50%, the market share of carried freight, 57% transport performance share and over 38% more revenues, these are the figures describing PKP Cargo’s situation in Q3 2014. The financial situation has permitted the operator to continue rolling stock investments, to optimize its activity and to further develop both nationally and international, including through acquisitions.
PKP Cargo is the biggest operator of Poland and the second biggest operator in the European Union operating trains in Slovakia, the Czech Republic, Germany, Austria, Belgium, the Netherlands and Hungary. In the logistics segment, the operator provides land transport services (road, railway) and maritime transport services (ferry). In the intermodal segment, PKP Cargo is considering the perspectives regarding the extension of Gdańsk container terminal and the permanent connection of Gdynia and Gdańsk ports to the terminals in Warsaw and Gliwice, as well as launching new connections on Hamburg – Poznań and Warsaw-Gliwice routes and the construction of the VW plant in Września.
Also, in order to serve foreign markets, PKP Cargo announced in January the tender for the acquisition of 20 multi-system locomotives at a cost of PLN 400 Million (EUR 95.6 Million). The vehicles will be put into operation in the second half of 2016 to carry freight to Austria, the Czech Republic, Germany, the Netherlands, Slovakia and Hungary.
“As we are expanding our international business, we are investing in new rolling stock. While we initially considered buying ten locomotives, we are now opening a tender for 15 multi-system locomotives with an option of buying another five. This will strengthen PKP CARGO’s capacity of operating international rail connections,” said WojciechDerda, Board Member in charge of Operations at PKP CARGO.
PKP Cargo’s development strategy focuses on new acquisitions to consolidate its position in the railway freight transport market. The takeover of AWT shares (80%) and Pol-Miedź Trans (PMT) – 49% is the launch of PKP Cargo’s strategic acquisition plan. For PKP, acquisitions are one of the key challenges with impact on the operator’s outcome.
Advanced World Transport(AWT)
In September 2014, the company reached an agreement with the shareholders of the Czech company Advanced World Transport (AWT) on the possibility to buy 100% of shares. At the end of December, PKP Cargo signed an agreement on the takeover of 80% of AWT’s shares, the second biggest railway freight operator in the Czech Republic with activities in Central and South Europe. The transaction was worth EUR 102.3 Million and the acquisition process will be completed after getting the permits in Poland, the Czech Republic and Germany, as well as that of the antitrust authorities in Slovakia.
This is the Polish operator’s first acquisition outside the country that will help PKP Cargo consolidate its position in Central and South Europe, significantly stimulating its capacity of providing services on the north-south corridor.
The 80% of shares were sold by The Bakala Trust, the rest of 20% being still owned by the Czech company Minezit SE with which PKP Cargo signed a shareholding partnership that regulates mutual relationships between parties, as well as the possibility of the Polish operator to buy the remaining shares in AWT.
“This is a historic moment for PKP CARGO and the entire PKP Group, and at the same time one of the largest transactions involving the purchase of a foreign business by a Polish company in recent years. The acquisition of AWT will cause our share in the Czech market to grow by leaps and bounds and will significantly strengthen the strategic position of PKP CARGO in Central Europe”, Adam Purwin, President of PKP Cargo’s Management Board said.
The Czech market is important for the Polish operator due to the various connection with Silesia region (located mostly in Poland, but also in the Czech Republic and Germany) and also because the Czech Republic is a gateway to South Europe and to the Adriatic Sea. Thus, PKP Cargo’s presence in the Czech Republic is one of the best opportunities for expanding its services on different routes. Also, another development potential of the company is provided by the Ostrava-Paskov terminal, whose strategic location is adequate for serving as hub to the ports of Hamburg and Gdańsk.Paskov terminal is close to industrial areas and to the Polish border (25 km) and Slovakian border (60), hence its strategic position on the network of PKP Cargo’s handling hubs in Poland.
AWT has a rolling stock fleet of 160 locomotives, including 10 with multi-system engine and 5,000 wagons. The company rents third of the wagons it uses. PKP Cargo’s well-equipped rolling stock fleet and technical solutions will significantly reduce AWT’s costs with renting and operating its rolling stock by using the technical facilities of the Polish operator. For PKP Cargo, this will determine a better operation of rolling stock and workshop services. With the takeover of AWT, PKP Cargo will have access to 13 European markets.
Pol-Miedź Trans (PMT)
PKP Cargo has also completed the preliminary agreement with KGHM Polska Miedź S.A.,for the takeover of 49% of the shares of Pol-Miedź Trans (PMT), a company fully owned by KGHM. The transaction could be completed in the second quarter of this year. The agreement enables the continuation of the acquisition process of 49% in PMT’s shares in exchange for a cash contribution and a locomotive supply contribution. Through this agreement, PKP Cargo can elaborate the due diligence report of PMT and present relevant application to the Office of Competition and Consumer Protection (UOKiK).
PMT controls around 2.4% of the railway freight transport market having a solid basis of revenues. The company has varied its rolling stock fleet which now includes 6 locomotives and 1,550 cars for bulk cargo. This transaction will help PKP Cargo gain new customers and expand its operations.
The main advantages of KGHM Polska Miedź following the transaction include access to a larger and constantly upgraded rolling stock fleet in Poland and a wider range of logistics services provided by PKP Cargo. Also, for PKP Cargo, the allocation of investments in PMT means extending the customers data base and the possibility to use rolling stock much more efficiently.
“Cooperation with KGHM is part of PKP Cargo’s consolidation strategy in the national market and the optimisation of offer for the large industrial groups which provide their own railway services. By using our services, rolling stock and know-how, we can jointly develop synergies beneficial for all factors involved”, declared PKP Cargo’s CEO, Adam Purwin.
KGHM constantly follows its strategy of focusing resources on the main activity and identifying a strategic partner for the railway division Pol-Miedź Trans will facilitate this process. In fact, this transaction will involve the separation of other business segments of the company. “The road transport sector and oil commercial activities will be separated from Pol-Miedź Trans and incorporated into other group companies. This project is in conformity with our long-term strategy which is focusing on our main activity. An industrial partner for our railway operations will allow us to reduce investments in this segment and will consolidate PMT’s position in the railway freight transport market”, declared Herbert Wirth, Chairman of KGHM Polska Miedź’s Board.
KGHM Polska Miedź is a company with a significant activity in the production of copper and silver with an experience of 50 years in the extraction and processing of copper, the owner of three mines in Poland and of other mines in the USA, Canada and Chile.
by Pamela Luică
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