SNCF and Deutsche Bahn are favourites to become a partner of Renfe Mercancías, Spain’s national rail freight operator, which is looking to expand its cross-border connections.

The Spanish Government is due to start assessing potential candidates on Renfe’s behalf in November, before a partnership agreement is signed towards the end of next year. The company wants to establish new intermodal links with Portugal and France, including the Port of Barcelona-Lyon high-speed corridor and the Perthus Tunnel under the Pyrenees.

Economic infrastructure

Renfe previously tried and failed to find a partner in 2016, but the then likely candidate Deutsche Bahn ended negotiations, citing factors such as unsatisfactory rail connections with ports and airports. The company has since worked hard to improve its economic infrastructure, chiefly through a 2017-2019 management project. This has resulted in the company achieving a balanced ‘Ebitda’ (Earnings Before Interest, Taxes, Depreciation and Amortization) so far in 2017.This followed Ebitda losses of -9.7 million Euros in 2016 and -8 million Euros in 2015. Ebitda is a particular method of assessing a company’s financial strength often used in valuation ratios. It is commonly used in Spain, Portugal and Italy when investors request a firm’s Ebitda as a basis for starting negotiations.

Renfe Mercancias wants to further improve its results in 2018 and 2019, by achieving moderate profits. Key actions for achieving these goals are reducing the workforce by 25 per cent and selling its shares in two freight rail companies. One is Transfessa, whose main shareholder is Deutsche Bahn (75 per cent), with Renfe having a 20 per cent stake. The other is Semate, of which Renfe owns 30 per cent of the shares. Transfesa has the majority shareholding of 62 per cent.