"BDZ - Passenger Transport" remains a monopolist on the market for at least another year At the end of last year, PIMK Rail Express became the first company to officially receive a license for a private passenger rail carrier. To a large extent, at the moment, however, there are neither conditions nor a legal basis for private rail transport to start. BDZ's monopoly in the passenger transport sector is coming to an end, although it is not yet entirely clear when exactly it will come. According to "BDZ Passenger Transport", there are currently no more than 12 profitable railway routes in the whole country, with 5% of the lines generating up to a third of the revenue, which turns the passenger transport market into a not particularly attractive territory for private investors. One option is for the state to bundle the new companies in the sector with a profitable line along with several smaller ones that are more difficult to generate profit. The so-called "package option" (which several Eastern European countries such as the Czech Republic and Romania have already implemented) would only be possible if the sector were subsidized for all loss-making lines. The subsidies (which currently only BDZ can receive) are part of our country's commitments to the European Commission through the National Recovery and Sustainability Plan. This should happen next year with the new contract for the public passenger service, which will run until 2039. Thus, in practice, by the end of 2024, the Ministry of Transport will have to launch a public procurement for passenger transport, in which any company with a license for such transport on railway lines will be able to participate. At the moment, there are 18 companies in our country with a license for freight rail transport and only one for passenger transport, but in the first months of this year, at least 2 more companies are expected to officially enter the segment. In practice, the key to the liberalization of this market remains with the rulers, who have to pass laws concerning the regulations for obtaining a subsidy. There is another dimension to the change in the way railways operate. At the moment, all stations, depots and objects serving passenger transport are under the management of the state company. In order to operate, private carriers would need to be able to lease or lease from the Ministry of Transport such mission-critical infrastructure, which could further delay the entry of private carriers.
Source: econ.bg (10.01.2024)

BDZ and Deutsche Bahn are in the final phase of negotiations to buy up to 70 modernized passenger cars BDZ and Deutsche Bahn are in the final phase of negotiations for the purchase of up to 70 wagons from the rolling stock of German railways. With them, the national rail carrier will modernize more than 20% of the rolling stock currently in use, which is over 40 years old. Between 50 and 70 modernized passenger cars, which until last month were in operation by Deutsche Bahn on the "Intercity" lines, will be purchased. The rolling stock is for speeds up to 200 km per hour, air-conditioned, without compartments, and open space type, having all the comforts for passengers. A Bulgarian team is due to visit Germany by mid-February to specify and finalize the delivery and acquisition procedures.
Source: Banker (25.01.2024)

Pimk, the first private passenger train company in Bulgaria, wants to launch a high-speed train to the sea Pimk, the first private train company in Bulgaria, wants to cover the destination from Sofia to Burgas with stops in Plovdiv and Stara Zagora. The company wants to serve the railway routes with express trains, developing a higher average speed than BDZ trains. The machines of the private trains will be able to move at up to 160 km/h. At the moment, three passenger trains have been requested. According to Penko Nestorov, manager of PIMK Rail Express, the estimated period in which it will be able to start its operations is December 14, 2025. At the end of October 2023, the Plovdiv-based private transport company Pimk announced that it had received a license for rail passenger transport from the Railway Administration Executive Agency. The activity of the company will be carried out through the company "Pimk Rail Express" EOOD, which was established in April last year. Thus, for the first time in its history, the state-owned "BDZ - Passenger Transport" will have a real competitor in the transport of passengers in Bulgaria. The Plovdiv company has a license for freight transport and since 2015 has been carrying out freight rail transport.
Source: money.bg (03.06.2024)

