"SENSATIONAL!" The privatization of CFR Marfă - the same ending as Oltchim, even though Dan Diaconescu was not involved

EMILIA OLESCU (Translated by Cosmin Ghidoveanu)
Ziarul BURSA #English Section / 16 mai 2013

The privatization of CFR Marfă - the same ending as Oltchim, even though Dan Diaconescu was not involved

The authorities did not want a show at the privatization of CFR Marfă and they have succeeded - there won't be any show, but there won't be any privatization either ... for now. None of the three offers submitted in the pre-qualification stage have qualified.

After extending the deadline for drawing up "the shortlist" from 12:00 to 16:00 (even though last Thursday, minister Relu Fenechiu was saying that it wouldn't take more than two days for evaluating the three briefs), the Ministry of Transports bluntly announced, without providing any further details, that, "following the verification and the review of the documentation for participating in the calls for tenders submitted by the potential investors for the pre-qualification procedure in the process for the privatization of SNTFM CFR Marfă, the Privatization Commission set up at the Ministry of Transports, has decided to reject the three potential bidders and to resume the procedure, according to the legal provisions".

A few days ago, minister Fenechiu himself was saying that in order to make sure that not just anybody can participate in this privatization, like it happened in the privatization process of "Oltchim", which was also a failure, the terms are quite drastic. That is why "three important companies in the industry" have submitted offers, which arrived in to the ministry in the last minutes prior to the expiration of the deadline for submitting the prequalification briefs.

The three bidders are Grup Feroviar Român (GFR), part of "Grampet" (a group controlled by Gruia Stoica), Asocierea "Transferoviar Grup (TFG) - Donau-Finanz GmbH & Co KG Austria" and American company "OmniTRAX", which the press wrote that it may have ties to businessman Cristian Burci.

Last Wednesday, Prime-Minister Victor Ponta was saying that he has asked for information about the companies which have submitted paperwork for the privatization of CFR Marfă and that the investors in question are dependable, and he expressed his confidence that they can implement an efficient strategy and went on to say that the company can be viable, but "it's not as easy as it looks".

The Prime Minister said: "I expect that any of the three - because I have asked for information, we are talking about dependable investors - I have confidence that any of the three will have the ability to implement a medium and long term strategy to improve the efficiency of the company, to preserve jobs and to increase competition on the domestic and direct market".

In turn, Relu Fenechiu said that after opening the prequalifying documentation, that the tenders are eligible, and if the sale price had been lower, the number of investors interested would have been greater.

Fenechiu - In a state of constant indecision on the privatization of CFR Marfă and his resignation

For about ten years now, all the governments that came into power have announced almost every year that CFR Marfă would be privatized, by putting up for debate various strategies for the sale of the company. So far, no call-for-bids was held for the railway freight operator, as the privatization of this company was postponed each time due to various reasons.

The last time an announcement concerning the postponement of the privatization of MT was made was last year, in October, claiming the lack of an approval from the Supreme Defense Council (CSAT).

The statements of Relu Fenechiu on the topic of the privatization of CFR Marfă were numerous and contradictory, over the last few months.

Upon taking over the position of minister of Transports, he said that CFR Marfă would not be privatized, then, just a few days later, after talking to the representatives of the delegation of the IMF, changing his mind and announcing that the sale of the railway operator in fact represents "priority number one", stating that the government would sell 51% of the shares of the company and in a few years it would sell the remaining 49%, and in just a few years, thus helping the state make "a considerable gain ".

At the end of March, the minister was saying that, if he failed to solve the issues of CFR Marfă as well as eliminate the deadlock of POS Transporturi by the end of June, he was likely to leave the government, just like Traian Băsescu wants.

Relu Fenechiu had made a similar statement concerning CFR Marfă at the end of January, after the hearing of the parliamentary commissions for industries concerning the approval of the state budget for the year 2013.

"I think that if CFR Marfă doesn't get privatized, I won't remain a minister anymore, for me it is a huge responsibility and I take it seriously", Fenechiu said at the time.

The Minister of Transports yesterday said, quoted by Mediafax, that he would only resign if the privatization failed because of him, and said that the paperwork submitted by the three investors interested in the privatization of CFR Marfă was rejected because they did not include the required elements.

