GFR, declared winner of race to privatise CFR Marfa

Grup Ferovoiar Roman (GFR) has been declared the winner of the race for the privatisation of Romania’s national freight rail carrier CFR Marfa, Transport Minister Relu Fenechiu said Thursday.

‘After six hours of negotiations, I can tell you that we have a winner. Today, we can declare a winner in the race for the privatisation of CFR Marfa and that is Grup Feroviar Roman,’ said Fenechiu.

He said GFR offered 202 million euros 51 per cent of the shares, to be paid up in full. On the other hand, GFR has pledged investments of nearly RON 900 million in CFR Marfa, Fenechiu added.

Fenechiu said GFR on Wednesday submitted a bid that was declared valid upon analysis, but the analysis of the financial bid revealed that the investor requested that it pay out the amount in instalments.

‘I want to say that under the contract pledged by them, they committed themselves to fully pay out the money, so there was a discrepancy between the pledged contract and their financial bid. We asked them for a clarification that was to decide whether they give up the instalment request or stick to it and disagree with a lump sum payment. They agreed in writing to give up on their condition, and the privatisation board decided that this company, GFR, is the winner of this procedure. GFR virtually pledged to pay up in one go. The instalment request was the only condition requested by GFR. They asked for it, but we disagreed,’ Fenechiu explained.

He said the transaction was worth nearly 400 million euros, as the price offered for the 51-per cent stake in CFR Marfa is RON 904,980,000, which is nearly 202 million euros. Moreover, GFR will invest nearly 200 million euros (RON 900 million) in CFR Marfa and an additional 1.5 million euros in environmental protection.

‘We hope to sign the privatisation contract in the near future and we hope CFR Marfa will become a profit-making, flagship company for Romania. The deadline for GFR to show us the money is two months after the contract is signed. The contract is scheduled for signing next week,’ said Fenechiu.

In relation to the complaints filed by OmniTRAX and Transferoviar Grup, the other two bidders in the same privatisation race, the minister said the judiciary opinions of the ministry’s consultants indicate there is no basis on which to be considered.

‘The same short time was request of all the bidders and it was known from the very beginning. This cannot be a reason to cancel the process,’ he said.

Fenechiu admitted that there is a discussion about the market monopoly of GFR following the takeover of CFR Marfa, as the company already has a 30-per cent market share, but the situation will be scrutinised by the Trade Competition Council, which will make a decision in this case.

He gave assurances that the privatisation contract will be made public.

In the race for the privatisation of CFR Marfa there were initially three bidders: Grup Feroviar Roman (GFR); Transferoviar Grup & Donau Finanz GMBH & CoKG, as well as US company OmniTRAX, with the last two having withdrawn from the race later on.

The Romanian Government has pledged before international financial institutions to declare a winner for the privatisation of CFR Marfa by June 20.

The sale of CFR Marfa is part of Romania’s 5 billion-euro ($6.6 billion) precautionary loan agreement with the European Union and the IMF, whose board of directors is scheduled to discuss the country’s progres on June 26. Romania is trying to complete its second accord by the end of June after asking for a three-month extension.

“We’ve completed the actions needed before the IMF board meeting and we’ve shown our commitment, so I’m optimistic about the results,” Prime Minister Victor Ponta said on Realitatea TV. “We can talk about another agreement afterwards, if the European Commission agrees to it.”

The process was complicated further by the possibility of legal challenges from two bidders that had pulled out of the tender. American company OmniTRAX and a consortium comprising Austria’s Donau-Finanz and Romanian Transferoviar Grup said they withdrew from the tender because of short deadlines that made it impossible to assess CFR Marfa.

Prime Minister Victor Ponta defended the tender on Thursday. “I don’t expect everybody to be satisfied,” he told reporters. “The process was as transparent as could be.”

The IMF declined to comment on Thursday, but Daniel Hewitt, emerging Europe economist at Barclays Capital, said that it would be difficult for the IMF to say Romania has failed in its obligations because governments have made considerable progress in other areas.

“From the IMF’s point of view, they need a better reason to flunk them (Romania),” Hewitt said, quoted by Reuters.

CFR Marfa

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