HART Signs Rail Contract With Ansaldo

Published On: Nov 25 2011 04:29:12 AM HST   Updated On: Nov 28 2011 10:25:29 PM HST

In spite of financial problems with the parent company of Italian firm Ansaldo Honolulu, the city Monday signed a $1.4 billion contract with Ansaldo to design, build and operate the trains in Honolulu's rail transit project.

Ansaldo's parent company, Finmeccanica, lost more than $1 billion in the third quarter, and its stock price fell 65 percent in the last year.

But after what the city claims was ?months of additional review of the contractor?s financial capacity,? city rail officials said they signed the contract with Ansaldo at midday Monday. A news release announced the contract approval at 4:40 p.m. Monday, ten minutes after city government offices had closed for the day.

"Over the weekend, we reached the conclusion that there is no material change in the financial capacity of this selected vendor, so it was ready to go," said Toru Hamayasu, executive director and CEO of the Honolulu Authority for Rapid Transportation.

Ansaldo's executives traveled to Honolulu from Italy and answered questions about their technical and financial capacity from the HART board in a two-and-a-half hour meeting Friday.

Hamayasu said Ansaldo is putting up $360 million in bonds, as insurance if it's unable to complete building the $570 million dollar train cars and control system.

"The bond money kicks in, either to find another contractor, or the bond company is going to find another contractor to finish the contract for us," Hamayasu said.

Asked for reaction to the city?s approval of the Ansaldo contract, Honolulu City Council Budget Chair Ann Kobayashi said, "I'm not surprised. This whole project has been rush, rush, rush."

Kobayashi has been critical of the rail transit project for years.

"I'm very concerned for the taxpayers, because I don't want my grandchildren to be paying these bills," Kobayashi said.

Transit opponent Cliff Slater has sued the city in federal court, saying it did not properly examine alternative technologies and routes. Slater said he doesn't believe Ansaldo is reliable enough to do the job:

"There's no third-party assurance that this is a safe deal. In fact, everything that you read in the financial newspapers is that this is a shaky deal," Slater said.

?Rail transit will bring much-needed jobs to our community during these tough economic times,? said Honolulu Mayor Peter Carlisle in a statement Monday. ?It will also provide a solid transportation option and restore quality of life for our residents who are forced to fight traffic daily, at the expense of times with their families and friends.?

Former Gov. Ben Cayetano is one of the parties in Slater?s federal suit against the city over rail.

?It?s unfortunate, but apparently the mayor believes by moving the project along, he can influence the court to go along with it,? Cayetano said Monday night when a reporter told him about the contract being approved. ?If we win in court, the court will stop rail, just like a judge stopped the Superferry when it was already operating.?

Decades ago, a court decision forced the state to move the controversial H-3 freeway project from Moanalua Valley to Halawa Valley instead, Cayetano said.

Hamayasu said the city will be watching the progress of rail transit closely.

"We're gonna be administrating, managing, overseeing every step of the way, to make sure that they're proceeding in the right direction and on time," Hamayasu said.

Speaking at a meeting of the HART board Friday, AnsaldoSTS CEO Sergio De Luca said his company is in fine financial shape, even though its owner Finmeccanica, Italy?s largest defense firm, announced earlier this month it has lost more than $1 billion in the last quarter.

"AnsaldoSTS has no debt, a strong cash position in the range of $400 to $425 million at the end of the year," De Luca said.

Ansaldo Honolulu, which won the contract to build and run the rail cars in Honolulu, is a joint venture formed between two Italian companies, AnsaldoBreda and AnsaldoSTS.

De Luca told the HART board that in nine transit contracts that AnsaldoSTS has worked on with AnsaldoBreda around the world, "Ansaldo Breda has always delivered on time, on budget and with full satisfaction of the customer."

AnsaldoSTS and AnsaldoBreda said they had $10 billion worth of transit projects under way around the world as of September, proving the companies are doing complex work in other cities with success.

Both companies also claim they have not had to pay surety or performance bond money because of a default on any job in the last ten years.

If Honolulu signs with Ansaldo, the company will have to deliver about 20 rail vehicles to the city by 2014 and another 60 or so by 2019.

The city awaits a final guarantee of $1.5 billion federal money toward the rail?s overall $5 billion cost.


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