March 28, 2014 / 10:36 PM / in 4 years

Peru awards $5.66 billion subway project to sole bidder

LIMA (Reuters) - A consortium led by European firms Finmeccanica SIFI.MI and ACS (ACS.MC) won a contract for a $5.66 billion subway line in Lima after competitors unexpectedly dropped out of the contest last week, Peru’s state investment agency said on Friday.

Consorcio Nuevo Metro de Lima will build and maintain the mostly underground 35-kilometer (22-mile) line in a 35-year private-public concession, state investment agency Proinversion said.

The government will put about $3.8 billion toward construction and maintenance of the project, with additional costs covered by the consortium, Proinversion said.

Ansaldo Breda and Ansaldo STS (STS.MI), both owned by Italian state-controlled industrial group Finmeccanica, together have a 27 percent stake in the project, said Italian construction company Salini Impregilo (SALI.MI) which is also part of Consorcio Nuevo Metro de Lima.

Spanish builder Iridium, owned by ACS (ACS.MC), controls 25 percent of the group, which also includes Spain’s FCC (FCC.MC) and Peru’s Cosapi, Impregilo said.

Two other consortiums, including one formed by Brazilian construction giant Odebrecht and Peru’s biggest builder Grana y Montero GRAM.M (GRA.LM), failed to submit bids last week as expected, sparking concerns that the auction might be flawed.

Proinversion said those groups pulled out after the government refused to raise the project’s $6.62 billion cost ceiling.

    “I assure you the process has been serious, objective and the result has been positive,” Transportation Minister Carlos Paredes said in a press conference after the announcement.

    Paredes said the subway, which will complement an existing system of buses and above-ground trains, is fundamental to improving the quality of life in the sprawling capital that is home to some 10 million people, or about a third of Peru’s population.

    The fast-growing Andean country needs to spend between $30 billion and $88 billion to close its infrastructure deficit, according to estimates by analysts and officials.

    Prime Minister Rene Cornejo has said the government will award $13 billion in contracts for infrastructure projects this year.

    Fernando Valdez, Consorcio Nuevo Metro de Lima’s spokesman, said construction on the train line will start in May and wrap up in five years.

    Reporting By Lucas Iberico Lozada and Danilo Masoni, Writing by Mitra Taj; editing by Gunna Dickson

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