Railways Ministry Assets Put at $41Bln

The Railways Ministry's core assets are worth between 1.25 trillion and 1.3 trillion rubles ($41.3 billion), according to a preliminary inventory by the Railways and Property ministries.

The final figure will be calculated after a raft of bills that will form the legal foundation for railways reform is passed through parliament, which could happen before the end of the year.

Under the reform program, the core railway assets are to be transferred to open joint-stock company, Russian Railways, said Alexander Borodin, head of the transport department with the Property Ministry.

Russian Railways, which may be formed as early as the first quarter of 2003, initially will be 100 percent state-owned.

The ministry plans to spin off all noncore assets such as hospitals, housing, resorts, schools and maintenance and construction enterprises before creating the company.

Officials who remain at the Railways Ministry or join the railways department at the Transport Ministry will have strictly regulated functions.

Russian Railways' rolling stock eventually will be spun off into competing passenger and cargo transport companies, followed by locomotive companies and depots.

The company will control the remaining infrastructure, which accounts for 50 percent or more of the ministry's value but less than 90 percent, said Deputy Railways Minister Anna Belova.

Industry watchers and players differ on the accuracy of the estimate.

Boris Chertkov, general director of SUAL Transport, called the figure "frighteningly low."

"The railways cover 87,000 kilometers. When we built our link to Komi every kilometer cost about $500,000, so the rails alone are worth $40 billion," he said. "Add the cost of stations, depots, locomotive and rolling stock to this. The Railways Ministry owns a lot, and their assessment frightens me."

However, Yevgeny Gavrilenkov, chief economist at Troika Dialog, said that according to the State Statistics Committee all assets in the economy are together worth 25 trillion rubles.

"It works out that the Railways Ministry accounts for some 4 percent of the value of the whole country's assets, and this seems like rather a lot," he said.

Gas monopoly Gazprom should be worth much more than the railways, Gavrilenkov said. Gazprom's production assets were worth 1.2 trillion rubles as of Dec. 31, 2001, according to the giant's accounts under Russian accounting standards.

Eduard Neigebauer, deputy director of the Prospekt brokerage, also said the figures seem inflated.

"If the value of the assets has been overvalued, then they will be difficult to sell," he said.

But Mikhail Khazin, director for strategic development at the SBT consultancy, said the 1.3 trillion ruble figure is about right.

The evaluation is in many ways "virtual," he added.

"This isn't money on a bank account -- essentially it is the Railways Ministry's evaluation of its role in the economy," Khazin said.