Rail con­sor­tium gears up for 2nd chance in­Mex­ico

Ex­perts say hopes are high that Chi­nese-led group will win re­vised ten­der, re­ports Zhong Nan.

China Daily (Canada) - - BUSINESS -

An­a­lysts say that a Chi­nese-led con­sor­tium is still a strong con­tender to win a land­mark con­tract to buildMex­ico’s first high­speed rail­way, in a bid­ding process be­ing re­ar­ranged for next year after the coun­try de­cided to with­draw an ear­lier of­fer to the group. Mex­i­can Pres­i­dent En­rique Pena Ni­eto can­celed the orig­i­nal $3.7 bil­lion con­ces­sion granted to the con­sor­tium early last month, amid crit­i­cisms that it was the only bid­der.

The con­sor­tium’s bid team has since stayed in Mex­ico and both the Chi­nese com­pa­nies in­volved and the gov­ern­ment have de­manded the Mex­i­can au­thor­i­ties restart the bid­ding, hop­ing that the ten­der process can be prop­erly set­tled this time, and as soon as pos­si­ble.

Ea­ger to se­cure the deal, Siemens AG of Ger­many, France’s Al­stom, Canada’s Bom­bardier Tran­sit Corp and Mit­subishi Corp of Ja­pan have all now said they will par­tic­i­pate in the re­ar­ranged ten­der, which is sched­uled to be held in eight months, ac­cord­ing to China CSR Corp, one of the coun­try’s largest train­mak­ers and a part­ner in the bid­ding con­sor­tium.

The orig­i­nal eight-company group for the new rail­way project, planned to con­nec­tMex­ico City and the cen­tral city of Quere­taro, was led by China Rail­way Con­struc­tion Corp and CSR.

Wang Meng­shu, an aca­demic spe­cial­ized in rail and in­fra­struc­ture projects at the Chi­nese Academy of En­gi­neer­ing, said even though there are com­pet­i­tive ri­vals, the ad­van­tage the

(CSR is plan­ning to es­tab­lish) a new man­u­fac­tur­ing and main­te­nance base to serve the needs of Mex­ico ... if the con­sor­tium won the bid next year.” WANG MENG­SHU ACA­DEMIC, THE CHI­NESE ACADEMY OF EN­GI­NEER­ING

Chi­nese com­pa­nies have is they are able to of­fer the whole pack­age of ser­vices needed to com­plete the project, in­clud­ing in­fra­struc­ture con­struc­tion, rail ve­hi­cles, main­te­nance and pro­fes­sional train­ing for lo­cal staff.

Wang, who is also a mem­ber of the team that is mod­i­fies the orig­i­nal bid doc­u­ment, said CSR is plan­ning to es­tab­lish “a new man­u­fac­tur­ing and main­te­nance base to serve the needs of Mex­ico, as well as its neigh­bor­ing mar­kets if the con­sor­tium won the bid next year”.

Op­er­at­ing in Mex­ico can be tricky for for­eign heavy in­dus­trial com­pa­nies, faced with high la­bor, lo­gis­tics and man­u­fac­tur­ing ma­te­rial costs, as well as an im­per­fect in­dus­trial chain.

Quere­taro is the cen­ter of Mex­ico’s aero­space in­dus­try and the new rail­way will be used to carry some 23,000 daily com­muters from the city at speeds of up to 300 kilo­me­ters per hour. The orig­i­nal bid­ding process be­gan in the mid­dle of Au­gust.

“High-speed trains with op­er­a­tional speeds of over 300 km/h have been run­ning in China for more than five years in var­i­ous ter­rain and cli­matic con­di­tions, and for­eign com­peti­tors are fully aware that Chi­nese rail prod­ucts have sig­nif­i­cant price ad­van­tages,” saidWang.

“It won’t take us long to pre­pare the next bid­ding doc­u­ment.”

Wang said the Mex­i­can gov­ern­ment plans to of­fer com­pen­sa­tion based on the ini­tial con­tract, but no ac­cu­rate fig­ure has been ac­cept­able so far to the Chi­nese-led group.

Even though the fi­nal cost for the con­nec­tion is still un­clear, the in­vest­ment pack­age has been es­ti­mated at $3.75 bil­lion to $4 bil­lion. The Mex­i­can gov­ern­ment pre­vi­ously wanted to start con­struc­tion in De­cem­ber and the line is ex­pected to be op­er­a­tional in 2017.

The high-speed project is part of the Mex­i­can pres­i­dent’s cam­paign to bring back pas­sen­ger trains, which all but dis­ap­peared more than a decade ago, ex­cept for some tourist lines.

Dong Yan, a rail trans­porta­tion re­searcher at the Na­tional De­vel­op­ment and Re­form Com­mis­sion, said the Chi­nese group should pay at­ten­tion to the likely ri­val ten­der be­ing sub­mit­ted by Canada’s Bom­bardier, which has years of in­dus­trial ex­pe­ri­ence in­Mex­ico.

After build­ing bul­let trains, light-rail ve­hi­cles and sub­way cars for the do­mes­tic mar­ket over the past decade, China’s train mak­ers and rail in­fra­struc­ture com­pa­nies have be­gun to work to­gether in re­cent years to take ad­van­tage of the huge op­por­tu­ni­ties be­ing of­fered glob­ally.

Dong said although it is the sec­ond bid, the Chi­nese rail con­struc­tion com­pa­nies are at­trac­tive to the­Mex­i­can gov­ern­ment and its business part­ners be­cause un­like their­com­peti­tors­fromCanada, Ger­many, South Korea and Ja­pan, they can come with their own fund­ing.

“They are ca­pa­ble of co­or­di­nat­ing fi­nance for projects through Chi­nese in­sti­tu­tions such as the Ex­port-Im­port Bank of China or China De­vel­op­ment Bank,” said Dong. “They also do not gen­er­ally seek sov­er­eign guar­an­tees when work­ing with lo­cal part­ners.”

China is cur­rently in talks with more than 20 coun­tries such as Sin­ga­pore, the United King­dom, the United States, Rus­sia and In­dia on po­ten­tial high-speed train projects.

So far it has se­cured three over­seas deals, in­clud­ing the sec­ond phase of the Ankara-Istanbul high-speed rail line in Turkey, and parts of the Hara­main high­speed rail project in Saudi Ara­bia.

Zhao Jian, a pro­fes­sor of rail trans­porta­tion at Beijing Jiao­tong Univer­sity, said one sig­nif­i­cant fac­tor in their fa­vor is that Chi­nese rail in­fra­struc­ture com­pa­nies are cur­rently more in­clined to adopt a “buildtrans­fer” business model to carry out projects in over­seas mar­kets, in­stead of us­ing the “build-op­er­ate-trans­fer” model as they might have in the past.

Be­cause the projects are be­ing built on for­eign soil, op­er­at­ing them may bring yet-un­known ad­di­tional po­lit­i­cal, so­cial or en­vi­ron­ment risks, said Zhao.

Un­der the present cir­cum­stances, Zhao sug­gested that this time, if it be­comes a mat­ter of who is pay­ing for it, Mex­ico could use its min­ing re­sources to un­der­write any loan needed. Con­tact the writer at zhong­nan@chi­nadaily.com.cn

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