necessary," but they would like to see it done through methods such as attrition, Dziekonski said. Approximately 10,000 people work for ZTM. Over the past two years, about 1,000 people have left the company and were not replaced.
