28 Jun 2022 11:16

TMH sells Hungarian business to local partner Magyar Vagon - paper

MOSCOW. June 28 (Interfax) - Russian train maker Transmashholding (TMH) has sold its business in Hungary to local partner Magyar Vagon Zrt, business daily Vedomosti said on Tuesday, citing TMH CEO Kirill Lipa.

Mutual settlements became a serious obstacle to further cooperation with Hungarian partners, Lipa said. "We worked through the Hungarian [subsidiary of] Sberbank , but due to sanctions it halted operations. Opening accounts at other Hungarian banks in the current circumstances is an impossible task for a Russian company," he said.

Lipa did not disclose the price of the sale. TMH subsidiary TMH International had two 50-50 joint ventures with Magyar Vagon in Hungary that specialized in railway projects, called TMH Hungary and TMH Hungary Invest. The latter acquired 90% of Hungarian engineering company Dunakeszi two years ago at an estimated cost of $25 million-$30 million. TMH Hungary managed Dunakeszi.

TMH Hungary signed a contract with Egyptian National Railways (ENR) in 2018 for the delivery of 1,300 passenger cars over five years for over 1 billion euros. At the time, TMH Hungary was still wholly owned by TMH, but Hungarian partners bought 50% of the company in 2019.

Under the contract, the first 650 railcars are being supplied by TMH's Tver Carriage Works (TVZ) and the other 650 are being delivered by Dunakeszi. The first cars were delivered to Egypt in 2020. The contract is being financed by the Hungarian and Russian export-import banks.

"Under the terms of the financing, we were required to ensure 51% localization in Hungary. Therefore, we were supposed to only supply a certain portion of products from Tver in any case. And the whole Tver part has already been carried out, meaning that, in terms of industrial, trade, economic and commercial cooperation, everything is finished with the Russian side," Lipa said.

He said TMH has retained the design documentation for the railcars, engineering support, operational planning and overall coordination of the project. Everything that was planned for this project in cooperation with Hungary will be carried out, but without TMH equity participation, Lipa said.

"The current circumstances might increase the duration of implementation, but negligibly. The project was supposed to end in August 2024, but it will probably end in April 2025," Lipa said.

Dunakeszi also secured a contract in August 2020 from Hungarian passenger train operator MAV-Start to repair and modernize its fleet of 403 passenger cars over four years. The cost of this work will total 90 million euros, TMH reported.

TMH is not the first Russian engineering company forced to part with its foreign business. In mid-June it was reported that OMZ Group , which is owned by Russia's Gazprombank , had sold its Czech nuclear engineering subsidiary Skoda JS. Investment group Wood & Company Financial Services bought 100% of shares in the company on behalf of Czech energy company CEZ in a deal experts valued at $50 million-$70 million.