Bringing High-Speed Rail to America Part II - Global Examples

Train Italia has been operating in Italy for many years and recently, some investors wanted to compete with them. Those investors weren’t familiar with the rail business – the head of this company NTV – is the head of Ferrari – so NTV went to SNCF and they are strategy partners and 20 percent shareholders. The operation started in April of this year.

Public-Private Partnerships in the Rail Sector

In France there are four public-private partnerships, three of them are for the new high-speed rail lines. One is for a 100-mile line, one for a 200-mile line and the third is for 50 miles in an urban area.

For the 100-mile line, the innovative financing structure is the GSM-R model (Global System for Mobile Communication-Railway), it’s an availability-based PPP: The government is making payments for a system that works. They pay a fee every year based on the availability and how the system is performing. Debt is taken by the private sector.

The largest PPP in the world is for the 200-mile line and it’s a SEA model. The cost is more than $9 billion and half of the investment is still paid by grants and half the money coming from the passengers. SNCF will be operating on the line first and there will be access charges to private sector to recoup their costs. The public sector had to be involved at every step, bringing a lot of guarantees. There was a risk of not reaching ridership numbers.

It was stressed that rail PPPs around the globe are very diverse and there are close to 30 right now. The risks shared varies and a strong financial involvement of the public sector is necessary.

PPPs can be very efficient Dehornoy said. When it comes to the commercial risk, in many cases the private construction firms don’t have experience in HSR. And some of them lost a lot of money; HSR in many cases is a new market.

“In Taiwan when they created it, they had no idea,” explained Dehornoy. “But the trains were working perfectly and it changes everything for transportation in the country. But some people lost their shirt.”

Talking about shared corridors for high-speed passenger rail and freight was The Louis Berger Group, Technical Vice President Rail & Transit, Vinay Mudholkar. In the 150 to 250 mph range, “One of the points is that each solution you apply in different parts of the world is different,” he stressed. “You need to look at economics of the whole system and how much fail passengers can regard.”

Shared corridors bring long-term sustainability to the region. It is energy efficient, brings affordable fares to the general public and minimizes the taking of land. It can also increase profitability. “It generates the combined best return on investments for private and public sectors.” He adds, “One job in the rail industry creates 4.5 jobs in the supporting industries.”

Mudholkar talked about the West Coast Main Line upgrade in the UK. There was limited time possessions available for work at nights and blockade strategies were adopted on parallel routes. On this project in the UK, he said American firms and funds played a big role in the project. But when it comes to the United States, he said, “We are not delivering things and the taxpayers are getting hesitant. Too much discussion; not enough delivering.”

When looking at the HSR project in Saudi Arabia, the economic stimulus of the project was 40,000 to 50,000 jobs in construction to support and in operations in maintenance. The locomotives are U.S. EMD locomotives from Chicago.

“We have some very smart engineers here that can do their job,” said Mudholkar. “International projects can do a lot of good to us if we get involved in them.” He added that there is a lot of machinery being sent to other countries to be working on HSR. “$75 million worth in the next couple years.”