Executives of the firms awarded the largest contract in state history assured Honolulu transit leaders Thursday that they have the financial muscle to deliver a train operating system and rail cars on time and on budget despite recent hurdles confronted by their Italian parent company.
Honolulu Authority for Rapid Transportation board members had asked Ansaldo STS and AnsaldoBreda, the two firms that comprise Ansaldo Honolulu JV, to give them those assurances after recent heavy losses, credit downgrades and legal troubles of their parent, Finmeccanica SpA. The Italian defense conglomerate owns or partly owns the two Ansaldo companies.
"We are 100 percent on budget," Enrico Fontana, Ansaldo Honolulu JV’s project manager and managing director, said Thursday.
Ansaldo STS builds train control and operating systems and makes money — including a $98 million net profit in 2012. AnsaldoBreda, meanwhile, makes rail cars and has been losing money for years — including a $912 million loss in 2011.
Executives of the two firms told HART officials that Finmeccanica has rebounded from some $3.2 billion in losses in 2011, which included the nearly $1 billion AnsaldoBreda loss. Finmeccanica has since reinvested hundreds of millions of dollars in the rail car builder.
The city also has several layers of protection to make sure its train system is completed, the Ansaldo executives reported, including a strongly rated bond from Chartis, an insurance firm, and a legal obligation by Finmeccanica.
Finmeccanica is on the hook for the project even if it sells its Ansaldo holdings, HART Finance Committee Chairman Don Horner said after the update.
Neither Ansaldo STS nor AnsaldoBreda has ever defaulted on a contract, Ansaldo STS’ U.S. Treasurer and Vice President for Administration Joseph Pozza told Horner and other board members on the finance and oversight committees.
Ansaldo STS’ work will cover about 85 percent of the joint venture’s unprecedented $1.4 billion contract to design, build, operate and maintain the city’s driverless train system, which officials say would be the first of its kind in the U.S.
The 20-mile, 21-stop line from East Kapolei to Ala Moana Center is Ansaldo STS and AnsaldoBreda’s 10th driverless system in the works. Officials anticipate its first 10 miles will open for use in 2017, and the whole line will start running in 2019.
Four of the nine other systems have started running in recent years in Copenhagen, Denmark; Riyadh, Saudi Arabia; as well as Brescia and Milan in Italy. AnsaldoBreda also signed in November a nearly $300 million contract to provide rail cars for Miami-Dade County, Fla., a fact company officials touted Thursday.
Ansaldo officials also unveiled images of Honolulu’s driverless train models, noting that the colors and seal on the outside of the trains were subject to change.
Should AnsaldoBreda default on the rail cars, STS would remain responsible for the contract and "is more than capable" of carrying it out, based on its financial strength, Pozza said.
Finmeccanica saw S&P cut its debt rating to junk status in January amid concerns it wouldn’t be able to sell off its energy and rail assets, in order to reduce overall debt. The conglomerate fully owns AnsaldoBreda and 40 percent of Ansaldo STS.
Nonetheless, Finmeccanica is "moving toward a profitable path," Ansaldo STS Chief Financial Officer Christian Andi said via a video feed from Italy. "We don’t see any issue" going forward with AnsaldoBreda, added Andi, who had planned to attend Thursday’s meeting in person but said he broke his leg recently in a skiing accident.
HART’s Finance and Oversight Committee members voted unanimously to authorize Ansaldo Honolulu JV to move ahead. Board member Ivan Lui-Kwan recused himself. HART’s lawyers advised him to refrain from voting because a business partner represents Ansaldo, he said.
HART Chief Executive Officer Daniel Grabauskas will give final approval for Ansaldo Honolulu to move forward, and he expressed confidence Thursday in the joint venture.
"There’s a proven track record here that people should be confident about," Grabauskas said. "The financial capacity of the principal company is there," he added, referring to Ansaldo STS.
