Debts And Tenders: Electroputere Wins 3 Mio EUR Railway Tender

Electroputere - Craiova, controlled by the Saudi-based Al Arrab Contracting Company, has won the tender for a 14 million RON (approximately 3 million EUR) contract organized by CFR Calatori (the Romanian Railway Company - Passengers) on 11 July for the maintenance of electric railway engines of 5,100 KW operated by the company.

This is the second consecutive tender organized by CFR Calatori and won by Electroputere, after the 691,820 RON contract tendered by CFR Calatori on 10 July and secured by Electroputere on 18 August. In both cases, the lowest price was the primary criterion for awarding the contract. However, deliberations probably did not take too long in either case, as Electroputere was the only bidder.

The two contracts come as a breath of fresh air to the ailing Electroputere, as the company was banned from attending tenders organized by the State, because of their overdue debts. Mircea Ursache, President of the State Asset Recovery Authority (AVAS), in end-May explained that Electroputere had been disqualified from several tenders organized by State-run companies because their fiscal record included largely overdue debts, so the company was forced to seek customers outside Romania. On the same occasion, AVAS President Mircea Ursache excluded any chance that the State might wipe off Electroputere"s debts.

By the end of June, Electroputere had accumulated debts of 113.87 million RON to the State, according to the records of the State Asset Recovery Authority. At such time, the State was starting the foreclosure procedure. The Electroputere management was not available yesterday for comment on the current status of such debts.

The matter raises questions as to Electroputere"s success in the two tenders organized by the State-held CFR Calatori, as the overdue debts to the State would normally prevent the company from participating in a tender organized by a State-run entity. One possible explanation would be that Electroputere may have restructured their debts between June and the date of the first tender by transferring them to another entity.

Electroputere - Craiova is controlled by Al Arrab Contracting Company with 86.28 percent. The Saudi-based investor acquired the majority stake in Electroputere from the State Asset Recovery Authority (AVAS) in 2007 and subsequently increased it through a capital injection.

At the end of the first half of 2009, Electroputere - Craiova reported losses of 16.97 million RON and a 70 per cent year-on-year increase in turnover to 136.05 million RON. The management has announced plans to lay off 500 employees, in two phases, by the end of September as part of a broader reorganization plan.