Alstom to bid in Tel Aviv light rail tenders

The French company is pleased with its role in the Jerusalem light rail, but is anxious about progress in Tel Aviv.

No transportation project in Israel has been eulogized as much as the Tel Aviv light rail project. Like a phoenix, the project has been repeatedly buried, only to revive as the congestion in the first Hebrew city worsens. The latest version of December 2010 is wholly financed by the state budget. The initial estimate is NIS 10.7 billion and the deadline is 2017.

Almost two years have passed, and the project is still in doubt, not just among greater Tel Aviv's residents, but also among the foreign contractors which are supposed to build the first line. At the InnoTrans, International Trade Fair for Transport Technology, in Berlin in September, executive of the contractors laughed out loud when asked their opinion if the light rail would leave the station by the government deadline of 2017.

France's Alstom SA (Euronext: ALO) built the Jerusalem light rail and plans to bid in tenders for building the Tel Aviv line. Alstom executive Jean-Pierre Gollot was the only person will to talk openly with "Globes" on the matter. "When I came to Israel for the first time 20 years ago, I was told that there were two major LRT (light rail train) projects: Jerusalem and Tel Aviv," he said. "When I asked which of the projects would get underway soon, I was told, 'Look, Jerusalem is a very sensitive project. Tel Aviv is a relatively simple project, and the government is very serious about it."

"Globes": Where is the problem, in your opinion?

Jean-Pierre: "The problem on putting dates on the projects is with you. We see in Israel a lot of advantages and professionalism, but we're a bit worried about everything to do with planning. The problem is the timing of decisions."

Alstom, one of the West's leading light rail rolling stock manufacturers, was a partner in Metrorail, which in 2006 bid in the tender to build the Tel Aviv light rail's Red Line, but lost to the MTS consortium (led by Africa-Israel Investments Ltd. (TASE:AFIL)). Since the decision to nationalize the project in 2010, Alstom has prepared to bid in the tenders for the project's rolling stock and signals, electrical, and control systems.

"Regrettably, we're again seeing delays," Alstom Transport South Europe VP Gian-Luca Erbacci told "Globes". "The systems tender is far advanced, but the rolling stock tender was supposed to be published last April, but there is no new date."

Since the launch of the Red Line project in its current format under NTA Metropolitan Mass Transit System Ltd., it has been battling the Ministry of Finance's Accountant General Department, which believes that the nationalization of the project was a huge mistake. An Account General official embarrassed NTA CEO Michael Ratzon, by freezing the rolling stock tender a few days after Ratzon announced at an infrastructures conference that the tender would be published "next week".

In September, NTA chalked up a victory, when Deputy Accountant General Gil Shabtai unexpectedly announced his resignation. But this has not ended the battle. NTA has professional problems as well. Two persons it approached to oversee the Red Line project turned the offer down, and it has been unable to find a candidate with a world-class reputation.

"Since 1998, we've been busy in writing proposals for tenders for this project," the Israeli representative of a foreign rolling stock manufacturer told "Globes". "If the political infighting doesn’t stop, we won't see any tenders this year either."

Erbacci does not mention the behind-the-scenes battles and is careful not to criticize NTA or the government. "The customer is king for us, and decides which systems best suit him," he says. He warns, however, that the light rail that the specifications the government wants to build for greater Tel Aviv differ from the norm in the competitive global light rail market. "This is a rather unacceptable mix of light rail and metro," he says, adding, "It is liable to raise the project's cost and affect its profitability."

Please explain.

"The line planned for Tel Aviv is partly underground and partly aboveground. The aboveground section does not have a separate route, but runs through a pedestrian road. The system therefore has to operate at two speeds: high speed below ground, and low speed aboveground. Such systems exist in Germany and France, but they require special adaptations."

Alstom insists that it believes in the Red Line, and that the tenders will attract strong interest among international vendors. "This is one of the top five projects of its kind in the world, and everyone is talking about it," says an Alstom officer. "Israel is a stable and functioning country with a strong payments ethic compared with other countries where Alstom operates."

Nonetheless, Alstom believes that in view of the Red Line's complexity, there is greater logic in choosing one the world's largest and most experienced light rail manufacturers, such as Alstom, Siemens AG (DAX: SIE; NYSE: SI), or Bombardier Inc. (TSX: BBD), to supply the rolling stock and other systems. This message is mainly directed at NTA, which wants to include Chinese companies in the project, even though they have negligible experience in projects outside China. The large number of companies that bid in the prequalification stage in the rolling stock tender - 16 altogether - also worries the big companies.

"The most complicated part that is most liable to breakdowns in megaprojects like the Tel Aviv light rail is integrating the contractors carrying out different parts of the project, the tunnels, stations, systems, rolling stock, and so on," a foreign trains expert told "Globes". "The integrator has to make sure that all the systems meet the line's complex specifications. For example, the volume of traffic in Tel Aviv, 12,000 passengers per hour each way, is right at the upper capacity limit of light rail networks. NTA has already assumed the great responsibility of the project's integration, and for that reason it is especially important to work with companies with experience in such complex projects."

Jerusalem light rail is a success

Alstom built the Jerusalem light rail line together with Ashtrom Properties Ltd. (TASE:ASPR) as part of the CityPass consortium. Alstom still owns 20% of the consortium, because the government has not approved the sale of the stake to Israel Infrastructure Fund (IIF) for NIS 24 million, which the companies agreed to in late 2010. The Jerusalem light rail has been operational for a year, even as the government and CityPass continue to clash at the arbitrator.

Nonetheless, Erbacci believes that the Jerusalem light rail is a success. "It's true that there were problems with the traffic lights and the drivers, as well as technical glitches, but this was the first experiment in operating such a system in Israel. We also encountered new problems, such as security issues, which require stopping traffic at an intersection every time there is a suspicious plastic bag. But, bottom line, we see that the trains are almost full and the line has become a symbol of the city. Jerusalem can be proud of its light rail."

The government is preparing to sue CityPass for more compensation.

"We're ready for it."

Published by Globes [online], Israel business news - www.globes-online.com - on October 11, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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