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Alstom Signs Agreement With Belgrade on Subway Construction

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Nov. 18 (Bloomberg) -- Alstom SA’s transport unit and the Serbian capital of Belgrade signed an agreement for the French company to provide trains and technology for Belgrade’s first subway line, the city’s biggest infrastructure project in decades.

Pending a feasibility study and preliminary designs that will be done by Egis Rail, Alstom Transport would provide the equipment for estimated 15 kilometers (9.3 miles) of tracks with 25 stops across the city of 1.64 million people, Belgrade Mayor Dragan Djilas said after signing the memorandum of understanding with Alstom Transport’s Vice President Gian Luca Erbacci.

Serb Deputy Premier Bozidar Djelic and France’s Trade Minister Pierre Lellouche signed a separate “letter of intent” on the governments’ cooperation on the project.

Financing Guarantees

Lellouche said France would help finance the “first phase of the project development,” along with providing 3.8 million euros ($5.14 million) for the studies. He did not elaborate.

Djelic estimated the cost of the entire project at between 900 million euros and 1 billion euros, saying that France would provide guarantees for about a half of that, while Serbia would back Belgrade’s efforts to secure the other half.

“The government will support the project by providing the necessary sovereign guarantees to Belgrade, but we don’t expect this would burden the budget of Serbia,” Djelic said. The expected loan would have 15-year maturity, including a five-year grace period and “an average interest rate of 5 percent, Djelic said.

France and Serbia will form a ‘‘bilateral working group’’ that will supervise the preparations, after which a binding contract may be negotiated between the city and Alstom, the officials said.

France offered last year to fund the studies as it sought to secure the work for Alstom. In April, Presidents Nicolas Sarkozy and Boris Tadic signed a document on broader ‘‘strategic partnership’’ that includes cooperation on the subway.

The studies will be completed in 15 months, including four months for a master plan. The first line may be open as early as 2017, Djilas said.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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