Global firms weigh in on high-speed rail development in California

Almost three dozen firms or teams of companies from around the world have put their names into the hat for potentially participating in the development of California’s high-speed rail program.

The firms, ranging from international construction conglomerates to global financial institutions, all submitted responses to the California High-Speed Rail Authority’s request for input in how to bring its ambitious bullet-train plans to fruition. Businesses were asked to offer their ideas by early this week on financing, building and delivering a ready-to-operate system of electric-powered passenger trains by 2022. Those responses will form the basis for the rail agency to determine its next steps for its first operational segment, a 300-mile route from Merced to Burbank estimated to cost about $31.2 billion.

Seeking companies’ interest “is not a formal procurement but is instead a means for the authority to gather practical feedback from the private sector, based on their experience and expertise, on how to structure upcoming procurements,” said Jeff Morales, the rail authority’s CEO, in a memo to the agency’s board members in advance of their meeting next week in Sacramento.

Among the issues for which the authority sought input were cost savings, schedule acceleration, innovation and attracting private-sector investment.

The responses represent firms from Spain, England, France, Italy, Sweden, Germany, China, Japan and Australia or their American subsidiaries, as well as some homegrown U.S. firms. They include some that are doing business with the rail authority or have done so previously, such as the Los Angeles-based consulting firm AECOM; Parsons Inc. of Pasadena, which is part of the contracting team building the first 29-mile segment between Fresno and Madera; and Dragados USA, a subsidiary of Spain’s Grupo ACS / Dragados that is one of the contractors to build a 65-mile section of the rail route through the Valley from Fresno to the Tulare-Kern county line.

Some are international banking or financing companies such as Barclays Bank and John Laing Investments, both in England, Meridiam Infrastructure of France and Australia’s Macquarie Capital or Plenary Group. And there are others who specialize in managing or operating transportation systems, including Spanish companies Isolux Corsan and Sacyr Concesiones, or Thales Group and VINCI Concessions, both based in France.

China, which has the fastest-growing system of high-speed rail lines in the world, weighed in with a pair of responses: one from Beijing National Railway Research & Design Institute of Signal & Communication Group Co. Ltd. and another from a consortium called Chinese High-Speed Rail Delivery Team. From Japan, the Japan California High-Speed Rail Consortium represents a collaboration of train manufacturers Kawasaki Heavy Industries, Hitachi, Mitsubishi Heavy Industries, railroad operator East Japan Railway Co., Mitsubishi Corp. and Sumitomo Corp.

Over the next month, staff will hold one-on-one meetings with respondents to discuss details of their responses, Morales said.

The rail line through the San Joaquin Valley, for which construction began earlier this year with completion expected in 2018, is intended to be the backbone of a $68 billion statewide system of trains connecting San Francisco and Los Angeles, with passenger trains traveling at speeds up to 220 mph by 2028. The initial operating segment from Merced to Burbank is planned to be the first portion of the line to carry paying passengers by 2022.

The rail authority has about $6 billion – a combination of about $3 billion in federal stimulus and transportation funds and about $3 billion from Proposition 1A, the $9.9 billion high-speed rail bond measure approved by California voters in 2008, to build its Valley sections from Merced to Bakersfield. The big question, from both critics and supporters, has been where the money for the rest of the system was to come from.

When the authority issued its request for responses in June, it raised the curtain on one potential strategy for getting the Merced-Burbank segment up and running: seeking a developer to finance, design, build and maintain the 300-mile route, in exchange for a 25- to 50-year repayment of the developer’s capital investment. The presumed source of repayment would be a stream of cap-and-trade money – funds paid by industries to the state to buy air-pollution credits under California’s landmark greenhouse gas-reduction program. The rail authority is scheduled to receive 25 percent of cap-and-trade money on an ongoing basis – anticipated to amount to about $500 million this year.

Remaining money from Prop. 1A, about $4 billion of which remains uncommitted, would be used to make incentive or “milestone” payments when the developer reaches certain benchmarks and match a portion of the developer’s investment. But the developer would be expected to finance the remaining costs in return for the long-term repayment.

This story was originally published September 30, 2015 at 4:32 PM with the headline "Global firms weigh in on high-speed rail development in California."