The authorities had great expectations concerning the privatization of CFR Marfă. On several occasions officials stated that there was major interest in the acquisition of the domestic railroad freight operator. Over the last few weeks, the minister was saying that there were more than 10 major companies interested in CFR Marfă.

The company was going to be privatized by June 20, 2013, a deadline which had been agreed upon with the representatives of the delegation of the IMF.

In 2008, railroad operators CFR Marfă and Grup Feroviar Român have set up the company "General Rolling Stock Company", which rents locomotives and train cars in countries from Central and South-Eastern Europe.

Last year, the company had a profit of 4.5 million Euros, and it would pay out dividends, the company's representatives recently told us. In 2012, the operating profit was 19.4 million lei.

GFR contributed about 50 million Euros to the share capital of the company upon its creation.

The fleet of "General Rolling Stock Company", which CFR Marfă contributed old train cars intended for scrapping, consists of 5,735 train cars.

Before 1989, the rolling stock of CFR Marfă had over 120,000 train cars, but according to some estimates, 80,000 train cars were cut and sold as scrap.

In the 2008-2009 period, the company has concluded rental contracts for the modernized train cars with private railroad transport operators and with companies from Germany, Czech Republic, Poland, Slovakia, Bulgaria, Hungary, Romania, etc.

GFR is the second largest railroad operator in Romania, after the state owned company. In 2011 it had a turnover of approximately 761 million lei and a profit of almost 29 million lei, according to data from the website of the Romanian Ministry of Finance (MFP).

Following the announcement made yesterday by the Minister of Transports, Gruia Stoica, the owner of Grampet, which also controls GFR, said, in a press release: "We think that a company of strategic importance for Central and South-Eastern Europe, which has participated in and has come as far as the final stage of international privatizations such as those of Hungary, Bulgaria or Montenegro, has every chance of being a serious and responsible competitor in the privatization of the Romanian railroad freight operator. Furthermore, we want to emphasize that our experience on the railway and the vastness of our operations in Romania represent evidence of our eligibility.

The Grampet group of companies and Grup Feroviar Român will continue to monitor the privatization of CFR Marfă and, depending on its developments, will make the best decision for the company's interests and for the 9,000 employees in Romania and abroad".

In 2011, CFR SA awarded railroad operator "Transferoviar Grup" of Cluj Napoca a rental contract for the railroad belonging to the non-interoperable railroad structure pertaining to the branch of Bucharest and to three circulation divisions. The contract was awarded following a public call for bids conducted at the Romanian Stock Exchange, and "Transferoviar Grup" won the rights to the Bucureşti Sud Călători -Titan Sud, Bucureşti Sud Călători - Olteniţa and Căciulaţi - Snagov Plaje divisions.

The contract was concluded for a four year period, and the criterion for awarding the call for tenders was the highest price and the takeover of the division within the shortest delays after the awarding of the call for tenders.

The railroad operator was also forced to take over the existing staff of CFR or the employees which operate on the division or group of divisions needed to ensure the minimum social package existing at the time of the lease.

"Transferoviar Grup" was created in 2003 by businessman Călin Mitică, as its main activity was railroad freight and railroad maneuvers, and its secondary line of business was maintenance of railroad freight and passenger cars and locomotives. In 2010, the group entered the market for railroad passenger transportation, on two routes in the counties of Buzău and Bihor.

It would seem that American company "OmniTRAX" of the US is represented in Romania by Philip Bloom, who is known to have owned businesses in Iraq, being sentenced to prison for conspiracy, bribery and money laundering.

When asked by journalists about the American company that wants to buy CFR Marfă and about its representatives in Romania, Relu Fenechiu said: "I've read about OmniTRAX, we will definitely study more about all the investors that will remain. I respect each of the three companies, I don't want to make any speculations about any of them. I am speaking about OmniTRAX, not about any of its representatives. Let's leave speculation aside".

Donau-Finanz GmbH & Co KG Austria, which formed a partnership with "Transferoviar Grup" SA in order to participate in the privatization of CFR Marfă, is an Austrian investment fund with tradition behind it, which manages assets worth over 2 billion Euros in areas such as asset management, investments, mergers and acquisitions, restructuring, residential development. The company holds stakes in companies in areas such as industry and real estate.

Donau-Finanz has qualified to the final stage of the privatization process of the railroad freight division of the Bulgarian Railroad (BDZ). GFR is also on the shortlist of the potential buyers of the BDZ.

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