Treasury seeks investor for distributor
Privatization of oil distributor Dyrekcja Eksploatacji Cystern (DEC) may happen by late May and could allow the company to break new ground in the freight industry by diversifying its client base beyond fuel producers.
DEC, owned by the state holding company Nafta Polska, distributes 96% of Poland's oil supplies via rail and owns 11,500 of Poland's 20,000 tanker cars. One condition of the sale stipulates that DEC must act to become a player in shipping cargo other than fuel. The distributor is at present almost totally dependent on its primary client, oil monopolist Polski Koncern Naftowy (PKN).
The government's interest in DEC's diversification seems driven by two considerations: the success of DEC itself, and perhaps more importantly, livening up a non-competitive situation in the rail-shipping business. DEC could diversify into areas corresponding to the company's core competence, perhaps moving chemical and agricultural goods, as well as hazardous materials, which require special conditions, such as heating or cooling. "This business (DEC) is a very good platform" to expand into moving other types of cargo, said Andrzej Szostak, general manager of RCF Polska, a subsidiary of investment bank NM Rothschild and Sons, which is acting on behalf of Nafta Polska.
Analysts noted that with state pipeline monopolist Przedsiebiorstwo Eksploatacji Rurociagow Naftowych (PERN) expanding its network, rail transport of oil will decline. "I think it is essential to diversify," Szostak said. But he also noted that pipelines do not reach every part of the country and that an adequate highway system remains an elusive goal. "The rail sector will remain, for a number of years, a vital element of the transportation system," Szostak said.
Last Monday, some 11 companies, at least two of which were Polish, submitted letters of interest to become investors in DEC. Among the potential investors were foreign rail operators such as Rail Polska, and leasing and logistics companies with some experience in railroads. But Szostak would not confirm whether any oil companies were involved. The state now had until today to make a decision on whom to invite to submit preliminary offers. Szostak would not comment on DEC's book value.
While individual investors and consortia may bid for any portion of the rail distributor, Szostak said, the government has yet to decide how much it will sell. The Treasury Ministry may even transfer 30% of DEC to state refinery and retailer Rafineria Gdanska. (see related story below)
As the domestic oil sector becomes more competitive, and with Polish membership in the European Union (EU), DEC's attractiveness to foreign oil companies will increase. Around 30% of Polish fuel comes from foreign refineries. But the ministry wants a DEC independent of the fuel industry and said it would not sell to PKN, Rafineria Gdanska or their competitors, Mierzwa said.
For DEC and other firms to evolve into a competitive rail freight industry, Poland's railroad monopoly must be forced to play fair. Polish State Railways (PKP) not only owns all the rails, but moves all the freight including fuel in DEC tanker cars, and would-be competitors are thus held hostage. This will continue until Parliament passes a law restructuring, commercializing and privatizing PKP and separating infrastructure from operations.
In anticipation of such reform, more than 20 companies have received licenses to move goods by rail though they cannot yet do so under the PKP monopoly. "You can assume for the time being that you have only one (rail) operator in the country," Szostak said.
