Freight transportation

In November, the Russian government must make a final decision on the privatization of JSC TransContainer, one of the largest assets owned by JSC Russian Railways (RZD). According to analysts, this decision will determine the fate of the entire railway reform: either a course will be taken towards further liberalization of freight transportation, or the process will turn back - towards the restoration of a monopoly on the market.

The intention of JSC Russian Railways to abandon further privatization of TransContainer and to form a United Transport Logistics Company (UTLC) on its basis became known back in the winter, but this topic still remains one of the most discussed in the railway transport market. At the beginning of the summer, Prime Minister Dmitry Medvedev publicly confirmed that such a project was being considered, and in August he instructed the relevant ministries and departments to work on this issue. In November, the government should also consider the investment program of JSC Russian Railways, in which the privatization of TransContainer was previously considered as one of the main sources of financing.

The project developed by Russian Railways OJSC involves the introduction of a controlling stake in TransContainer into an interstate joint venture with the participation of the railways of Kazakhstan and Belarus. The monopoly proposes to consolidate its assets at the company it owns, OJSC Russian Railways-Logistics, but the project provides for parity in ownership between the countries of the Common Economic Space (SES). UTLC is designed to become a logistics operator for the potential volumes of transit containers between Europe and Asia, which today are transported primarily by sea, bypassing the railway systems and territories of the Russian Federation, Belarus and Kazakhstan. The President of Russian Railways, Vladimir Yakunin, repeatedly published posts on his personal blog explaining the goals and advantages of this project and did not refuse to answer questions from Kommersant (see material on this page).

No agreement

Meanwhile, these efforts are not enough to convince critics of the project, including among senior officials. First Deputy Prime Minister Igor Shuvalov, speaking to reporters on October 19 after a government meeting on the privatization of state property, confirmed that the project to create UTLC on the basis of TransContainer is being considered on behalf of the prime minister, but he himself is a supporter of the privatization of the company. “I would suggest that the government consider sales as a priority,” he said. “If there are some very weighty arguments in favor of another decision, all these arguments will need to be seriously considered,” the government’s official website quotes the First Deputy Prime Minister. The price of the issue is indeed quite high: the market value of 50% of the company’s shares is estimated at 27 billion rubles.

Russian Railways and other departments spoke in the same spirit about the project, pointing to a large number of unanswered issues. The Ministry of Economic Development most clearly outlined its position, supporting the idea of creating UTLC, but only without contributing Transcontainer to its authorized capital. Deputy Minister Sergei Belyakov, in a letter to the government (a copy is at the disposal of Kommersant), reports that “until now, there are no estimates for Kazakhstan and Belarus of both the value of the property that is supposed to be transferred to the authorized capital of UTLC, and their ability to contribute to the authorized capital of UTLC cash".

Mr. Belyakov also hints to the government that “the presence of its own material assets is not an integral condition for the functioning of a logistics operator,” citing as an example international practice, and in particular the French forwarder GEFCO, which Russian Railways JSC recently showed interest in acquiring. The Ministry of Economic Development considers the inclusion of TransContainer shares in the authorized capital to be premature. Moreover, the letter emphasizes that the sale of shares at an open auction “due to increased interest from potential investors” could bring the state 32-33 billion and even 35 billion rubles, taking into account the control premium.

The opinion of the Federal Tariff Service (FTS) is formulated in a more streamlined manner. Deputy head of the service Tamara Stebunova writes to the government that the FTS supports the creation of UTLC, but at the same time points out details missing from the project. In addition to the gap already noted by colleagues from the Ministry of Economic Development - the assessment of assets and “the possibility of participants making deposits in cash” - the FTS also reminds us of the legal shortcomings of the state. In particular, the procedure for the work of railway carriers of the SES countries on infrastructure belonging to each other has still not been regulated, which makes it impossible to make a detailed calculation of the business plan of the company they are creating, which, by the way, also does not exist. All this “requires additional consideration and discussion of options” and “conducting a financial and legal examination of the participating companies,” Ms. Stebunova summarizes the official position of the FTS.

Market against

Market analysts interviewed by Kommersant are also very skeptical about the prospects of UTLC in the version of JSC Russian Railways. The general director of the INFOLine-Analytics agency, Mikhail Burmistrov, based on the latest statements by Igor Shuvalov, believes that the likelihood of creating a trilateral joint venture is low. “JSC Russian Railways traditionally very actively influences the conditions and progress of the privatization of subsidiaries. The recent example of non-admission to participate in the competition for the sale of a blocking stake in the First Freight Company AFK Sistema only confirmed this trend,” the expert notes. Meanwhile, according to market participants, Vladimir Yevtushenkov’s holding was ready to pay significantly more for these shares to Vladimir Lisin’s company, which acquired the stake for 50 billion rubles.

