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France’s Alstom wins NIS 1.5 billion ($416 million) Israeli railways tender

France’s will maintain Israel Railways outdated IC3 cars for seven years.

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France’s Alstom SA (Euronext: ALO) has won the NIS 1.5 billion tender to maintain Israel Railways’ outdated IC3 carriages. Alstom will provide maintenance for 46 systems on cars over seven years, with an option to extend for eight years.

The agreement to outsource Israel Railways’ maintenance services was reached a year ago, after a lengthy struggle by the workers committee. The agreement states that the maintenance of no more than 30% of Israel Railways’ current rolling stock could be outsourced, as well as its future electric rolling stock. The agreement resulted in the cancellation of Israel Railways’ contract signed with Canada’s Bombardier Inc. (TSX: BBD) to maintain all rolling stock. Israel Railways paid Bombardier €2 million compensation for cancelling the contract.

Bombardier was the favorite to win the new tender, in which Germany’s Siemens AG (NYSE: SI; XETRA: SIE) and Vossloh AG (XETRA: VOS) also participated. Bombardier is Israel Railways’ main supplier of rolling stock and shares in the maintenance. Siemens, a secondary vendor to Israel Railways, quit the tender before the best and final stage. For Alstom, the tender win gives it its first foothold in Israel Railways. It already provides maintenance to the rolling stock that it supplied to Jerusalem light rail franchisee, CityPass.

Alstom will begin maintaining the rolling stock in January 2014, and will hire 100 people for the project, mostly in Israel. The employees will be trained by French experts. The maintenance services will initially be provided at the Israel Railways depots in Lod and Haifa, before moving to a special depot that will be built within three years.
Israel Railways said that, in addition to outsourcing the rolling stock maintenance, it has launched a major change in its rolling stock division: a reform in work procedures, round-the-clock work in shifts, administrative restricting, and employee training and mobility.
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