Daily Archives: October 24, 2013

PKP Cargo (PKP SA) is Going Public. Will China Get a Bigger Foothold in Europe?

China is riding the rails to riches. As per these recent posts on SI, China is Kicking the USA’s @ss when it comes to rail with its recent launch of the world’s largest high-speed rail route from Beijing to Guangzhou in the world’s third largest rail operation that carry’s over 25% of the world’s total railway workload. Add to this the fact that Laos is committing to invest 6.2 Billion on a new 260-mile passenger and freight railway between Kunming and Vientiane that connects China to Thailand and ports closer to the Suez Canal, and China is riding the rails to riches in a big way.

And now it looks like they get a chance to expand their operations in Eastern Europe. On October 31, Polskie Koleje Panstwowe SA, the Polish state railway, is going IPO on the Warsaw Stock Exchange with the sale of its cargo Europe in an effort to raise as much as 1.6 Billion zloty (approx 518 Million dollars). PKP runs the EU’s second largest freight company after Deutsche Bahn AG and controls 8.5% of rail freight in the EU, and can also arrange transports to and from Asian markets, including countries, such as Kazakhstan, Uzbekistan, Turkmenistan, Mongolia and China with licenses to provide services in Slovakia, the Czech Republic, Germany, Austria, Belgium and Hungary. PKP is going to keep at least 50% of cargo, but may be offering close to 50% for sale.

And we know China is interested. China paid a visit to PKP SA last month to determine the investment outlook of the Polish in terms of Chinese relations in the power, telecommunication, and railway industries. An IPO gives China the chance to buy a big stake even if the investment opportunity is otherwise limited. And with a bigger stake in Europe, it makes it easier for China to send goods to the European market (through its new rail line from Zhengzhou to Hamburg). Add a big stake in PKP SA to its DB Schenker (Deutsche Bahn) partnership, and China would be poised to have influence over a rather sizeable chunk of the European rail transport network. It’s the obvious investment for acquisition hungry China.