IMF: State-owned companies in Bulgaria are expensive, inefficient and carry risks for everyone Large companies with state participation in Bulgaria have low profitability and inefficient allocation of resources, and although they are not significant in terms of share, they play a decisive role in the production network, which can negatively affect the productivity and competitiveness of the entire economy. The level of state-guaranteed debt of state-owned enterprises is small - on average only 0.5% of GDP in 2010-21 (the average level in the EU is 9%, and in other countries of Central and Eastern Europe it is 3.5%). And the support with such guarantees due to the COVID-19 pandemic was many times lower - 0.3% of GDP in Bulgaria compared to almost 2% in the EU for 2019-2021. But there is a key point - there is no generalized information on guarantees in Bulgaria, issued by the state-owned enterprises themselves, since their activity does not require the approval or supervision of the Ministry of Finance. Thus, total liabilities averaged around 12% of GDP in 2013-2021, which could be a source of concern. This is stated in the Analysis of the International Monetary Fund "Fiscal risks of state-owned companies". The analysis is based on data from 15 companies in which the authorities at various levels have over 50% share: Energy sector (National Electric Company (NEK), Kozloduy NPP, Bulgargaz, TPP Maritsa Iztok 2, Electricity System Operator, Bulgarian energy holding (BEH), Mini Maritsa Iztok, "Bulgartransgaz"), Transport sector (National Railway Infrastructure Company (NRI), BDZ - Passenger Transport Ltd., Air Traffic Control (RVD), Transport Construction and Reconstruction (TSV), BDZ - Cargo Services Ltd., Port of Varna, Bulgarian Port Infrastructure). The total assets and liabilities of these 15 companies represent about 70% of the total for the entire segment with state participation 2015-2021, which covers about 700 companies. The general assessment for them is that the fiscal support is much higher than what they give as revenues to the budget. In 2017-19, they received subsidies, capital investments and capital transfers (direct support) and deferred tax and dividend exemptions (indirect support) of an average of 1.5% of GDP. To this they have responded with a contribution of 0.2%. Net, they absorbed 1.3% of GDP immediately before the pandemic and at the end of the last GERB government. In the first pandemic year (2020), this ratio became 2.5% against 0.1% and is an illustration of how an unexpected shock can lead to large fiscal costs for companies with state participation, the IMF says. These are companies in which 4.1% of all employed work. Their financial stability can affect the fiscal performance of the state, especially when they have incurred potentially significant costs, whether expressly guaranteed or without the authorities making a contractual commitment. In 2023-2024, the state doubled the dividend collected by these companies from 50% to 100% to support the budget, but the price for this is a risk to their investment, productivity and profitability. "Furthermore, the dividend policy lacks predictability and seems to be driven by the needs of the state budget. Such a policy reduces the incentives of companies to invest and thus has a significant adverse effect on economic activity," the authors of the report add. State-owned companies are much, much less profitable than those in the private sector. Return on assets (one of the key measures of profitability) was between minus 1% and 2% for the period 2015-2021, with an average of 10% in private. In 2022, this difference suddenly melted (9% for state-owned, 11% for private), but not because there was better management, but because of three specific companies - NEK, Kozloduy NPP and Maritsa Iztok 2 TPP, and their income from sharply increased energy prices due to Russian aggression against Ukraine. Return on equity (another measure of profitability, measuring a firm's ability to generate profits using its shareholders' capital) for SOEs is on average 20 percentage points lower than that of private firms. Due to the specifics of many state-owned enterprises, profitability is logically lower than that of private ones, but in countries with better management results, the difference between them is 4 percentage points or five times smaller than in Bulgaria, the IMF recalls .Everyone suffers from the bad management of business with state participation. Six state-owned enterprises have been facing short-term challenges in meeting their obligations for years. In the period 2015-2022, without sufficient liquid assets to cover the amounts due to creditors in the next 12 months were National Railway Infrastructure Company, TPP Maritsa Iztok 2, National Electric Company, BDZ - Passenger Transport, BDZ - Freight Transport and Transportation Construction and Reconstruction. Bulgargaz faced a liquidity crisis in mid-2022 due to low collection of receivables and arrears from Toplofikatsia Sofia. Accumulated arrears to suppliers were paid through a (bridging) loan and/or state aid. Another indicator of concern to IMF analysts is the high debt-to-asset ratio (ie, less financial flexibility) of several large state-owned enterprises. These are, for example, "Bulgartransgaz", National Railway Infrastructure, Bulgarian Energy Holding and Electric Power System Operator. It has also seen how debt-to-asset dynamics can change sharply - in the case of Bulgargaz, it jumps from around 45% in 2019 to over 90% in 2022. The combination of high debt and low profitability raises concerns for the ability to service the debt and therefore risks at the fiscal level, the IMF explains.
Source: Dnevnik (18.07.2024)