Future of Romanian Rail Freight Scheduled for Decision This Month

ROMANIA – After years of prevarication the sale of the country’s freight rail system to private interests is seemingly on track to be approved with an announcement due by the 20th June, in time for the next review of the country’s finances by the International Monetary Fund (IMF). After the only three bidders tendered for the contract originally all were subsequently precluded from bidding for CFR Marfa, the national rail cargo carrier, by the Transport Ministry after failing prequalification tests in early May.

The sale of 51% of CFR Marfa for a minimum bid of €180 million was back on again this week after negotiations between the government and the IMF. The three bidders are said to be private rail group Grupul Feroviar Roman (GFR), OmniTRAX, a US based operator with sixteen railroads there plus interests in ports and other transport infrastructures, and a consortium between the Austrian investment fund Donau-Finanz and Romanian TFG, another private rail cargo and passenger group.

Originally bidders needed to prove a turnover of €110 million over the past three years but now this has been reduced by 80%. The bids must be finalised by June 5 and with CFR Marfa's reported sales of around €250 million for 2011 showing a €20 million loss, accumulated debt allegedly approaching €350 million and a wage bill for 9,000 people plus ageing infrastructure and equipment, intensive management and careful fiscal management with potentially some hard decisions will lie ahead for the bid winners.

The IMF made provision for a Stand by Arrangement (SBA) in 2011 to support the Romanian economy but, together with the EU, outlined certain financial measures which Romania had to undertake to continue to receive a line of credit, one of these being privatisation of certain industries beginning with rail freight. In March the SBA was extended, but only until June 30, if a conclusion of the CFR Marfa deal is not announced ten days previous to this as promised the situation may prove very serious for a Romanian economy which plunged from its standing as ‘Economic Tiger of Europe’ in 2000 to the IMF’s biggest debtor country by 2010.