BUSINESS

Bombardier-led group wins US$288-million contract for Azerbaijani rail project

09/11/2013 12:07 EDT | Updated 11/11/2013 05:12 EST
MONTREAL - Bombardier's rail division continues to expand its signalling business by winning its first major contract in the Eastern European country of Azerbaijan.

The Berlin-based division of the train and plane maker is part of a consortium awarded a US$288 million contract to supply signalling equipment for a 503-kilometre line to Azerbaijan Railways. The equipment will be installed along a corridor connecting Asia and Europe.

Bombardier Transportation's (TSX:BBD.B) share of the contract is US$203 million. It will deliver an Interflo 200 signalling system on the Baku-Boyuk-Kesik section of the line. A Russian joint venture partner will supply the engineering work.

"We are proud of our first contract in Azerbaijan, the largest signalling contract ever awarded in the CIS (former Soviet Republic) countries," stated Peter Cedervall, president rail control solutions for Bombardier Transportation.

The Interflo 200 technology is in Russia, as well as in Brazil, Thailand and across Europe. It is typically used for busy networks where higher safety levels are required. The system can eventually be upgraded to be compatible with the European Rail Traffic Management system.

The Trans-Signal Rabita consortium's contract includes the design, manufacture, supply, installation, testing and commissioning of the double track line. The project will be completed over four phases, ending in 2017.

Analyst Walter Spracklin of RBC Capital Markets said that while the contract is not large, signalling work tend to attract higher margins than rolling stock.

(It) "further solidifies Bombardier's growing market share in rail signalling and highlights continued benefits being reaped from relationships fostered in Russia and the Eastern block," he wrote in a report.

Systems and signalling contributed US$1.28 billion in revenues for Bombardier Transportation last fiscal year, or 15.7 per cent of its overall revenues.

Bombardier has more than 14 years of signalling experience in the Commonwealth of Independent States (CIS) and Baltic countries. But its relationship with the Soviet Union and Russia dates back more than 50 years.

In the late 1990s, it acquired rail coach maker Deutsche Waggonbau AG (DWA). It also supplied electrical propulsion equipment for the new dual-voltage locomotives being built by Novocherkassk Electric Locomotive Works NEVZ.

In 1996, Bombardier and Russian Railways formed the joint venture Bombardier Transportation (Signal) Ltd., the first international joint venture to be formed for the Russian Railways. The partnership employs 150 workers. Two years ago, Bombardier Transportation acquired a large minority stake in Russia's largest signalling equipment producer known as Elteza, a subsidiary of the Russian Railways.

On the Toronto Stock Exchange, Bombardier's shares set a new 52-week high of $5.01 in intraday trading. They were up five cents at $5 in midday trading Wednesday.