EUROPE's first major railway privatisation programme was a convoluted affair with British Rail famously being divided into 100 separate units in preparation for sale. But the privatisation of Italian State Railways (FS) will be very different, as FS will remain a fully-integrated railway.
"We will privatise the whole of FS which is a strong and traditional railway and which is not a barrier to other operators," Elia told IRJ in Tokyo. "We don't want to destroy the system – only an integrated railway is useful. It can still be available to all operators, but someone must manage the whole system and develop the technology.
"Less than 40% of the value of the group will be sold and it will happen by the end of June 2016. It is a good choice for the state, for our clients, and for FS," Elia says.
In May FS appointed a joint venture led by McKinsey working with Ernst & Young and The Brattle Group as advisors for the privatisation process.
Selling parts
Limited privatisation of two FS activities is already underway. FS has started the process to sell part of its power supply network to Terna, a private electricity grid operator. "Negotiations are currently underway with Terna regarding 9000km of our medium and high-voltage electricity network through the country, which should be concluded in the autumn," Elia says.
Grandi Stazioni is being split into three segments - GS Rail, GS Retail and GS Immobiliare – and the retail section will be sold. "We are currently working on concluding all the preparatory stages," Elia says. He expects to be able to publish the public tender in the autumn and complete the sale by the end of the year.
Privatisation is being made possible because FS is profitable. Operating revenue increased by 0.7% in 2014 to €8.4bn and Ebitda grew by 3.9% to €2.1bn. However, Ebit dropped by 19.8% to €659m due to a 2.7% increase in amortisation which cost €30 and a €275m increase in depreciation and devaluation. FS says regulatory changes in 2014 led to a significant devaluation of some of its assets, mainly belonging to Trenitalia's Cargo business unit and FS Logistica property. As a result net profit fell by just over 34% to €303m.
Nevertheless, FS managed to increase capital investment in 2014 to €4.26bn of which almost €1.5bn is self-financed. Of this, €2.85bn was invested in infrastructure improvements and €1.1bn in rolling stock and other transport-related activities.
Elia says the priority is to increase capacity especially for commuters in Milan, Rome and Naples. "We prefer to use technology initially to increase capacity," Elia says. "We have sufficient track but we need to install a system to enable us to use the tracks more intensively." FS currently operates trains at 5-6 minute headways in the major cities but wants to reduce this to 3 or even 2-minute headways for which it needs cab signalling and ATO. It is now looking at a high-capacity version of ERTMS to achieve this. "We believe in innovation because it is the only way not to die," Elia says.
Elia is enthusiastic about the prospects for what is expected to be the world's fastest high-speed train: Frecciarossa 1000, the first of which entered service in April. "We asked for a 360km/h train and we will complete the validation by the end of the year," he says. "We specified that the train must not exert forces on the track at 360km/h that are any higher than a train operating at 300km/h. The new trains also consume 30% less energy at 300km/h than our older high-speed trains."
Frecciarossa 1000 has been authorised for operation in Italy but Elia wants the train to be certified in eight European countries. "We have to repeat the certification process in each country, but we are not starting from zero in each case," Elia explains. "We have had the first meetings with the national safety authorities in France and Belgium as we want to operate between Paris and Brussels, and we are searching for KVB signalling equipment for operation in France. We want to test whether our standard of service is as good as people in Italy say it is."
Competition
Elia says he does not necessarily want to compete with other operators outside Italy if FS is able to find a way to cooperate with other railways, but he recognises this may not be possible. Referring to Italy's private high-speed operator, NTV, Elia says: "We have coped with competition in Italy and now we want to try it abroad."
FS already run trains in Germany through its Netinaria subsidiary which it acquired from Arriva when the bulk of the company was purchased by German Rail (DB). Elia is clearly keen for FS to extend its reach further and take advantage of the opening of markets to competition in Europe.
