BERLIN German Finance Minister Wolfgang Schaeuble has agreed a 1 billion euro (857.46 million pounds) cash injection for indebted rail operator Deutsche Bahn [DBN.UL] and additional investment in its network, the transport ministry said on Wednesday.
The government will inject the 1 billion euros this year or next to shore up Bahn's capital. Over the coming four years, the state could invest another 1.4 billion euros in the network, the spokesman said.
State-controlled Deutsche Bahn has almost 20 billion euros (17.15 billion pounds) of debt.
In July, credit rating agency Standard & Poor's cut the group by one notch to "AA-" from "AA", citing a weak operating performance and uncertainty over the timing and proceeds of a partial privatisation of units Arriva and Schenker.
The capital injection is aimed at avoiding further downgrades that would raise Bahn's interest payments.
Kirsten Luehmann, who sits on Deutsche Bahn's supervisory board, said the capital injection meant it was no longer necessary to partially privatise British subsidiary Arriva.
"The plans for a capital increase make this superfluous," added Luehmann, a transport policy expert with the Social Democrats (SPD), junior partners in Chancellor Angela Merkel's ruling coalition.
Deutsche Bahn had planned to sell part of Arriva along with 40 percent of its logistics subsidiary Schenker to raise 4 billion euros to service debts.
Ludolf Kerkeling, head of the NEE European rail network lobby group, said the capital hike plans would not improve Germany's rail network.
"The planned capital increase is not foremost about improving rail transportation in Germany, but rather attends to incorrect political and corporate decisions," he said.
Under the agreement with Schaeuble, Bahn will reduce its dividend payments to the government, which in recent years flowed back to the group in the form of investments in its rail network, and Berlin will cover the shortfall.
This will amount to a further 1.4 billion euros in government investments over four years.
(Reporting by Markus Wacket; Writing by Paul Carrel; Editing by Ruth Pitchford and Mark Potter)