“The importance of today’s moment is that the state must finally decide on the further development of Russian Railways,” says Sberbank Investment Research analyst Igor Vasiliev. “Either it will remain exclusively an infrastructure monopoly, or it will turn into a transport holding company, combining the functions of an infrastructure owner and a logistics operator.” ", he explains. According to the expert, the fate of the controlling stake in TransContainer will depend on this decision: either it will be privatized or will remain the property of government agencies. Market participants, in turn, believe that if the second option is chosen, this will be considered as a signal to curtail market reforms on the railway.

According to a high-ranking source of the Prime agency in the government of Kazakhstan, they also do not have complete information about the project to create UTLC. “Why should a company be created on the basis of Russian Railways-Logistics, and not on the basis of a completely new company into which the parties could contribute assets?” — the agency’s interlocutor is perplexed. Considering the incomparability of contributions to the company’s authorized capital, the government of the republic wants to “understand what we will pay a lot of money for,” Prime quotes its source.

From a cannon to sparrows

Considering the technological side of the issue, experts note that transporting the current volumes of transit containers does not require a large number of wagons. With a flow of about 100 thousand TEU per year and a delivery time of 14 days, only about 3-4 thousand platforms will be needed, estimates Igor Vasiliev from Sberbank Investment Research. Delivery speed is the only competitive advantage of railways over sea transport, and it will require ensuring as few stops as possible along the way. “These stops will be inevitable at border points, for example in Zabaikalsk, Dostyk and Brest, and the remaining terminals in Russia and Kazakhstan will practically not participate in this process,” he notes, actually agreeing with the position of the Ministry of Economic Development about the redundancy of the asset contributed to UTLC.

Alexey Bezborodov from Infranews clarifies that the basis of TransContainer’s business, as well as that of operators in Kazakhstan and Belarus, is domestic transportation: it is on them that the main profit is generated. The expert recalls that in 2011 TransContainer acquired a 67% stake in the largest Kazakh container operator Kedentransservice, which owns 17 terminals in the republic, which allows it to de facto control the transportation of transit containers along the “Kazakh” route through Dostyk. According to Mikhail Burmistrov, given the declared parity of participating countries, the inclusion of TransContainer in UTLC promises excessive benefits for companies from Kazakhstan and Belarus, while “Russian shareholders of TransContainer will find themselves in significantly worse conditions.”

Market experts generally urge not to overestimate the volume of container transit, which can switch to rail from sea transport. “For goods whose market value is relatively low, there is no alternative to sea transport, since this is the cheapest mode of transportation. The railway can only compete for expensive and seasonal goods, for which the cost of delivery is less important than its speed,” notes Igor Vasiliev from Sberbank Investment Research. At the same time, in his opinion, railway tariffs in this case will remain one of the main barriers to container transit through Russia.

Logistics in French

Simultaneously with the refusal to privatize TransContainer, Russian Railways announced a major acquisition. PSA Peugeot Citroen has chosen Russian Railways as the buyer of 75% of its logistics operator GEFCO. The French concern found itself in an unfavorable financial situation and decided to sell a non-core asset - a freight forwarding company - for €800 million. One of the participants in the Russian railway market did not immediately believe the Kommersant correspondent that the specified transaction amount was calculated in euros, and not in rubles. “With this money we could buy 200 new locomotives!” - he exclaims. According to him, the problem of wear and tear on the locomotive fleet of Russian Railways is the most acute problem on the country’s railways today, which “eats up” the lion’s share of the network’s capacity. “It would seem that JSC Russian Railways should solve this problem first and foremost, and not support foreign companies,” Kommersant’s interlocutor is perplexed.

Market analysts also note that GEFCO has no tangible assets other than warehouses in Europe and several dozen trucks. The company's main value is its personnel and contracts with the former parent company. “For €800 million, you can build 20 container terminals,” Alexey Bezborodov, director of the research agency Infranews, offers his comparison, adding that without a modern and extensive container infrastructure, global logistics companies will never conduct their transit through Russia. In his opinion, GEFCO’s competitive advantage is its good knowledge of the logistics of automobile factories, which has nothing to do with container transportation of a wide range of goods between East and West. “Moreover, GEFCO has no experience working on the Trans-Siberian Railway, and it is far from obvious that French managers will be able to understand the Russian specifics of the railway business,” the expert notes.

The general opinion of market participants is that the privatization of TransContainer will in any case be better for both the market and the company itself. “With the arrival of FESCO managers to the board of directors of TransContainer, the company’s affairs have improved significantly,” notes Alexey Bezborodov. “But as long as the controlling stake remains with Russian Railways, the company will not be able to effectively compete with shipping lines and international container operators,” the expert is convinced.

“Now is the time to make a second TransContainer,” argues a top manager of one large railway operator. “With the same $1 billion, you can buy platforms, build terminals and create an alternative to the current TransContainer, provide customers with a truly high-quality service that will be in demand by the market ", he thinks. At least for a private investor, such a project would not have the risk of getting stuck in protracted interdepartmental and intergovernmental approvals.

Alexey Ekimovsky

Fork for "Transcontainer"