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TrainOSE, Greece: Privatisation on the anvil [free access]

September 1, 2013

TrainOSE is the state-owned rail operator in Greece. The company operates all rail services in the country except the Athens Metro system. It was established in 2005 as a subsidiary of the Greek national railway company (OSE) and the ownership was transferred in 2008 to the Hellenic Republic (HR). The company is currently in the process of being privatised. The move is part of an attempt by the national government to deal with the country’s economic crisis and the growing national debt by selling stake in state-owned assets as per agreements with the European Commission. In July 2013, Hellenic Republic Asset Development Fund (HRADF) requested pre-qualification bids.




TrainOSE is engaged in the provision of traction services for the rail transportation of passengers and freight; the development, organisation and exploitation of urban, suburban, regional, extra-urban railway transportation of passengers and freight; as well as bus transportation or combined transportation of passengers and freight as well as the provision of all logistics services.


As of December 2012, the company operated a railway network of more than 1,500 km with over 300 daily itineraries, serving 15 million passengers and 4.5 million tonnes of freight annually.


The rolling stock operating on TrainOSE’s network is leased from the OSE. Under the privatisation process, rolling stock ownership is being transferred to the HR and rolling stock maintenance (currently provided by OSE) is being transferred to the new state-owned company ROSCO S.A. (ROSCO).


Financial health


For the calendar year 2012, TrainOSE reported an annual turnover of EUR83 million.


As of December 2012, third party claims for damages pending before competent courts was about EUR31.5 million and the outstanding debt owed by the Greek State to TrainOSE was about EUR122 million, largely because of overdue value added tax (VAT) returns.


New business opportunities


Recently, the company has taken several initiatives to increase its attractiveness to private players.


In March 2013, TrainOSE signed an agreement with US-based Hewlett-Packard (HP) and China-based shipping company, Cosco. According to the terms of the agreement, HP will distribute its products in Central and Eastern Europe by maritime transport to Cosco's private commercial (containers) terminal in the port of Piraeus and then by international freight rail transport provided by TrainOSE. The agreement coincides with the completion of a rail line linking the port of Piraeus with the country’s inter-European railways network. This initiative is estimated to result in significant profits for TrainOSE.


Since May 2013, the company is offering a new overnight intermodal freight transport service called Intermodal Cargo Shuttle (ICS) on a daily basis, providing terminal-to-terminal and door-to-door freight transport from Athens to Thessaloniki. This initiative is expected to significantly improve TrainOSE’s revenues.


Additionally, the planned expansion of the existing national railways system to the new terminal in Alexandroupolis port, the new port of Kavala (Nea Karvali) in Northeast Greece, and to the port of Lavrion in South Attica, is expected to increase business opportunities for TrainOSE.


Contracts prior to privatisation


HRADF has envisaged that prior to the completion of the tender procedure for privatising TrainOSE, the company would enter into the following contracts:


Privatisation process and criteria


The privatisation process for TrainOSE is being carried out through an international competitive tender released by the HRADF in July 2013. It will comprise two main phases – pre-qualification, and investor selection.


Pre-qualification: In this phase, potential investors will have to submit their expressions of interest (EoI) documents to the HRADF by September 16, 2013. The investors will then be selected to participate in the second phase based on their financial capacity and the legal eligibility criteria set out in the invitation.


The financial capacity criteria concerns the minimum equity of interested investors for the three most recently audited financial years (in the case of corporate entities) and the minimum sum of active and uninvested/uncommitted funds for the latest financial year (in the case of private equity firms or funds). In the case of a consortium, the financial capacity criteria must be fulfilled by each consortium member on a pro rata basis to its stake in the consortium.


The legal eligibility criteria concerns criminal offences related to the professional or business conduct of the companies, as well as the good standing of interested investors and authorised representatives.


It has also been mentioned in the tender document that a member of a consortium may not participate in more than one consortium at the same time during the tender procedure, nor may a member of a consortium participate in the tender procedure also as a single interested party.


Investor selection:  In this phase, the pre-qualified bidders will be requested to submit their binding offers. The investor selection criteria and process will be elaborated in the Request for Binding (RoB) offers, although the value of the bid will be the critical criterion. Following this, subject to a confidentiality agreement, the pre-qualified bidders will be provided with information on the company and rights-of-site visit, and will be allowed to comment on the draft share purchase agreement (SPA) and any other legal documentation that may be provided to them in accordance with the RoB offers.




Given TrainOSE‘s operations and especially its business development potential, the privatisation move is expected to attract the attention of potential foreign investors. It is reported that companies from Russia, France, Germany, and the US have already shown interests in the tender.


There are also plans to privatise ROSCO. HRADF has already launched an international tender in August 2013 for the sale of 100 per cent stake of ROSCO. The Investment Bank of Greece and Kantor Management Consultants will act as financial advisors for the deal; law firms Hogan Lovells International LLP and M. & P. Bernitsas Law Offices will act as legal counsels, and Louis Berger S.A. will be the technical advisor.


(1 EUR [Euro] = 1.34 USD)