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Alstom agrees terms to acquire Bombardier Transportation

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Εργοστάσιο Alstom

Alstom has signed a memorandum of understanding with Bombardier and pension fund Caisse de Dépôt et Placement du Québec (CDPQ) to acquire Bombardier Transportation, ending weeks of speculation about a proposed tie up between the two railway equipment manufacturers.

Alstom will acquire 100% of Bombardier Transportation’s shares at between €5.8bn and €6.2bn. Under the deal, CDPQ, which currently holds a 32.5% stake in Bombardier Transportation, will become Alstom’s largest shareholder with around 18% of capital. CDPQ will reinvest about €2bn in Alstom plus an additional €700m. Bouygues will remain a shareholder in Alstom with around 10% of capital.

The signing of the MoU was unanimously approved by the boards of both Alstom and Bombardier and the transaction is fully supported by CDPQ and Bouygues.

An extraordinary general meeting to vote on the reserved capital increases and the rights issue will take place no later than October 31. This will be followed by a rights issue between the first half of 2020 and the first half of 2021.

The transaction is subject to approval from relevant regulatory and anti-trust authorities and closure of the deal is expected in the first half of 2021. However, this will be a challenge bearing in mind that the planned merger between Alstom and Siemens Mobility was overturned by the European Commission almost exactly one year ago over the potential impact of the deal on competition in the signalling and high-speed rolling stock markets.

The acquisition of 100% of Bombardier Transportation shares will be paid through a mixture of cash and new Alstom shares. The total equity component is about €5bn, of which €2bn will be raised on the market. €2.6-2.8bn of equity will be provided by CDPQ for a fixed price of €44.45 per Alstom share. Bombardier will provide €500m in equity for a fixed price of €47.50 per Alstom share. A €2.4bn bridging facility will be fully underwritten by banks and refinanced by equity of up to €2bn to be raised through a rights issue and new debt of about €400m.

Once the transaction is completed, Alstom will have an order backlog of around €75bn and annual revenues of around €15.5bn.

“I’m very proud to announce the acquisition of Bombardier Transportation, which is a unique opportunity to strengthen our global position in the booming mobility market,” says Mr Henri Poupart-Lafarge, chairman and CEO of Alstom. “This acquisition will improve our global reach and our ability to respond to the ever-increasing need for sustainable mobility. Bombardier Transportation will bring to Alstom complementary geographical presence and industrial footprint in growing markets, as well as additional technological platforms. It will significantly increase our innovation capabilities to lead smart and green innovation.”

Bombardier says the deal marks an “exciting new chapter” for the company. “Going forward, we will focus all our capital, energy and resources on accelerating growth and driving margin expansion in our market-leading $US 7bn business aircraft franchise,” says Mr Alain Bellemare, president and CEO, of Bombardier. “With a stronger balance sheet after the completion of this transaction, an industry-leading portfolio of products, a strong backlog, and a rapidly growing aftermarket business, we will compete in this market from a position of strength”

Alstom and Bombardier Transportation operate in a growing market with passenger traffic expected to increase by 3-5% annually between 2015 and 2025 and the global rail OEM market expected to achieve a 3% cumulative annual growth rate between 2021 and 2023.

Comparison

Alstom had an order backlog of €40bn and €8.1bn of annual sales at the end of its financial year on March 31 2019. By comparison, Bombardier Transportation had a €32bn order backlog and €7.4bn of sales as of December 2019. After the transaction, Alstom says it expects to benefit from significant additional technologies and added R&D resources.

Montréal will become the headquarters of Alstom of the Americas, leading all Alstom operations and expansion on the American continent. Alstom will establish a centre of excellence for design and engineering in Quebec, as well as high-tech R&D activities focused on developing sustainable mobility solutions.

“The acquisition of Bombardier Transportation is a one-time opportunity coming at the right moment for Alstom, having significantly strengthened its operational and financial profile over the past four years, and adding to Alstom complementary commercial and industrial platforms,” Alstom says.

