Bombardier will build super-fast trains for Chinese railway ministry

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(The Canadian Press)

By Luann Lasalle, The Canadian Press

MONTREAL - A joint venture led by Bombardier Inc. (TSX: BBD-B.TO) has been awarded a US$4-billion contract to build 80 high-speed trains in China that will use some of the Canadian company's most advanced technologies.

Bombardier's share of the contract is estimated at US$2 billion to build trains for the Chinese railway ministry. The trains will have maximum operating speeds of 380 kilometres per hour and use energy-saving technologies developed by Bombardier.

"It is the fastest, most eco friendly VHS (Very High Speed) train in the world," company spokesman Talal Zouaoui said Monday.

Investors reacted positively to news of the contract with Bombardier shares rising almost seven per cent, up 31 cents to $4.88, at noon Monday on the Toronto Stock Exchange.

Bombardier Sifang Transportation Ltd., a Chinese joint venture of the Canadian industrial giant, will manufacture the trains in China. Engineering and project management will be done in China and Europe.

The contract is a significant deal for Bombardier, which has been hoping to boost its rail business as the Montreal company copes with declines in sales of regional jets and corporate jets caused by the global economic recession.

Asia, especially rapidly growing China, has also become a major growth area for the company as the country spends billions of dollars to modernize its transportation infrastructure.

The new trains will have advanced aerodynamics to reduce energy consumption and will be "very stable" when travelling at speeds of up to 380 kilometres per hour, Zouaoui said.

The rail cars will be made of aluminium and will be climate controlled for energy efficiency, he said.

Bombardier said the first train is scheduled for delivery in 2012 and the last one will be completed in 2014.

The trains will be made in Qingdao, a sea port and industrial city north of Shanghai in northeastern China. Bombardier Sifang currently employs more than 3,000 people in China.

The trains will be based on Bombardier' Zefiro high-speed rail technology and by Bombardier Mitrac propulsion and control systems.

Bombardier says its Zefiro trains, which premiered in China last year, aim to create a new definition of very high speed rail travel.

Established in 1998, Bombardier Sifang is a joint venture between Bombardier and CSRSifang Locomotive and Rolling Stock Ltd. It is focused on supplying passenger rail rolling stock for China.

"This is a landmark order for next-generation rail equipment and the result of a positive and productive, long-term relationship," Andre Navarri, Bombardier Transportation's president and chief operating officer announced from Berlin, where the company's global rail division is headquartered.

"We are supplying the latest VHS technology for one of the most far-reaching high speed rail initiatives anywhere in the world," Navarri said in a statement.

Desjardins analyst Benoit Poirier called the contract a "landmark order" for Bombardier's Zefiro trains.

"We believe further orders from China and other countries might follow in the near future," Porier wrote in a research note.

"We estimate that Bombardier could bid on at least 3,000 cars in Asia over the next three years (worth about US$4.5 billion, assuming US$1.5 million per car). Considering Bombardier is a market-share leader in this region, we would expect the company to win a significant amount of this business."