Peru regulator investigates Orient Express contract

By Terry Wade

LIMA, Dec 23 (Reuters) - Peru's transportation regulator has put the Machu Picchu railroad concession of Orient-Express Hotels under review, as would-be competitors pressure the luxury tourism company to open its tracks to competition.

The competitors allege the terms of the concessions were violated when Orient-Express (OEH.N: Quote, Profile, Research) was spun off from its parent company, Sea Containers Ltd SCRA.PK, before it filed for bankruptcy in 2006.

Romulo Guidino, the head of Orient-Express' Peruvian unit, Ferrocarril Transandino, said the government initially allowed the transfer of the concession from Sea Containers to Orient-Express, but then decided to investigate the transfer after receiving complaints from competitors.

"We are upholding all the terms of the contract," he told Reuters.

But two aspiring newcomers, Inca Rail and Andean Railways, disagree.

They say the company has repeatedly blocked their attempts to put trains on the scenic line that runs from Cuzco to Machu Picchu, which draws over 1 million visitors a year, and that the government has started to put pressure on Orient-Express to open its monopoly to competition.

This month, Peru's transportation ministry rejected Orient-Express' request for a five-year extension on its concession, now due to expire in 2034 after Peru privatized its rail infrastructure in 1999.

The company, whose share price has slid over 80 percent in the past 12 months on the global economic crisis, has high-end hotels all over the world, including the Cipriani in Venice and the Copacabana Palace in Rio de Janeiro. It also operates rail lines in Europe.