Alstom says the deal will enable it to broaden its commercial reach in Germany, Britain, and North America and give it access to Bombardier Transportation’s unique presence in China and what Alstom describes as a best cost industrial footprint in Eastern Europe, Mexico and China. The takeover will add monorail and peoplemover systems to Alstom’s product portfolio, and give Alstom’s services business access to the largest installed train fleet worldwide and a wide range of maintenance facilities. Both companies are active in the railway signalling market.

Recovery plan

Alstom says it is committed to recover Bombardier Transportation’s full operational and profitability potential with the objective of restoring project execution and margin. This is important as Bombardier Transportation has been suffering from declining profits largely caused by a series of major delays in delivering new fleets of trains and reliability problems once trains are in service. Bombardier Transportation announced a 7% drop in revenue from $US 8.9bn in 2018 to $US 8.2bn in 2019 when it released its consolidated full year results on February 13.

Alstom says it plans to fix the problems at Bombardier Transportation by focusing on operation turnaround and backlog execution based on Alstom best practices systematic roll-out, a structured action plan to ensure successful integration and deployment of Alstom best practices and technologies globally, and instil Alstom’s financial discipline and successful track record in profitability growth. Alstom says it already has a good understanding of Bombardier Transportation through numerous projects on which the two companies have worked together.

 

Source: railjournal.com

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Epirus claims the advent of the railway in the region

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Epirus Region sends an official request for the train to reach the area. The request concerns the examination by the Ministry of Infrastructure and Transport of the maturation of a railway project that will connect Epirus with the national network of the country, thus reaching Ioannina and the port of Epirus, Igoumenitsa.

In the Regional Council, held on May 15, it was unanimously decided to send the above request in order to push the State to investigate the possibility of such a public investment with funding from the new programming period, i.e. NSRF 2021-2027. More particularly, the Region is calling for the construction of a new 147km railway line from Kalambaka to Igoumenitsa as this project is still environmentally licensed. In essence, we are talking about the completion of the so-called “Railway Egnatia”.

Kachrimanis (Epirus Governor): 110 years of promises – We will claim the advent of the railway

As the Regional Governor of Epirus, Mr. Alexandros Kachrimanis, told ypodomes.com, Epirus has a long history of announcements -of over a century- regarding the advent of the train. On July 17, 1911, the newspaper “Epirus” wrote about an announcement according to which railway would reach the town of Ioannina.

“From that point an on, every now and then, we talk about the arrival of the railway in the area but we never get to its implementation. There is no provision for this even now, but we, the people of Epirus, said that we will claim that the railway reaches Ioannina and Igoumenitsa”, he noted.

In fact, as Mr. Kachrimanis reveals, the Region, with its own resources, prepared a preliminary study for a new single-track railway line Igoumenitsa-Ioannina-Argyrokastro and from there an additional connection with a railway line from the town of Kozani.

“Let me remind you of the projects that started in the 1930s for the line to reach Kozani and never ended. Also during Mr. Vereli’s secretaryship, there was again a promise that was not kept”, emphasizes Mr. Kachrimanis, who even reveals that in the period 2005-2008 several studies were prepared but there was never a follow-up.

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GRITS: The new electronic tolling system with one transceiver for all motorways

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Σταθμός διοδίων

End titles for the tender regarding the installation of satellite tolls were put by the Ministry of Infrastructure and Transport after a decision of the Minister, Mr. Kostas Karamanlis, cancelling the relevant tender.

It was the last act of the case, as essentially the tender was already neutralized by the Council of State, where after an appeal of the participants, serious deficiencies were found.

It is reminded that it was an ambitious plan to install transceivers for the traffic control of all trucks and cameras for passenger vehicles, combined with free flow lanes on the motorways and a proportional charge according to the kilometers travelled.

Market sources describe this plan as maximalistic, as such a wide implementation, as they comment, does not exist in any country of the western world.

“GRITS”: A transceiver for all motorway axes

One cycle is coming to an end, but a new cycle is opening at the same time in the case of the modernization of greek motorways’ tolls. According to information of ypodomes.com, the agreement between the Ministry of Infrastructure and Transport and the concessionaires as well as the state-owned Egnatia Odos, has been secured. This agreement was one of the first goals set by Mr. Kostas Karamanlis, as a Minister.

