On Friday Peru awarded a huge new, US$5.7 billion, turnkey design, build, finance, own and operate subway project, for the country’s capital Lima, to an international consortium called imaginatively enough “New Lima Metro”. The consortium that will now build this 35km (21 mile) new subway system extension is led by two giant Spanish engineering and construction companies, Fomento de Construcciones y Contratas (FCC) and Actividades de Construccion y Servicios SA (ACS).
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In February, Peru’s Private Investment Promotion Agency, a.k.a. Proinversión, had announced that as many as three separate international consortia were then shortlisted to participate in the final stage of the public tender for the 30 year concession. Last week, however, two of the three consortia dropped out, leaving the Spanish led engineering and construction consortium as the winning bidder by default, having also met all of the new tender’s reference requirements.
The winning consortium includes strategic partner ACS with a 25% interest, their Spanish engineering and construction counterpart FCC with a 19% interest, and a rolling stock and electro mechanical equipment provider Finmeccanica with 27%, all with vast subway building experience. Italian construction group Salina also has a 19% interest and a Peruvian local partner Cosapi is also participating with 10%.
In addition, the consortium includes a top-level operating technical advisor, the Metro de Madrid. All of this is frankly what it takes to get a top level, multi-billion dollar, international project done, with so many levels of complexity in planning, design, financing and execution. Some local critics have already said the new subway will be too expensive with its very deep tunnels in places and driverless trains.
The project, which is the largest in Peruvian transportation history, comprises 27km (17 miles) of new underground tunnels, and track, and the building of 27 stations for Lima’s Line 2. The line will link the Lima metropolitan area districts of Ate and El Callao, plus an 8km (5 mile) underground spur from the existing Line 4 to the Jorge Chavez International Airport with 8 stations.
The Peruvian government will itself put up about US$3.8 billion toward construction and maintenance of the project, and spend almost US$500 million on land expropriations under eminent domain, leaving the balance of the total cost, about US$1.4 billion, to be covered by financing provided by the consortium, as is typical in such public private sector infrastructure partnerships.
The total price tag includes all works, rolling stock and signaling installations as well – in other words completely turnkey down to the last nut and bolt. As many as seven of the new stations will be deep mined and twenty eight provided by cut and cover under existing roadways.
“I assure you the process has been serious, objective and the result has been positive, ” Peru’s Transportation Minister Carlos Paredes said in a press conference after the announcement. Paredes also said that the subway, which will complement an existing system of buses and above ground trains, should make a huge difference when it is finished to improving the quality of life in the capital of 10 million people. With about a third of Peru’s entire population, Lima is scattered in a form of urban sprawl up and down the coastal plain, a bit like Los Angeles, sandwiched against the mountains of the Andes.
The winning consortium is headed by two of the ACS Group’s subsidiaries, Dragados and Iridium and by FCC’s subsidiary, Vialia. The two Italian companies Impregilo and Ansaldo, are part of Finmeccanica, are involved and the Milan based Salini Costruttori as well. The Finmeccanica companies will provide electromechanical equipment and rolling stock. Peruvian company Cosapi is also participating in the project. Metro de Madrid will act as operating advisor for the project.
The deep mining portions are anticipated to be completed in two stages, each requiring four enormous underground tunnel boring machines with a minimum diameter of over 30 feet, enabling twin tracked single tunnels, and also four earth pressure balancing machines to permit soft tunneling as well, which is how the channel tunnel was dug.
The 17 mile Line 2 will run east-west through Lima, from Ate to Callao, where FCC is also working to upgrade the port there. Once operational, its 27 stations will serve over 600, 000 travellers per day, who will save up to 90 minutes on their commute. It currently takes two hours and twenty minutes to travel that route by car.
The spur from line 4 to connect the city to the airport will run along 5 miles of tunnel, from Avenida Faucett to Avenida Néstor Gambetta. 8 stations will be built along this line.
Fernando Valdez, spokesman for the new Lima Metro, said construction on the new train line will commence now in May, and the subway will be up and running within five years. By a very nice coincidence 2019 is also the year Lima will host the Pan American Games, said Christy Garcia, head of railway projects at Proinversión. The consortium will operate the line for 30 years.
The subway is designed to carry 660, 000 passengers daily and users will initially pay 0.75 cents, rising to $1 later, Garcia told reporters. The Peruvian government plans to build four more metro lines in the capital, she also said as part of its infrastructure development programme.
Giant Spanish international engineering, construction, water and environmental services group Fomento Construcciones Y Contratas is publicly listed on the Spanish Stock Exchange, and is controlled by billionaire Esther Maria Koplowitz, the daughter of its founder Earnest Koplowitz.
With recession in Spain and in international construction markets in recent years, for a time FCC lost a great deal of money. Last March, Esther Koplowitz’s eldest daughter Esther Alcocer Koplowitz was appointed as the new Chairman of the company, and Juan Béjar Ochoa was appointed both as Executive Vice-Chairman and as Chief Executive Officer. It has been their job now to execute both a new long strategic plan together and, as well, to deliver current operating performance with short term cost reductions an asset divestitures as well.
This new contract announced today is very much a move in the right direction for FCC therefore, as it continues to implement a radical restructuring of the heavily indebted company and to focus on its core strengths, with such international subway construction projects very much being one of them.