DEC sale unlikely to be slowed despite potential problems for PKP
Analysts and parliamentarians said they doubted the Treasury Ministry would halt the privatization of fuel distributor Dyrekcja Eksploatacji Cystern (DEC) despite concerns over the possible negative impact a sale could have on Polish State Railways (PKP).
The Transport Ministry last week reportedly requested the Treasury Ministry to pull the plug on DEC's privatization for the time being, saying it would harm attempts to move forward with PKP's privatization. The Treasury Ministry has not answered the request and no officials at either ministry were available for comment by press time.
"PKP agrees with the position of the Transport Ministry," said Roman Hajdrowski, press secretary for the railroad's management board. "It (DEC's privatization) can complicate the privatization of PKP."
DEC currently owns approximately 11,500 railway cars used for fuel transportation and distributes up to 96% of Poland's fuel supplies via rail. Privatization of the leasing company began in late 1999. While all parties involved in the sale have been tight-lipped, a source close to the railroad industry, who asked not to be identified, said the process was about 75% complete. Other sources have said the outfit is worth roughly $50 million-$100 million.
PKP is particularly threatened by DEC's plan to expand its transportation operations. Such a move could cut into PKP's freight traffic, a business that now serves as a lifeline for the ailing railroad.
PKP lost more than zl. 2.28 billion ($583.3 million) in 1999, an increase of 66% from 1998. Currently, the railroad's debts are approaching some zl. 7 billion ($1.7 billion), said former Transport Minister Boguslaw Liberadzki, a deputy with Democratic Left Alliance (SLD) and member of Parliament's Transportation and European Integration Committee.
"Privatization of DEC, with inflow of capital, new technology, new ideas, can create some problems for PKP," said Roman Bukowski, a member of PKP's management board responsible for restructuring and privatizing railroad assets.
He noted, however, that the issue of DEC's privatization had not progressed beyond initial talks at board meetings. He also said neither the railway or the Transport Ministry had plans to take action. "And for sure we have no hidden plans concerning such practices," Bukowski said.
The source confirmed, however, that any wavering on DEC's privatization would send a negative signal to investors. The source also noted that DEC is not necessarily a threat to PKP and that the railway should be able to handle the competition if it restructures its own operations.
Parliamentarians doubted DEC's sale would be affected. "It would be against privatization as a concept," Liberadzki said. He added that the Transport Ministry should have considered how deeply DEC could cut into PKP's business when it decided in 1998 to grant concessions for independent rail operators to use the railway's tracks.
"For a small amount of money (operators were able to) buy an entire rail market," Liberadzki said.
The concession agreements make no distinction as to what types of cargo independent operators can move over rail lines. For that reason, nothing stands in the way of DEC developing a freight railway.
Liberadzki pointed out, though, that additional operators could be a boon to PKP, as anybody using the rails has to pay the railway access charges. He said the ministry should initially attempt to regulate what types of cargo DEC or another operator moves to try to prevent PKP from being unduly harmed. "Two to three years are necessary," he said. "Competition could fill up gradually".
The bill on restructuring, commercializing and privatizing PKP has been with the Sejm's Transportation Committee for several months. There is no clear timeline for when the relatively unpopular bill will make its way to the floor and, if passed, to President Aleksander Kwasniewski's desk.
"This bill is orphaned," Liberadzki said.
A number of companies have already expressed interest in PKP's privatization, including Wisconsin Central, France's SNCF, Germany's Deutsche Bahn and Rail Polska. Finnish Railway (VR) also expressed interest but later withdrew, Liberadzki said.
