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Korean firms seek ‘optimum’ bid for Brazil bullet train project

The South Korean consortium bidding for Brazil’s $20-billion high-speed rail service downplayed the impact of its recent loss of construction partners.

The group said it is in talks with big-name constructors in Korea such as Hyundai Engineering and Construction and POSCO Engineering and Construction to form a new lineup before submitting its proposal. It is also contacting some large Brazilian contractors.

“We are seeking collaborations with firms of both countries to forge the ‘best-suitable’ strategy,” Korea High Speed Rail Group for Brazil TAV said Sunday.

Four Korean firms including Hyundai Amco Co. and Kolon Engineering & Construction Co. pulled out from the group last week.

The deadline for submission of proposals originally set for April 11 was postponed for three months.

Brazil’s state-run transport regulator ANTT said Friday that it has decided to push back the project deadline for the second time upon requests from interested contenders. The countries include Korea and Japan, and France, Spain and Germany in Europe.

Bids were originally due late last year but have been delayed due to the country’s presidential elections and other political issues.

Brazil plans to build a 510 kilometer-high speed railway to connect Rio with Sao Paulo and Campinas, which will cover seven stations including stops at international airports. It is expected to be completed ahead of the 2016 Summer Olympics in Rio de Janeiro.

Yet countries have been wary of participating in the bid for the project due to unfavorable financial conditions related to it, Korean officials said.

The bullet train project is to be 70 percent financed by the Brazilian government and the rest by the private sector. The winning consortium has to pay for 20 percent of the latter amount, or 6 percent of the total amount, according to the Korean group.

Korean officials say that this condition ― with the country’s interest rate topping 11 percent and related taxes of 50 percent ― will make it challenging for the contractor to make profits during the train’s 40 year-operation period.

Consortia in the bid, including the Korean group led by Hyundai Heavy Industries and Korea Railroad Corp., have thus been calling for modifications to the Brazilian government.

Officials explained that recent business withdrawals of Korean builders in the consortium were initiated by the project’s murky financial prospects.

However, the group said its influence on the bid will be minimal as they are in talks with bigger-name firms.

“We are also in contact with top Brazilian builders who will be responsible for most of the construction of the railway,” group officials said.

With the rescheduling of the bid, the group also projected that the Brazilian government would come up the modified financial conditions shortly and its bidding process would thus speed up.

By Koh Young-aah (youngaah@heraldcorp.com)
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