China’s Cosco is expected to make an offer for Greece’s rail network after becoming the sole bidder for the country’s largest port, two people familiar with the matter have said, as the state-owned shipping giant forges ahead with a plan to build a European transshipment hub.
Buying Trainose and Piraeus Port Authority would give Cosco maritime connections to the Suez Canal and rail links to the Balkans and Central and Eastern Europe.
Bolstered by its merger with China Shipping Group in December, Cosco’s focus on Greece is about building market share at a time of anguish in a bruised and oversupplied shipping sector, industry sources said.
It also fits with China’s “One Belt, One Road” policy of building a modern Silk Road to boost trade and create an outlet for Chinese industrial powerhouses caught up in the global downturn and slower growth at home.
Cosco was unchallenged in its € 358 million offer for a 67 percent stake in Piraeus Port Authority last month and is set to be named the preferred investor.
But it could face competition for the rail network, including from US railroad holding company Watco, one of the individuals said, after Greece relaunched the tender in an effort to drum up more interest.
Trainose today is valued at dozens of millions of euros.
“Cosco and Watco are interested in Trainose,” said the source, who declined to be identified.
“There is also a Greek group which is interested and is looking for a partner”
Greek Railways until recently registered operating losses of about $3.8 million per day, having accumulated a total debt of € 11.5billion or about 5% of Greek GDP. In 2008, the company reported a loss of more than € 900 mil, on sales of about € 227 million.
Between 2000 and 2009, the cost of the company’s payroll soared by 50 percent even as overall personnel decreased by 30 percent. The average salary of a rail employee was said to be over € 65 ooo with trains frequently running empty.
In 2010, this debt was 8bn euros and cost 420m euros in interest payments.
For the better part of a decade, the Greek state has provided loan guarantees to Greek Railways, thus allowing it to borrow billions even though the company’s finances were so skewed that it paid three times as much on interest expenses than it collects in revenue.
In 2012 a BBC report on the Greek railways concluded that at the time it would be cheaper to sent rail passengers to their destinations by taxi – provided that more than two people shared the ride.
In 2015 when ownership of the railways passed on to TAIPED the company’s debts were written off much to the dismay of several opposition MPs who argued that the debt will be passed on to the Greek taxpayer.
The EU also agreed to allow the government to continue to subsidise rail services to the tune of € 50 mil until 2020 in order to continue providing services in remote parts of the mainland.
Since 2010 railways staff was reduced by several thousand mainly through retirements and many of the biggest lost making routes were abandoned.
Despite the millions poured in the railways in the last twenty years the company suffers from chronic underinvestment in both rolling stock and track, electrification of the network as one of the main priorities .
Greek Railways was one of the organisations involved in the series of scandals unearthed in 2012 where it was revealed that bribes were paid by European manufacturing companies to Greek decision makers to get lucrative contracts. The investigation led to the arrests of thirteen executives Greek Railways (OSE,) who were charged with stealing state funds and being involved in decisions that damage the national interest.
The then New Democracy Transport Minister Michalis Liapis, who was implicated in the scandal was protected under the statute of limitations even though evidence was sent to Parliament.
Prosecutors conducted an investigation based on accusations against the former high-ranking OSE executives for actions or omissions in terms of procedures followed for procurements and in meeting contractual obligations, including attempts to change specifications for the purchase of new electrically-powered trains at a cost of €3.6 billion.
Additionally they were charged with leasing eight Siemens Desiro electric trains for 16 months for 1 million euros per month, when OSE could have acquired the trains without paying anything, as part of a penalty clause for failure to promptly deliver new rolling stock by the Siemens-Hellenic Shipyards consortium which owed 8.3 million euros when the lease agreement was signed
TRAINOSE, an operational arm of Greek Railways OSE, showed a profit 15 million euros in 2012 because 11 billion euros of the €12.5 billion of debt was passed on to the state and continues to turn profits but it is still in dire need of investment.
Reuters, Greek Railway News, Athens News Agency.
Editing and additional material Y Xamonakis