Russian Railways Seeks Stake in Deutsche Bahn

26.09.2008 (10:58) | Internaitional Herald Tribune

Russian Railways, one of the largest railroad companies in the world, said Wednesday that it would submit a bid to buy up to 5 percent of Deutsche Bahn when the German state-owned railroad network is partly privatized this year.

"We are thinking of trying to obtain, approximately, a 5 percent stake," Vladimir Yakunin, president of Russian Railways, said in an interview here after he held talks with Deutsche Bahn executives. "For us, integration is an essential part of our strategy. Obtaining a stake in Deutsche Bahn's international public offering would be a good investment."

Under the terms of Deutsche Bahn's privatization, the German government will remain the sole owner of the railroad infrastructure, including the track, the stations and the energy supply, while 24.9 percent of the passenger and freight business will be sold to private investors, with the government retaining the remainder.

Russian Railways, which is also state-controlled, has begun a modernization program that calls for €400 billion, or about $585 billion, to be invested in the Russian railroad system by 2030.

As part of this modernization program, Siemens, the German technology and industrial company, announced Wednesday that Russia's first high-speed rail line, linking Moscow to St. Petersburg, would go into operation at the end of 2009. Siemens, which won the €600 million contract in 2006, said it would deliver 8 high-speed trains, each with 10 cars, by 2010.

The company said it hoped to be awarded more contracts from Russian Railways, which plans to introduce other high-speed rail links between major cities.

Although the U.S. credit crisis has had an impact on the Russian banking system - the central bank in Russia has already pumped over €40 billion into the country's three largest banks to maintain liquidity - Yakunin said he saw no problems in obtaining financing.

He said the Russian government would provide a fifth of the total funds required for the restructuring and modernization program, Russian Railways would provide 45 percent from its operating budget, and 35 percent would come from the private sector. Russian Railways last year posted revenue of €27 billion and a net profit of €1.8 billion. It has 1.2 million employees and accounts for over 3 percent of Russian gross domestic product.

The company is divesting some divisions, although it cannot sell any of its infrastructure under a recently passed law. The law identifies 42 strategic sectors that must remain under Russian ownership.

TransContainer, which specializes in handling cargo, was spun off as an independent entity in 2006 as part of a structural reform aimed at developing a competitive market to replace the monopoly Russian Railways held over all rail infrastructure and operations. Yakunin said 15 percent of TransContainer had already been sold, including a 9 percent stake sold to the European Bank for Reconstruction and Development, which paid €134 million. Plans to sell a further 35 percent of TransContainer, and as much as 50 percent of Refservis, which specializes in transporting perishable foods, have been put on hold because of the recent stock market turmoil.

"I am not going to sell valuable goods cheaply," Yakunin said. "I am not under pressure. We don't need the money. I will wait until the markets are better."

In the short term, up to the middle of 2010, the plan is to separate the company's freight and passenger businesses into two separate divisions, and to introduce competition into both sectors. In addition, the national government would set tariffs instead of local authorities, and the tariff system for cargo would be reformed so that, for example, privately owned and state-owned railcars are charged the same tariff for using the track.

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