The Ukrainian Railways public joint-stock company (Ukrzaliznytsia) and Alstom signed a cooperation memorandum on supply of locomotives to Ukraine and servicing of the locomotives at InnoTrans 2018, an international trade fair for transport technology, on September 19. Ukrzaliznytsia’s requirement for various types of freight and passenger electric locomotives was estimated at 495.
The CFTS portal interviewed Alstom's Senior Vice President for Europe Gian Luca Erbacci at the world's largest railway exhibition one day before the signing of the document. We asked him about the progress of the relevant negotiations between Alstom and Ukrzaliznytsia and Alstom’s plans for Ukrainian manufacturers.
Gian Luca, what does the InnoTrans 2018 mean to you?
As usual, InnoTrans is an opportunity to exchange views on the market with our partners and customers. We talk about trends. We have an opportunity to listen to the rhythm of the development of the railway business once every two years.
Are you satisfied with the range of products that your company is presenting this year?
Yes. I am very satisfied because I personally participated in the selection of the products that are presently on display at the exhibition. They are the Сoradia Stream "Pop" regional train for Trenitalia, the Prima H4 shunting locomotive, and the Aptis electric bus, as well as our key digital mobility, signaling, and train traffic control products.
At the exhibition, you are displaying products that will be available in the future. I want to ask you about the products that are currently available: how many locomotives did Alstom’s enterprises around the world produce in 2018?
Firstly, we are not talking about the future because all the products on display are already in production. Regarding locomotives, we have produced more than 4,200 in the past 20 years. About 30 locomotives are being produced this year and three times more (about 100) will be produced next year. Everything depends on the size of these locomotives. The 1520-millimeter gauge requires powerful electric locomotives – the most powerful ones that we produce. More time is needed for its production because it is a difficult product.
Are you referring to mainline locomotives?
Yes. However, everything depends on the timetable that we agree with a customer, the needs of the customer, and the customer’s financial capabilities.
Does Alstom produce locomotives for the 1520-millimeter gauge only in Kazakhstan?
We have two factories that are capable of producing such locomotives. One is in Kazakhstan and the other in Belfort, France. We have a design bureau in Belfort and production facilities in both Belfort and Astana.
Is this product currently being produced in Belfort?
Yes. We built the first locomotives for Azerbaijan there. Serial production was later launched in Kazakhstan.
You mean passenger locomotives for Azerbaijan?
What is the main goal of your alliance with Siemens and at what stage is your merger now?
The main reason is that competition in the world is constantly increasing. We believe that this global of Alliance will lift us higher on the crest of innovation and strengthen our position in individual products.
We are currently under antitrust investigation by the European Commission, which is studying the impact that the merger will have on the market. The results of the investigation should be known at the end of this year or the beginning of the next year. We plan to complete the merger in the first half of 2019.
Do you not fear that products of Alstom and Siemens will compete with each other within this alliance?
Firstly, it is too early to talk about this. Secondly, it is very important for both Alstom and Siemens to maintain relations with their existing customers and preserve the continuity of supply of products that are familiar to customers. In the railway industry, a train must be designed for 30 years, and we must ensure continuity of the life of trains, their maintenance, and supply of spare parts for them. Therefore, we are not particularly worried about losing our traditional customers.
An Alstom delegation visited Kyiv in April. There were more visits to Ukraine after that. Were there negotiations on supply of electric locomotives?
Firstly, I headed this delegation. We traveled with a team of technical, commercial, and financial professionals in April. We met with the main participants on the Ukrainian transport market. I have a very good impression of communicating with them and the interest they showed in our company.
Were negotiations held after April?
Commercial negotiations are confidential. However, of course, I can confirm that we continue to hold regular negotiations with potential partners, and everything is moving in a positive direction.
What constraining factors did you notice during these negotiations?
There are no particular limitations. As in any negotiations, it is necessary to agree technical issues, the quantity, the financing possibilities, and the terms of a contract. Nothing particular about the negotiations in Ukraine distinguishes them from our negotiations in other countries.