The new system where all axes will be entering is the so-called “GRITS” (Greek Interoperable Tolling System). Aegean Motorway, Attiki Odos, Olympia Odos, Moreas Motorway and Gefyra SA are already included in the network. As of next October, Egnatia Odos and its vertical axes, Ionia Odos, Nea Odos and Kentriki Odos-E65 will also join.

For the drivers, this means that with one transceiver they will be able to drive on all covered motorways without having to change a device. The charge remains the same (0.06 euros per kilometer) as do the discount packages on each motorway. In short, drivers will charge the transceiver of their choice with money and with it they will be able to pay everywhere across the country.

According to sources close to the subject, the existing motorways are currently upgrading their systems and from June the testing of the systems will start for a period of 3-4 months. GRITS is reportedly scheduled to operate next October, possibly even a little earlier, if trials are completed soon.

For the future, a new tender for electronic tolling system is being explored where interoperability will go to a higher level with the operation of a free-flow system.

Operation of the hybrid tolling system on Olympia Odos on its way

IBI Group’s hybrid tolling system will also be put into operation soon by Olympia Odos. But what is the “hybrid tolling system” that is being implemented? It is basically a fairer charging policy that is addressed exclusively to the owners of o-pass devices (i.e. Olympia Motorway’s electronic transceivers).

Its “smart” operation is extremely simple. O-pass users are charged at the tolls according to the price of each station but upon drivers’ exit at the interchange of their choice, a calculation will be made subtracting the kilometers that haven’t been used till the next toll station. Based on these kilometers, the difference will be deducted from the paid price and the money will be refunded to the drivers’ accounts.

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Attiki Motorway: Procedures for extension projects and new concession period, begin

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Σήραγγες Αττικής Οδού

The process for the new tender regarding the operation of Attiki Motorway begins With the hiring of a technical and financial consultant. The three companies that have been selected by the Ministry of Infrastructure and Transport are: RACE Consulting Engineers LP, LDK Consulting Engineers SA and Hill International.

What is interesting in the decision of the Minister of Infrastructure and Transport, Mr. Kostas Karamanlis, is that it gives the possibility for more than one concession contracts, that is, the exploitation and operation of Attiki Motorway in sections.

As described in the decision: “The Ministry of Infrastructure and Transport intends to auction in the near future one or more concession agreements for the operation and maintenance of Elefsina-Stavrou-A/D Spata and the Western Regional Avenue of Ymittos, in combination with additional construction projects (extensions of Attiki Motorway and/or projects on other roads)”.

This scenario has gone public since last autumn and was even linked to funding VOAK Motorway project in Crete. The previous model received by the Ministry of Infrastructure for VOAK was considered financially unsustainable, however, this is just one among many scenarios for the next day on Attiki Motorway, that are on the table.

The search will be carried out with two elements: one related to the financial aspect as this affects the expiration date of the contract and the second to the parameters related to the provision for obligations such as heavy maintenance, upgrade of the tolling system, etc.

In more detail, the search will include issues related to:

Carrying out technical control of the Concession Agreement during the period of operation and maintenance and specifically for the production of a technical report focusing on the following issues:

A. Identification of time points for heavy maintenance of the project

B. Cost of heavy maintenance

C. Estimation of foreseen costs for the fulfillment of the obligations deriving from the concession agreement

D. Identification of the systems that refer to the regulation/control of the circulation as well as the collection of toll fares

E. Additional or emergency works performed which are not compensated by the State and that have been accounted for and have also been included in the financial model

F. Operating-maintenance costs in addition to the fixed remuneration of the operator and matching with the provisions of the contract between the operator and the concessionaire

Detailed examinations

In addition, issues such as: the validity of the applicable parameters for the correctness of application by the concessionaire, scrutiny on financial statements, extraction of information regarding contractual clauses on tax-free reserve, accumulated losses, etc. as well as the investigation of existing loan obligations, etc.

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