August 12, 2013 / 10:59 PM / in 4 years

UPDATE 1-Brazil delays high-speed train bids for at least a year

By Leonardo Goy

BRASILIA, Aug 12 (Reuters) - Brazil’s government put off bidding for a high-speed train project for at least one year because there was only one confirmed consortium competing for the 38 billion reais ($16.7 billion) deal, Transport Minister César Borges announced on Monday.

Lack of competition led the government to postpone the tender for the bullet train linking Brazil’s two largest cities, Sao Paulo and Rio de Janeiro, after Spanish and German groups guaranteed that they will bid if given more time, Borges said at a news conference.

After massive protests against corruption and misuse of public money paralyzed Brazilian cities in June, the government preferred not to open itself to further criticism by awarding the bullet train contract to the one bidder, analysts said.

Officials said only one group led by France’s Alstom SA and including state-owned railway company SNCF Group was ready to present their bid by Friday’s deadline.

Borges said the postponement was to increase competition and not related to an anti-trust investigation of foreign engineering companies over alleged price-fixing in building and maintaining railway and metro lines in Brazil.

Alstom and Germany’s Siemens AG, which leads a consortium looking to build the high speed train, have said they are cooperating with Brazilian authorities probing a possible cartel that colluded to win contracts between 2004 and 2007.

The 260-mile (420-kilometer) high-speed rail link is at the heart of a $100 billion investment plan by President Dilma Rousseff to upgrade Brazil’s roads, railways, airports and port through private concessions. The bullet train project has suffered a series of delays and cost revisions in recent years.

A previous tender in 2011 had to be canceled due to the absence of bids, leading the government to improve the terms for investors last year. The project is due to start running in 2020.

The government estimates 40 million people will ride the bullet train in its first year, with demand rising to 100 million passengers by the end of the concession in 2060. Some companies interested in the project question these numbers.

Critics of the project say it is not financially feasible because Brazil’s middle class is not big enough to ensure enough customers. They say the country should overhaul dilapidated existing infrastructure instead.

“We want the greatest possible competition,” said the head of Brazil’s infrastructure agency EPL, Bernardo Figueiredo.

Brazil hopes Japanese and South Korea companies that had shown interest but dropped out will now present bids, Figueiredo said. Those companies include South Korea’s Hyundai Corp and Japan’s Hitachi Construction Machinery Co Ltd and Mitsubishi Heavy Industries.

The Spanish consortium formed by state train operator Renfe and high speed train maker Talgo, once considered the favorite to win the Brazilian contract, last week asked for a postponement to have time to redo its bid.

The Spanish group sought and got guarantees from Brazil that it would not be excluded from the bidding because of the train crash that killed 79 people in Galicia last month.

Spanish officials told the Brazilian government that the worst rail disaster in Spain’s history did not involve a train that was running on a high-speed system.

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