Making Tracks

Economic News

22 Jul 2010
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The recent signing of major contracts for railway infrastructure upgrade programmes is a key step in Bulgaria's plans to be a transport hub for Southeastern Europe. The combination of the experience of private European companies and EU funds will help the country overhaul its outdated freight system and allow it to maximise its international links with neighbouring countries.



On September 5 the transport ministry struck a 162.5m euro deal with Astaldi, in which the Italian company will construct rail and electricity infrastructure on a 114km stretch between Plovdiv and Svilengrad, which is near the Greek and Turkish borders.



In a separate deal, Austrian firm Thales Rail Signalling and French firm Alcatel Lucent will provide signalling and telecommunications infrastructure to the same stretch of rail in a contract worth 35.6m euros. When the project is completed, in an estimated 39 months, the line will be capable of taking trains travelling at 160km per hour.



Anton Ginev, general director of the National Railway Infrastructure Company (NRIC), told OBG that work on the line was "essential" to enhance the country's transportation system and would provide important service efficiency and reliability improvements by converting a diesel single-track part of the network to electrified service for passengers and freight.



The NRIC is involved in several initiatives to upgrade the nation's rail infrastructure to help improve capacity, international linkages and bring the rail network up to par with EU standards for freight and passenger rail transport. A consortium lead by Spanish firm Iberinsa has signed a 3.35m-euro contract to provide technical support for the modernisation of the route from Vidin, on the southern bank of the Danube in northwestern Bulgaria, to Sofia.



Finalised geographical surveys are expected for the Danube Bridge II that links Vidin to the Romanian town of Calafat in September. The bridge will provide road and rail connections between Bulgaria and Romania at a cost of 236m euros. Other stretches to receive attention include the lines between Plovdiv and Burgas, Mezdra and Gorna Oryahovitsa and Sofia and Plovdiv.



The Bulgarian rail network is long due an overhaul. In the past decade only 790km of the country's 4316km of primary track has been upgraded and much of the power generation and signalling infrastructure is obsolete, meaning that trains are limited to speeds of 100km per hour on most lines. Usage of the country's rail network has dropped markedly since the early 1990s. In 1990 63.25m tonnes of freight was carried by rail. By 2006 this figure was 21.18m, up 900,000 tonnes on the previous year's figure.



The Plovdiv - Svilengrad overhaul is expected to cost 340m euros, of which only 37m euros will come from the state coffers, 150m euros in the form of a loan from the European Investment Bank and the remaining 153m euros from the EU's Instrument for Structural Policies for Pre-Accession programme, which focuses on infrastructure. In addition, the NRIC is looking to sell non-crucial assets in order to raise revenues. In the first week of September, the Plovdiv and Pomorie stations were sold off for 7m euros and 11m euros respectively.



Ginev said the sale of Pomorie station, which the NRIC owned, would provide resources for debt liquidation of the company. He said he expected "other unprofitable stations and railway infrastructure properties" would be sold that by the end of the year, providing an additional $44m.



Bulgarian State Railways (BDZ), the national carrier, announced in September that it would place a 120m euro, 10-year private bond issue aimed at attracting Bulgarian and foreign investors.



"A proportion of the money will go towards covering existing debts but the main focus is the overhaul of 1200 freight wagons in the BDZ fleet," Christina Belevelva, public relations manager for BDZ, told OBG. "Since last year we have seen strong growth in demand for rail freight services from Bulgarian businesses and the current fleet is outdated and insufficient."



Competitors will increasingly meet this rise in demand. As of the first of this year, the Bulgarian freight sector has been open to private competition and in August the first private operator, Bulmarket, announced it had purchased five Siemens electric locomotives from Danish State Railways. The liberalisation of passenger operations to private carriers is planned for 2010.



Bulgaria is looking to take advantage of its position as the eastern-most point of the EU to become a vital link for freight heading between Western and Central Europe and Asia. While much attention has focused on the country's attempts to upgrade its road connections, the existence of a multi-nodal transport system is crucial to the realisation of this goal. Construction of a 25.9m euro intermodal freight terminal in Sofia bringing together road, rail and air transport is expected to begin before the end of the year. There are plans for similar logistics centres in Plovdiv, Ruse and the port of Burgas. In a country where 700 cars are registered by authorities every day and news of severe traffic accidents are rarely out of the headlines, the development of a strong rail network can take the strain from the increasingly congested road network.



Ginev told OBG that Bulgaria is the only European country where five of the ten Trans-European Transport Corridors (Corridors IV, VII, VIII, IX and X) pass. With that in mind, the country's potential to become a major transport leader in Southeast Europe and a future EU transportation hub can be assumed to be "very high."

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