Russian Firm Unveils €300m Wagon Deal with Iran

EghtesadOnline: Russia’s United Wagon Company said it will soon start supplying freight wagons to Iran, as part of a €300 million deal signed in February to supply 6,000 goods cars.

News ID: ۷۷۶۲۵۱

16 May 2017

“We signed the contract in February and we are now taking practical steps to put it into life,” Andrey Krivchenkov, executive director at Russia’s United Wagon Company, told Financial Tribune on the sidelines of the Fifth International Exhibition of Rail Transportation, Related Industries and Equipment, which opened in Tehran on Monday.

The contract is financed by a Russian state-owned insurance company.

As per the agreement, the Russian company is committed to supply the wagons within three years, of which 4,900 are to be produced in Iran. A total of 1,100 CBU (completely built unit) wagons are to be shipped to Iran within two years, 900 of which are to be imported a year after the signing of the contract (by February 2018), according to a press release of the Ministry of Industries, Mining and Trade, according to Financial Tribune.

The 4,900 cars will be produced jointly with three Iranian companies: Arak-based Wagon Pars will manufacture 2,200 wagons, Arak Steel 1,250 and the rest will be produced by Wagon Kowsar.

“We have inspected all Iranian plants, fixed all the installments and are all set to start the manufacture of prototypes next month. We will do it step by step,” Krivchenkov said.

“We are in long-term cooperation with the Islamic Republic of Iran Railways and Iranian operators. So our participation in this exhibition is not the first step in collaborating with Iran.”

Some 300 domestic and foreign companies, including those from Sweden, Switzerland, Belgium, France, India, Ukraine, New Zealand, Turkey, Latvia, Spain, Russia, China, Serbia, the Czech Republic, Italy and Germany, are participating in the four-day Tehran exhibition.

Among the foreign participants are big names such as ABB, Ansaldo, Alstom, CRRC and Siemens, of which the latter has already forged partnership with Iranian companies to supply equipment to the fast-growing Iranian rail sector.

MAPNA Steals Limelight

Siemens has been cooperating with Iran’s major industrial conglomerate MAPNA Group for years. It signed a contract with the Iranian giant in 2011 to supply 150 locomotives to the Islamic Republic of Iran Railways.

MAPNA successfully acquired the technology and delivered the order in time.

Now the Iranian company is expanding its presence in the domestic market, which is in dire need of modern equipment as thousands of kilometers of new railroads, subways and electric and high-speed routes are being laid across the country.

Speaking to the Financial Tribune at the exhibition, MAPNA's deputy for marketing and sales, Reza Javaheri, elaborated on the company's new activities, including a preliminary deal it signed in October 2016 with Siemens to manufacture 50 diesel electric locomotives for passenger trains.

“Under the deal, the locomotives are manufactured under a Siemens license. We are now trying to finalize a financing deal,” he said. “Together with Siemens, we are negotiating with German banks. The project will be launched as soon as these talks come to a conclusion.”

Yet another agreement was signed between MAPNA and Siemens last year for the joint manufacture of 70 electric locomotives to be used in the 926-km Tehran-Mashhad railroad, which is being electrified.

“No contract has been signed; we are still in talks with Siemens,” Javaheri said.

The IRIR and Siemens’ transportation subsidiary, Siemens Mobility, signed several memoranda of understanding January last year to develop Iran’s railroads.

The agreements concern electrification of Tehran-Mashhad railroad and Tehran-Isfahan high-speed train, supply of 500 wagons, development of Iran’s railroad infrastructure and provision of consultation and technology.

Javaheri said MAPNA is in talks with international companies for the manufacture of high-speed trains and that Siemens is among the negotiating parties.

“We should have a foreign partner to carry out the project. Our candidates should agree to transfer the know-how to us. They should also be able to provide finance or leasing options,” he said.

The company also hopes to win tenders for the supply of 250 passenger cars for Iran’s biggest rail transport company RAJA, 630 wagons for Tehran’s subway and 70 switchers.

Javaheri added that as per schedule, MAPNA needs to finalize all the above-mentioned projects by the end of the current Iranian year (March 20, 2018).

Huge Demand

According to the deputy head of IRIR, Babak Ahmadi, Iran needs 28,000 freight wagons, 4,000 passenger cars and 1,480 locomotives in the next seven years.

“Currently, there are a total of 2,000 cargo wagons in Iran’s rail fleet,” he was quoted as saying by the Ministry of Roads and Urban Development's news portal.

Iran is scrambling to renovate its aging rail fleet. As part of a scheme that started in the fiscal 2015-16, the government has discarded some 400 wagons of over 45 years.

"As of December this year, IRIR plans to discard wagons that have been in service for more than 30 years, if they do not meet IRIR’s standards regarding wagon maintenance and overhaul," Ahmadi said.

IRIR estimates 600 wagons will be out of service as part of the plan.

The official noted that the government seeks to procure the needed passenger cars through joint ventures with international companies, which allow domestic industries to acquire the manufacturing know-how.

Iran's 20-Year Vision Plan (2005-25) stipulates that the number of passengers using rail transport will increase from the current 25 million to 65 million per year.

Iran is planning to lay a total of 9,134 kilometers of railroads. The construction of more than 3,500 kilometers of railroads is underway.

Iran’s sixth five-year development plan (2017-22) has tasked the government with increasing the share of rail in cargo and passenger transportation to a minimum of 30% and 20% respectively by the end of the plan.

Minister of Roads and Urban Development Abbas Akhoundi earlier said the government will operate 1,800 kilometers of railroads by the end of the current Iranian year (March 20, 2018), of which more than 900 km pertain to double-tracking.

Last week, a 267-km line between Tehran and Hamedan’s provincial capital came on stream.

The progress of most of these projects has been stymied by shortage of finance and equipment.

The Qazvin-Rasht railroad project, for example, has nearly come to a halt for a long time despite a 91.5% progress.

According to Akhoundi, the 25-trillion-rial (over $650 million) project will be completed and launched by the end of summer.

The Gharb rail project includes two routes. The first section of the route, from Arak to Kermanshah, has made 95% progress.

Officials anticipate the project to roll soon.