Банкеръ Weekly



THE STATE-RUN CARRIER AND KREMIKOVTSI HAVE SHAKEN HANDS It is indisputable that after the monopoly of the Bulgarian State Railways (BDZ) ends, the state-owned company will retain its dominant position, no matter if one, two or more competitors would appear in the sector. However, the difficulties for BDZ are yet to come. They are not purely financial, but also connected with the regulation of the state-run carrier's operation. Under the transitional and final provisions of the Act on Railway Transport, enforced as of January 1, 2002, the Ministry of Transport and Telecommunications issued a temporary licence to BDZ for the 2002-2003 period. BZD did not have to file an application for it. But as of January 1, 2004, it will have to apply for a permission together with the other private firms. The legislative act stipulates that the candidate should have a good reputation, be financially stable, professionally competent, and be able to pay a civil liability insurance for the passengers, cargoes and post parcels. I don't know how we'd manage to fulfill that requirement (editor's note: for financial stability) and get a licence if the term stipulated in the law's transitional and final provisions in not extended, BDZ's Executive Director Georgi Neshev said for the BANKER weekly. However, the Deputy Transport Minister Nikola Yankov believes such an extension of the term is not necessary: BDZ's assets many time exceed the company's liabilities. There won't be any problem to get the licence and the term won't be prolonged.Yet, Mr. Neshev hopes some of the company's assets would be sold out in order to fill BDZ's purse. More than a month ago he announced that interest towards such deals has been shown from abroad. An order for 10 diesel locomotives has been placed by the international forwarding company Mulitzer Minch. BDZ has also received an inquiry for the purchase of 10-15 narrow-gauge locomotives from a German company, whose mediator is the Bulgarian Transimpex. Wagons that have not been used by BDZ could also be sold. Thus, the fears that BDZ could not get a licence are quite exaggerated. There is hardly a country that would deprive itself of its national railroad carrier and of the money it brings to the Treasury. After almost one year of debates, an agreement was at last reached between BDZ and Kremikovtsi about the prices for transportation of iron and steel works' cargoes. On Monday, August 11, the two companies signed a contract that will enter into effect on October 1 and will be valid by the year-end. However, neither of the sides was willing to specify the agreed prices, terms and way of payment. According to BDZ's data, 13% of its proceeds come from Kremikovtsi, although its cargoes account for a quarter of the transported goods. This is due to the preferential prices which Kremikovtsi enjoys as BDZ's biggest client. The signed document also specifies the schedule for repayment of the works' liabilities to BDZ, which should start as of the beginning of this month. The railway carrier estimates its recievables from Kremikovtsi at BGN18MN, accumulated due to the difference in the price for transportation which the works has been paying to BDZ (BGN0.02.4 per ton for 1 km) and the price demanded by BDZ (BGN0.03 per ton for 1 km). Under the new contract the price formation will be based on the quantity of transported cargoes. There will be three basic prices, Mr. Neshev specified: There will be one price for cargoes up to 6,000,000 tons, another one - for quantities between 6,000,000 and 7,000,000 tons, and a third one for over 7,000,000 tons. The sanctions for non-observation of commitments have been clearly specified for the first time. As of the beginning of next month the two companies will again begin negotiations for their 2004 contract and new debates regarding the prices should not be ruled out. Fuel might be added to the fire by the fact that Kremikovtsi does not intend to give up the license for a private railway carrier, for which the works filed an application in the beginning of 2003.

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