Potential Siemens-Alstom Rail merger could derail Indian Railways bid

As one of three final bidders, Stadler could lose time and money if the Siemens-Alstom merger results in annulation of the bidding process

Plans to merge the rail businesses of Siemens and Alstom could jeopardise a bid to build 5,000 electric coaches for Indian Railways, as the two companies belong to rival consortiums. Another bidder, Swiss firm Stadler Rail, also stands to lose.

On Friday, Alstom confirmed that it is in talks with Siemens over a potential merger of rail businesses. While the decision to join forces may be intended to challenge the global expansion of state-backed Chinese firm CRRC, it is the state-owned Indian Railways that will be immediately affected.

Siemens and Alstom belong to rival consortiums bidding for one of the largest Indian rail contracts opened to foreign firms, at almost CHF2.97 billion ($3.06 billion). The winner will enter a joint venture with Indian Railways to build and supply 5,000 “state-of-the-art” electric coaches over a ten-year period. The coaches will be manufactured at a purpose-built rail coach factory in the eastern Indian town of Kanchrapara in West Bengal state.

If and when Siemens and Alstom merge, it could result in the entire bid being annulled and Indian Railways re-starting the tender from scratch.

“We’ll see when it happens as nothing is official yet. There are clauses in the bid document on mergers and acquisitions,” an official from the Indian Ministry of Railways who wished to remain anonymous, told swissinfo.ch on Monday.

The bid document clearly states that changes in the consortium will not be permitted if the new member is an “Applicant/Member/Associate of any other Consortium bidding for this Project”.

“We are aware of the situation but do not want to speculate at this stage,” said a spokesperson from Siemens. Alstom was also contacted but has yet to respond.

Swiss loss

It is not just Siemens and Alstom that stand to lose from a potential annulment of the Indian bid. Swiss firm Stadler Rail has also qualified for the final stage of the bid. The Kanchrapara rail coach factory is an important part of the company’s expansion into India, which allowed 100% foreign direct investment in rail projects, such as high-speed trains and freight corridors, from 2014 onwards.

Rivals GE and Alstom have already grabbed a slice of the pie, winning a $2.6 billion contract to build 1,000 diesel engines and a $3 billion contract to build 800 electric engines respectively in 2015.

Stadler refused to comment on the impact of the Siemens-Alstom merger on its chances of winning the Kanchrapara bid as it was “an ongoing procedure”.