(Bloomberg) — Italy’s state railway Ferrovie dello Stato SpA is moving ahead with plans to sell minority stakes in its high-speed train network, Chief Executive Officer Stefano Donnarumma said.
The head of a vast company whose tracks total almost 17,000 kilometers (10,600 miles) throughout the euro zone’s third-biggest economy wants to build up an investor base that broadens ownership of some of the country’s major lines.
“We are in preliminary talks with international and other funds to sell minority stakes in a new company to be created from the high speed part of the RFI unit, which could eventually boost its value to as much as €70 billion in 10 years,” Donnarumma said in an interview. The high-speed network is currently valued at around €8 billion ($9.4 billion), he said.
Donnarumma’s appointment a year ago by Prime Minister Giorgia Meloni was among the most high profile changes she has enacted at publicly-controlled companies. The move to tap investors underscores how an entity that symbolizes the Italian state’s national reach is modernizing and looking beyond its borders.
Under Donnarumma, Ferrovie is trying to improve the country’s transport connectivity by implementing an ambitious spending plan totalling €100 billion over five years, and including some of the biggest single projects driven by the European Union’s recovery fund.
As part of that, he wants to attract private capital, and is in talks with the Finance Ministry to adopt a so-called RAB, or regulated asset base model, which has predictable cash flows, thus offering steady returns which are attractive to private investors.
Speaking in an interview at Bloomberg’s Rome office on Wednesday, Donnarumma said he is hoping that foreign funds will take an interest, alongside Italian players such as infrastructure fund F2i SGR SpA.
The 57-year old mechanical engineer, who grew up in both Milan and in the southern seaside city of Salerno, said he’s relishing the challenge of running a company with over €16 billion in revenues and 97,000 employees.
Regarding Ferrovie’s future, Donnarumma said the company will remain solidly Italian because it provides a service to the country connecting even the remotest areas. He ruled out the possibility of listing on the stock exchange, insisting “there’s no such project.”
Ferrovie does have international ambitions in the way of expansion of travel outside Italy’s borders. One such idea would play into a broader plan to build a continent-wide high-speed rail system that functions like a subway and rivals air travel.
“We would like to contribute to the creation of a European ‘metro-line’ that connects many of the cardinal points,” Donnarumma said.
Ferrovie’s Frecciarossa fast trains already run to Paris and Lyon. Earlier this month, a further connection to Marseille started running.
The distinctive arrow-shaped red trains are also headed for other European cities, with plans to connect Rome and Milan to Munich by next year, and extensions north to Berlin and South to Naples expected by 2028.
Ultimately, Donnarumma wants his trains to reach London via the Channel Tunnel. That’s planned for 2029, by which time he is expects Ferrovie’s international passenger numbers to have risen by 40%.
The company’s recently created international unit pools subsidiaries from countries including Greece, Germany, the Netherlands, Spain, the UK and France.
In Italy itself, Donnarumma said the group is pushing ahead with investments across the peninsula. In the North, that includes horizontal connections from Milan to Venice, and improved lines from Genoa to Milan.
Ferrovie’s projects in the south of Italy include the Salerno-to-Reggio Calabria line, which he said now has financing, and the Naples-to-Bari line aimed at connecting the east and west coasts of Italy with fast trains.
In addition to state funding, the group is the single largest beneficiary in Italy of European post-pandemic funds, with €25 billion out of a total €190 billion in grants and loans earmarked for the country. Ferrovie has already invested €13 billion and will continue to do so despite some delays, Donnarumma said.
The company is also investing about €200 million in infrastructure including antennas to improve services like onboard wifi. Donnarumma said in the autumn they plan to run some tests on the Turin-to-Milan rail line, and in two or three years, they could cover the whole high-speed network.
Donnarumma has spent his career in the corporate world. He started out in 1993 at automaker Fiat SpA, before working for Bombardier Inc and Alstom SA in train production. He has extensive experience in state-owned companies including electricity network Terna SpA and most recently multi-utility ACEA SpA.
He’s glad to return to an area that he says was his first passion as a child with multiple toy rail sets.
“When I was a kid I would pretend I ran the train company,” said Donnarumma. “Now I actually get to do it.”
–With assistance from Flavia Rotondi.
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