Bulgarian State Railways (BDZ) is offering on concession the central railway stations in Sofia and Plovdiv, the Transport Ministry said.

The planned concessions are expected to improve the quality of service and to cut costs of the loss-making railway.

This radical change in BDZ’s governance follows a new policy set by Transport Minister Petar Moutafchiev. Because of the heavy debts accumulated by BDZ through the years, the ministry is in desperate search for ways to reduce some of the burden.

On January 18, the Cabinet approved Moutafchiev’s plan, which sets out measures for financial and organisational improvement of BDZ, the National Rail Infrastructure Company, and the state-owned company for transport construction and rehabilitation. The measures include sales of certain non-operating assets in the railway sector, the proceeds of which will be used to settle debts.

Debts and old-fashioned equipment are among BDZ’s biggest worries.

Currently, BDZ has a total of 13 111 passenger coaches, most of which are way below European Union quality standards. Only 50 passenger coaches meet modern requirements, having been renovated through a programme financed by the European Bank for Reconstruction and Development.

A total of 669 coaches are in use. There is a shortage of 91 coaches needed to ensure the problem-free movement of trains. The 200 coaches scheduled for decommissioning in 2007 will most certainly add to BDZ’s problems.

As The Sofia Echo has previously reported, BDZ’s problem is finding a way to achieve a balance between passenger and cargo traffic. The first is the main social obligation of the company, which provides the cheapest transport in the country and jobs for several thousand people, most of whom have low levels of qualifications. However, the second service brings money to BDZ, although this money is inadequate to meet the passenger costs of BDZ.  Local producers complained last year that the railway carrier was not able to meet all cargo transportation demand and some deliveries were either slowed or redirected to more expensive means of transport.

In order for BDZ to achieve an appropriate balance, Moutafchiev’s plan proposes steps towards BDZ’s biggest ever restructuring.

The first step will be to increase the number of state-owned railway companies to seven in order to improve the management of infrastructure and to expand the range of services. The state has three railway entities at present, two for passenger and cargo services and a third for managing railway infrastructure. The four new companies will specialise in management of railway coaches, maintenance and repair of equipment, power supply, and telecom services linked to the existing fibre optic lines of the railroad company. The new entities are expected to have better access to EU funded programmes and private financing, as they will be relieved of the big burden of overdue liabilities in the existing railway structure. Another goal is to ensure that expanding cargo service no longer subsidise the loss-making passenger service. Through the new companies, Moutafchiev plans to repay part of the 424 million leva debt by selling non-core assets of the company worth 94.3 million leva. Another move towards improving the financial state of BDZ involves a decision on whether to borrow 70 million leva this year. The money will go to upgrade more than 2000 outdated cargo railway cars. This move is aimed at meeting rising demand for rolling stock from large production companies.

Earlier this month, BDZ said that they expected to raise cargo turnover by 20 per cent on the year to 25 million tons in 2007, as some of its large clients had projected a 30 per cent rise in their demand for rolling stock this year.

Restructuring is one thing but real estate is another. As one of the biggest state owned companies in Bulgaria, BDZ has in its possession a long list of attractive real estate. Before now, the question of concessions or even privatisation of some of BDZ’s assets has not been raised by the state, but the huge financial problems has put it on the agenda. Moutafchiev’s plan calls for BDZ to auction 30 real estate properties to raise more than 50 million euro. The basis for the sum is the recent hike in real estate prices in Sofia. Although the offered properties are at smaller or redundant railway stations, there will be no lack of interest since the properties are in industrial areas around the city.

Among the most attractive properties are Pioner (in Sofia’s Dianabad neighborhood), Serdika (close to Sofia central rail station), Pomorie (on the Black Sea coast), Dobrich-Sever (northern Bulgaria) and a 35 decare plot in Sofia’s Iliantsi neighborhood. The 60 decares at Pioner have a starting price of 24 million leva while for the 50 decares at Serdika, the starting price is 40 million leva.

Serdika is likely to be attractive because it is close to the city centre. Parking areas, residential complexes and entertainment centres are among potential buyers’ plans. Pioner could offer plenty of opportunities for residential complexes. Interest in concessions on Sofia’s and Plovdiv’s central railway stations is likely to be high.