Bombardier Transportation Welcomes Conclusion to Metronet Negotiations

2008-04-01 00:08:00

Bombardier Transportation Welcomes Conclusion to Metronet Negotiations

BERLIN, GERMANY–( EMWNews – April 1, 2008) – Bombardier Transportation welcomes today’s announcement from Metronet which updates the negotiations on the transfer of Metronet contracts by the PPP Administrator and brings clarity to the proposed next steps in the planned modernisation programme for the London Underground.

The difficulties encountered by Metronet and its subsequent entry into Administration have caused a significant number of problems in relation to the scheduled modernisation programme for the London Underground network. Since Metronet entered into administration, London Underground Ltd (LUL) has been seeking to agree with the Administrator and the current contractors (including Bombardier) the basis upon which the Metronet undertaking can be transferred to an LUL nominee company.

The result of these negotiations, which is subject to a court decision that will be sought by the PPP Administrator, is that the Bakerloo, Central and Victoria Lines (BCV) programme, currently working to upgrade the Victoria Line with Bombardier’s new trains and Westinghouse Rail System’s new signalling, will continue and complete its implementation as originally planned. Bombardier has continued to work on this contract during the course of Metronet’s administration and work is progressing well.

The Sub Surface Lines (SSL) upgrade programme, which is less advanced in its implementation, will be re-scoped with regard to the signalling portion. The signalling portion of Bombardier’s SSL contract, currently sub-contracted to Westinghouse Rail Systems Limited (“WRSL”), has been transferred to Metronet and re-negotiated directly between WRSL and Metronet. A payment of pounds sterling 95 million ($189 million) has been agreed between Bombardier and WRSL, in full and final settlement, to compensate WRSL for the de-scoping of their signalling contract. As proposed, this payment will have no material impact on Bombardier’s financial results, as the accounting for the relevant contracts already included estimates for technical and execution risks, which will be reduced significantly. Bombardier will continue to supply new rolling stock to the SSL programme, with a small increase in scope as requested by the customer.

Bombardier’s original train maintenance contracts for BCV and SSL will be amended so that the maintenance work remains with Metronet. Bombardier will retain a Technical Support and Spares Supply Agreement (known as a “TSSSA”). These changes were made at the request of Metronet to assist with the resolution of the industrial relations issues arising from the proposed transfer of staff to Bombardier.

The payment of an outstanding receivable of pounds sterling 28 million ($56 million) due to Bombardier will be made. This payment relates to signalling and rolling stock work performed predominantly under the original procurement contracts prior to the appointment of the PPP Administrator, and costs incurred related to the original maintenance programme. Other work performed has been paid in accordance with the contracts.

Bombardier wishes to emphasize that these contractual changes are subject to a Court decision that will be sought by the PPP Administrator on the transfer of the Metronet contracts to an LUL nominee company.

The net impact of these proposed changes on Bombardier will be a reduction in its Metronet order backlog of pounds sterling 1.3 billion ($2.6 billion) from pounds sterling 3.2 billion ($6.4 billion), and a reduction of Bombardier’s total backlog from $33.5 billion to $30.9 billion. This adjustment has been reflected as at January 31, 2008.

The impact on Bombardier’s Metronet backlog is broken down as follows: a reduction in the signalling work subcontracted to WRSL and integration and project management activities of approximately pounds sterling 950 million ($1.9 billion); a reduction in the scope of the maintenance contracts of approximately pounds sterling 400 million ($0.8 billion); and an increase in the rolling stock portion of the SSL programme of approximately pounds sterling 50 million ($0.1 billion).

Commenting on today’s announcement, Andre Navarri, President of Bombardier Transportation said: “We are pleased that these negotiations are coming to a conclusion and to have maintained our contracts for the supply of new rolling stock for both the BCV and SSL lines. We appreciate the level of confidence in our commitment to value and service that this decision demonstrates. Bombardier has always met its contract obligations to date and we will continue to do so. London Underground is one of the biggest subway systems in the world and we look forward to delivering the modern vehicles that London’s passengers deserve.”

About Bombardier UK

Bombardier Transportation employs around 4,500 people at production facilities in Derby and Plymouth and at 24 maintenance, refurbishment and overhaul centres across the UK. Bombardier currently maintains approximately 2500 vehicles in Great Britain. In the UK’s rail transportation industry, Bombardier is the leader in the manufacturing, refurbishment and maintenance of rolling stock.

Bombardier’s rail transportation products are in operation in all major UK regions, providing efficient, reliable, rapid, modern and state-of-the-art transportation-from intercity travel, urban and suburban railways, to metros and light rail systems.

London in particular benefits from many Bombardier products and services. In addition to the new trains for London Underground’s Victoria and Sub-Surface lines, Bombardier’s products provide many of the transport links for the capital.

Bombardier’s award winning ELECTROSTAR electric multiple units are the most reliable new generation EMUs currently operating in the UK, with the star performers consistently proving to be the class 357 ELECTROSTAR operated by c2c. ELECTROSTAR trains are also proving popular with passengers on South Eastern Trains and Southern Railways, where they help to bring thousands of commuters to and from London daily. Bombardier will soon be providing CAPITALSTAR trains to Transport for London. These new units will be operated on the London Overground services and will be delivered during 2008 and 2009.

Traffic congestion in the city of Croydon has been significantly reduced through the use of Bombardier FLEXITY Swift light rail vehicles on the city’s Tramlink system. The first of 55 new generation Bombardier built Docklands Light Railway cars will also start to enter passenger service during 2008, joining the current Bombardier manufactured fleet of 94 automatically guided light rail cars.

Current Status of supply contracts for Metronet

Bombardier’s supply contracts for Metronet are all proceeding well and are to schedule.

For the Victoria Line upgrade programme, two pre-production trains have already been produced, with one of these running in test in London and the second at Bombardier’s test track in Derby. The second train is running successfully in conjunction with the Westinghouse Rail System’s new signalling system. Manufacture of the “series build” for the rest of the fleet will begin in Q2 2008. The installation of all signalling equipment along the Victoria Line and in the control centre required for overlay running have now been completed and testing of the system is on-going. The Victoria Line upgrade is on schedule to be completed in 2012 when the full new fleet of 47 eight-car trains will be in service

For the Sub-Surface Lines upgrade programme, Bombardier will build 1,395 new cars (191 trains), the first of which will enter service on the Metropolitan Line in 2010. The first pre-production train will be completed during 2008 and will begin its testing programme later in the year. Already, the first cars have been produced and are undergoing initial testing.

About Bombardier Transportation

Bombardier Transportation has its global headquarters in Berlin, Germany with a presence in over 60 countries. It has an installed base of over 100,000 vehicles worldwide. The Group offers the broadest product portfolio and is recognized as the leader in the global rail sector.

About Bombardier

A world-leading manufacturer of innovative transportation solutions, from regional aircraft and business jets to rail transportation equipment, systems and services, Bombardier Inc. is a global corporation headquartered in Canada. Its revenues for the fiscal year ended Jan. 31, 2007, were $14.8 billion US, and its shares are traded on the Toronto Stock Exchange (BBD). Bombardier is listed as an index component to the Dow Jones Sustainability World and North America indexes. News and information are available at www.bombardier.com.

BOMBARDIER, FLEXITY, CAPITALSTAR and ELECTROSTAR are trademarks of Bombardier Inc. or its subsidiaries.

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