U.K. Gives $7 Billion Rail Deal to Hitachi After Three-Year Wait

The U.K. awarded a 4.5 billion pound ($7 billion) train order to Hitachi (6501) Ltd. and Henderson Group Plc's John Laing, more than three years after the suppliers were named as preferred bidders for the contract.

The deal covers 92 trains totaling 596 rail carriages, which will we built at a new factory in County Durham, northern England, according to a Department of Transport statement today. The new plant will create 730 jobs and another 200 during construction, it said.

The trains will be used on intercity routes, including London-to-Bristol, after plans to upgrade the nation’s rail network survived Prime Minister David Cameron’s drive to cut government spending. Hitachi and Henderson waited since 2009 to conclude the deal after a change of government and cost concerns caused delays.

The new trains are “great for rail passengers who will experience faster and more comfortable journeys,” Transport Secretary Justine Greening said in the statement. “A new train factory is fantastic news for Britain and will be welcomed by everyone who wants to see a thriving UK manufacturing sector.”

Hitachi will open a European research facility at the County Durham site, according to the statement. The Tokyo-based trainmaker will also construct maintenance depots in Bristol, Swansea, west London and Doncaster, as well as upgrading other facilities across the country.

Agility Loan

Agility Trains, Hitachi’s venture with Henderson’s John Laing, is seeking a loan facility of as much as 2.2 billion pounds from 10 banks for trains that will be used on the Great Western Line, people familiar with the matter said today. They asked not to be identified because the details are private.

Hitachi, which also makes nuclear reactors and air conditioners, fell 2 percent to 434 yen in Tokyo trading today. Hitachi owns 70 percent of Agility, with Henderson holding the rest.

The new contract is part of the Intercity Express Program that was approved by the previous Labour government. The plan includes the electrification of the Great Western line from London’s Paddington Station to the city of Bristol, which will allow the replacement of 30-year-old InterCity 125 diesel expresses.

The Conservative-led coalition confirmed Agility as the preferred bidder for the Intercity Express Program in November 2010, after the venture revised its offer. Bombardier Inc. (BBD/B) was also on the shortlist.

The government the same month agreed to fund 2,100 railcars for delivery of over 8 1/2 years as part of a more than 20 billion pound push to improve services. That commitment included 600 railcars for the 16 billion-pound Crossrail route, which will provide the first east-west service across London by 2018.

To contact the reporter on this story: Neil Denslow in Hong Kong at ndenslow@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

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