When does the French delegation plan to pay its next visit to Ukraine?
During my visit, I decided that we needed to have an office in Kyiv, and it was opened on July 2. We hired the person who now represents Alstom in Ukraine. He is currently being trained in all the company's products: locomotives, trams, and subways.
As I said, negotiations with the Ukrainian side are ongoing. Our employees travel to Ukraine almost every week, depending on the need.
Ukrzaliznytsia will most likely purchase locomotives in batches. The first batch could potentially consist of 200 locomotives.
Only one person works in the company’s Kyiv office?
Currently, yes. When necessary, he asks us for legal, commercial, and technical support. We will assemble a team after we sign a contract. The size of the team will depend on the operations we agree upon.
Nothing much has been heard about the operations of the representative office since its opening...
Our goal right now is not to provide a lot of information to the mass media. For now, we are deliberately not disseminating information about the negotiations because there is a lot of competition on the market. We will announce the details of the contract when we sign it and begin implementing it.
When would you like to sign the contract?
It would be nice to sign a contract next year. However, negotiations are continuing.
It was announced in Astana in June that Alstom wants to supply about 300 electric locomotives to Ukraine. Has this number changed in the intervening months?
Regarding volumes, I would like to supply at least one thousand, but, according to our information, Ukrzaliznytsia needs about 500 electric locomotives. This is a large number, and it requires large amounts of funds. Ukrzaliznytsia will most likely purchase the locomotives in batches and the first batch will most likely consist of 200 locomotives.
How long will it take you to produce these 200 locomotives?
We can produce as many as the customer needs. In fact, we have more plants where they can be produced.
How technologically difficult is it to retool facilities for production of rolling stock from the 1435-millimeter to the 1520-millimeter gauge?
From the technological viewpoint, there are no particular differences. Power supply systems for electric locomotives require greater efforts because, as I said earlier, locomotives for the 1520-millimeter gauge are very powerful – 8,800 kW. This electric locomotive has a payload of 9,000 tons.
Regarding possible localization of production in Ukraine, how much does the Ukrainian side want and how much are you ready to offer at the initial stage?
The degree of localization is highly dependent on the financing terms. When a country requests financing from another, the other country– France, for example – demands that a significant part of the production should take place in France. However, we are exploring opportunities and looking for potential partners in Ukraine to allow part of the work to be done in your country.
The Kryukov Railway Car Building Works is a very interesting partner. I can say that it looks good.
Is the likelihood of French financing high?
This is one of the possibilities. However, it is confidential information. I can only say that we are discussing this possibility with the French government.
Your representative in Kyiv is Vadym Pavlenko, who previously worked at the Kryukov Railway Car Building Works. Does this mean that you are considering it as the site for localization of production, as General Electric has just done?
It is one of our potential partners. We are exploring such a possibility. It is a very interesting partner. I can say that it looks good.
It was stated in the spring that Alstom was also exploring the possibility of producing parts and components for locomotives at Ukrainian enterprises. Is this true?
Yes. We consider Ukraine not only as a market for sale of trains or locomotives. We consider it as a possible industrial partner for production of spare parts, which will be exported to the world market, to all countries.
We will organize a day for suppliers during a transport exhibition in Ukraine in October (the Rail Expo). Our purchasing director and his team will meet with dozens of potential Ukrainian suppliers to explain what Alstom needs and what the company requires for the global market.
We consider Ukraine as a possible industrial partner for production of spare parts, which will be exported to the world market.
Could you name a few of such products?
Metal parts, electronic systems, welded products, and many other parts, as well as assemblies for trains and trams.
Do you reach agreements on production of components and supply of locomotives during a single negotiation process or separate negotiation processes?
They are separate negotiations. These two processes run in parallel.
Are you aware of the activities of your competitors on the Ukrainian market?
We respect our competitors, but we do not comment on their activities. We hope to be the best choice for our Ukrainian partners.