Brazil sweetens terms for Rio-Sao Paulo bullet train

BRASILIA Thu Dec 13, 2012 7:07pm EST

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BRASILIA (Reuters) - Brazil set more attractive and less risky terms on Thursday to attract international bids to operate a high-speed train between its two biggest cities after an attempt last year found no takers.

The planned 350 km per hour (217 mile per hour) bullet train will run between Rio de Janeiro, Sao Paulo and the fast-growing adjacent city of Campinas by 2020, said Bernardo Figueiredo, head of the government agency in charge of infrastructure projects.

The government will shoulder more of the risk by raising to 45 percent from 30 percent the public stake in the consortium that will design the high-speed system, provide the technology and the trains for it, and operate it on a 40-year concession.

"It's a way of sharing the risk with the investor and making the project more attractive," Figueiredo told a news conference.

The winner must invest an estimated 7.7 billion reais ($3.7 billion), offer economy class tickets of no more than 200 reais ($100) and guarantee that trains cover the 260 miles between Rio and Sao Paulo in no more than 99 minutes.

To qualify to bid, companies cannot have had a fatal accident on an existing high-speed system they operate in the past five years. That's down from the 10 years required earlier.

The new auction to pick the operating consortium will be held on September 9, 2013, at the Sao Paulo stock exchange Bovespa.

A second auction in 2014 will choose the engineering group that will build the track, with a minimum investment of 27.3 billion reais, Figueiredo said.

President Dilma Rousseff has made the train between Sao Paulo and Rio de Janeiro a top priority for her government despite concerns over its high cost and doubts whether it will ever be profitable.

German, French, Spanish, Japanese and South Korean builders and high-speed train operators are expected to compete for the project, which has long been coveted by foreign investors seeking to cash in on Brazil's need to fix infrastructure bottlenecks and prepare to host the 2016 Olympics and 2014 FIFA World Cup soccer tournament.

The bullet train will have stations at three international airports: Galeao in Rio de Janeiro, Guarulhos in Sao Paulo and Viracopos in Campinas, Figueiredo said.

Among the companies expected to bid are Germany's Siemens AG, France's Alstom, Canada's Bombardier Inc, South Korea's Hyundai Corp and Japan's Hitachi Construction Machinery Co Ltd and Mitsubishi Heavy Industries.

Critics argue the 260-miles between the two megacities is already amply served by commercial flights of less than an hour and that Brazil's growing middle class is not big enough to make a bullet train financially feasible.

Figueiredo, however, said the government estimates 40 million people will ride the bullet train in its first year, with demand rising to 100 million passengers by the end of the concession in 2060.

The government will pay for its part of the building costs with fees the operator must pay to the state, set at minimum 70.31 reais for each kilometer traveled by the trains, totaling more than 27 billion reais over the 40-year life of the concession, he said.

The winner of the contract will be the bidder that offers the highest fees to the government and a design that costs the least to build, Figueiredo said.

(Editing by Peter Galloway and Lisa Shumaker)

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