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Solution sought on Spanish train deal

Dec 20, 2012
From wire reports

Solution sought on Spanish train deal
DEAL-MAKER: Artis Birkmanis says Pasazieru vilciens is currently evaluating 3 options.

Latvia’s Transport Ministry has drafted proposals for reaching an agreement with Spain’s train manufacturer Construcciones y Auxiliares de Ferrocariles S.A. (CAF) during a mediation process at the Mediation Institute of the Stockholm Chamber of Commerce, the Latvian State Television program ‘De facto’ said, referring to unofficial information, reports LETA.

The Transport Ministry wants CAF to agree to the failed train procurement’s initial provisions, not the amended contract, and cut the number of trains to be supplied by 15 percent.
Latvian Prime Minister Valdis Dombrovskis (Unity) declined to reveal whether he will support such an agreement. According to the Transport Ministry’s stance, the number of supplied trains must be reduced regardless of whether it is set during a mediation process or a new procurement. Therefore it is important to wait for mediation results and only then comment on them, said the prime minister.

‘De facto’ reports that, at the beginning of the mediation process, CAF urged Latvia’s passenger train operator Pasazieru vilciens to continue their deadlocked talks and return to specifying the contract’s amendments. However, the Latvian side declined the proposal. Pasazieru vilciens had to come up with its proposal by Dec. 18. The sides will meet again at the beginning of January.

However, it is still possible that the talks may fail. According to unofficial information obtained by ‘De facto,’ two of five Pasazieru vilciens board members strictly oppose purchasing new trains from CAF. They now believe that the contract should be signed with South Korea’s Hyundai and Switzerland’s Stadler. Nevertheless, a new procurement will prolong the process significantly.

Pasazieru vilciens has been busy evaluating three options for buying new trains, said board chairman Artis Birkmanis in an interview on Latvian Radio on Dec. 10. These options include a new train procurement, a lease and a leaseback, emphasized Birkmanis.

The company says it is looking to its draft proposals for the most economically advantageous option. Asked about the exact number of trains in the agreement, Birkmanis declined to provide a direct answer, adding that it will depend on the company’s rolling stock, passenger numbers and other criteria.

The portal Pietiek.com previously reported that, in return for Greens/Farmers deciding against teaming up with Harmony Center and proposing a referendum on the introduction of the euro in Latvia, Unity could yield to the Greens/Farmers regarding the new train procurement and agree to sign a contract with Spain’s CAF. Birkmanis, however, said he knew nothing about this.

It was on Nov. 16 that Pasazieru vilciens commenced a mediation process at the Mediation Institute of the Stockholm Chamber of Commerce to reach an agreement with CAF on the failed train procurement.
Pasazieru vilciens announced the train procurement in December 2009. In March 2011, the European Commission confirmed that 100 million lats (142.8 million euros) would be provided from the European Union’s Cohesion Fund for the project. Under the failed contract, the total cost of 34 new electric trains and seven diesel trains that Pasazieru vilciens wanted to buy was 144 million lats, of which 100 million lats would have been covered from the bloc’s Cohesion funds, whereas Pasazieru vilciens would be co-financing 44 million lats.

The current mediation process in Stockholm will last until Jan. 16, says Birkmanis. During the process, Pasazieru vilciens will be represented by law firms Baker and Glimstedt. The process will cost Pasazieru vilciens 24,000 euros. The other half will be covered by CAF.

Pasazieru vilciens aims to conclude the process with minimal financial risks. The company is ready for a settlement, but declines to predict its potentials terms.

It decided to participate in the mediation process at the beginning of October due to not being able to agree with CAF on the procurement of new trains.

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