Siemens to finalise more contracts for Egypt's $4.45bn high-speed rail system by year-end

Agreements for the second and third lines on the 1,800-km rail network to be completed in 2021 subject to financial closing

Siemens Mobility expects to finalise agreements for the second and third line of Egypt's $4.45 billion high-speed electric rail system by the end of this year after financial closing, according to the company's chief executive for the Middle East and Africa.

The project is already generating a “high level of interest” from other countries in the region and the German contractor is in ongoing discussions with Egypt's National Authority for Tunnels and the Ministry of Transport on the two lines, Leon Soulier, Siemens Mobility's chief executive for the Middle East and Africa, told The National on the sidelines of the Middle East Rail exhibition in Dubai. Siemens is awaiting the go-ahead from the Egyptian Cabinet.

“The idea is that we would still close both contracts within this calendar year, subject to financial close, because not only are we doing the construction, supply and maintenance, we are also providing a financing package,” he said.

“What we need is the Egyptian Cabinet's approval for the Ministry of Transport to be mandated to sign the further lines and this is the important step that remains to be done. We're bringing the financing, but in the end the financing has to be repaid, just subject to Cabinet approval. ”

Last month, a consortium comprising Orascom Construction, Siemens Mobility and Arab Contractors won the multibillion-dollar contract for Egypt's first high-speed railway line that will connect the country's Red Sea and Mediterranean coasts. The deal covered the initial 660-kilometre line out of the total 1,800km of rail network planned. Siemens, which dubbed the project a “Suez Canal on tracks”, will receive a share of $3bn out of the total $4.45bn contract value.

The company plans to deliver the first of its high-speed trains, which will be adapted for Egypt's climate, in two years, Mr Soulier said.

The 660km line is designed to carry up to 30 million people per year, saving up to 50 per cent travel time and cutting carbon emissions by 70 per cent, compared to the current use of cars and buses.

The Arab world’s most populous country is undertaking the project as part of wider plans to upgrade its overcrowded transport network, protect the environment, create jobs and develop its economy.

The project financing will be based on engineering, procurement and construction (EPC), plus financing basis. The consortium will help structure and arrange the financing on behalf of the client.

Siemens “have engaged with banks and financial institutions to see if they can provide loans for this project, but this is from the banks directly to the Egyptian government, the Ministry of Finance and the central bank”, Mr Soulier said. “We have facilitated those discussions and this is still ongoing, the financial close is still pending.”

Normally, the financial close occurs within 12 months of the EPC contract being signed, but in this case it may be sooner than September 2022, the executive said.

“We as a company are not waiting for that, we have started already preparing the production lines for the trains, making a lot of design decisions which resonated with the client during the negotiations,” he said. “We pre-started it because the Egyptian government asked us to do this on the fast track, so we took this quite seriously.”

The technology company made “sizeable” investments to allocate people and resources to the project to “hit the ground running”, Mr Soulier said.

Siemens' project in Egypt has garnered interest from other markets in the Middle East and Africa in high-speed electric rail systems, Mr Soulier said.

“We have seen an interest because this project was not on the radar, it was not planned for 10 years and now it finally came to fruition. It was a direct negotiation and a direct partnership with the client,” he said. “Walking around the exhibition, we got a lot of questions.”

Many countries in the region are planning their own main railway lines and there are opportunities to engage with customers on taking a similar approach to Egypt, he said.

One example of that is the planned GCC railway network, which would be “a perfect fit” for this type of high-speed rail connection, the executive said.

Mr Soulier confirmed they are in discussions with some countries in the region but it is “too early” to reveal customers and the main focus is on finalising the remaining agreements with Egypt.

“Our biggest priority now is to ensure and secure the second and the third line because that's obviously on the table and this would bring the scale that we would need to do a project like this, it's really a seismic shift,” he said.

With countries seeking more sustainable modes of transportation, the demand for green technology is expected to drive new developments in the sector.

Hydrogen-powered fuel cell trains for main lines are an “interesting technology” but is still in its early years, Mr Soulier said.

“It's still in its infancy but it will develop fast and it will develop soon,” he said. “What's needed is not only a hydrogen train, but you also need to set up a certain level of infrastructure in terms of fuelling and storage.”

While there's a lot of market interest in the concept, it has not yet reached commercial levels, he added.

For countries in the region that have not yet adopted electrified rail systems, hydrogen-powered trains are an alternative option, he said.

Updated: October 13th 2021, 9:25 AM