PKP loan no panacea
By : Robert Wylot
Polish State Railways' (PKP) (http://www.pkp.com.pl) announcement that it had secured another loan to pay off a chunk of its short-term debt may have come as good news to management, but industry observers said last week that the latest liability will only push cash-starved PKP further into the red while ignoring the main issue facing the company: its overdue restructuring.
PKP's decision on July 30 to take another zl. 300 million ($71 million) in loans is a drop in the bucket compared to what it already owes. The company is staggering under the weight of zl. 7.5 billion ($1.8 billion) in outstanding bills but needs another zl. 3.9 billion ($930 million) to restructure itself into four independent entities, which eventually may be privatized. But before strategic investors can be sought for these new companies, the Transportation Ministry first has to stick to its restructuring schedule, which now appears in doubt.
"The restructuring is delayed by at least half a year and the Oct. 1 deadline for the launch (of the new PKP-based companies) will not be kept," said Henryk Klinkiewicz, president of TOR transport consultancy.
"Loans are now taken to repay loans that were taken three months earlier."
PKP's financial woes are getting worse by the day. PKP Spokesman Roman Hajdrowski said the railway will lose another zl. 1.9 billion ($470 million) this year after posting a zl. 2.3-billion ($550 million) loss in 2000. As a result, PKP has had little choice but to take out additional loans to address short-term liabilities instead of plowing cash into the railway's restructuring.
"The law passed in 2000 envisages that restructuring will cost zl. 3.9 billion in 2001-2002," Hajdrowski said.
A quarter of that bill zl. 1.1 billion ($262 million) is earmarked for some 24,000 workers who will lose their jobs by the end of next year.
On the upside, after PKP is restructured some of its units may become profitable. "The cargo and the high-standard passenger units can make a profit, but they (first) must be privatized, which means better management and new capital for investment," Klinkiewicz said. Hajdrowski agreed, saying that the cargo unit is already generating a profit and the high-standard passenger unit breaking even. However, he said, the regional (low-fare) transport sector would likely remain subsidized.
To break the vicious circle of borrowing to pay debts, PKP has to be restructured, Klinkiewicz said. But while the decision to divide the company into separate units was reached in June, progress in forming the new entities has been marginal. Klinkiewicz blamed logistical difficulties and the reluctance of PKP's management and unions to change. "The restructuring must be accelerated," he said. "The process is delayed, while nobody pays attention to the costs of the delay."
