After nearly four years of trying to land a buyer for its rail assets, the Italian defense firm Finmeccanica has announced that it will sell the company that’s creating the trains and operating system for Honolulu’s future rail transit system to Hitachi Ltd.
The Japanese industrial group, which makes nuclear power equipment, rail systems and industrial machinery, will buy Finmeccanica’s stake in Ansaldo STS SpA and AnsaldoBreda SpA in a deal valued at $2.2 billion. The deal is expected to close sometime later this year, according to a Hitachi statement released Tuesday.
Finmeccanica owns all of AnsaldoBreda, a train manufacturer that is unprofitable, and 40 percent of Ansaldo STS, a firm that builds train operating and controls systems and is profitable.
The two Ansaldo companies formed a joint venture, Ansaldo Honolulu JV, to design, build, operate and maintain Oahu’s elevated train system and passenger cars under a $1.4 billion contract — the largest in state history.
Finmeccanica has been trying to sell off its rail assets for the past several years, and at several points during that time a sale appeared imminent.
At one such moment in October, when Finmeccanica was reportedly on the verge of selling to either Hitachi or Chinese firm China CNR Corp., Honolulu Authority for Rapid Transportation board members sought and received assurances from its contractors that a sale would not disrupt progress on the project.
On Tuesday, Ansaldo Honolulu JV Project Manager Enrico Fontana repeated those assurances. "I can confirm that we continue to work full time on this project, and we’ll keep focused on our goals," he said in a phone interview. A big reason Hitachi would be interested in buying AnsaldoBreda is because of its contract to deliver the Honolulu project, which likely to add financial strength and stability, Fontana said.
"The integration into Hitachi will secure the best possible future for the Ansaldo STS and AnsaldoBreda businesses and their employees," a Finmeccanica statement added.
Nonetheless, HART Executive Director Dan Grabauskas said Tuesday that he aims to get a "strong statement of commitment" from Hitachi on the rail project.
The Ansaldo purchase also comes during an uncertain time for the cash-strapped rail project, which now faces as much as a $910 million deficit. Rail leaders are trying to persuade state lawmakers to extend the rail tax surcharge as rail officials scramble to close the gap, but that extension remains uncertain.
In 2013, Grabauskas and rail officials had further asked for assurances from Finmeccanica that its Ansaldo venture could carry out the rail contract despite Finmeccanica’s heavy losses, credit downgrades and even a corruption scandal that saw the defense firm’s chairman resign earlier that year.
During a March 2013 meeting, Ansaldo executives looked to ease HART board members’ concerns by noting that the city has several layers of protection to make sure its train system is completed, including a bond from insurance firm Chartis and a legal obligation by Finmeccanica.
Meanwhile, Ansaldo and HART remain at an impasse over the cost to deliver four-car trains for the system instead of two-car models. HART officials have said the move would save the project about $20 million, while Ansaldo estimated the switch would cost about $4 million. Despite saying last fall that he believed the two parties were close to a resolution, Grabauskas on Tuesday said they still had not reached an agreement.
Amid the recent uncertainty over how to fully fund rail, Ansaldo has continued its work. It expects to deliver its first train in early 2016, Fontana said Tuesday.
Hitachi has sought to expand overseas as most of Japan’s nuclear power plants remain shut after the 2011 earthquake and tsunami. Finmeccanica Chief Executive Officer Mauro Moretti is selling the rail unit to focus on faster-growing helicopter, aerospace and defense-electronics businesses and is cutting debt at the company, which is owned 32 percent by the state.
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Bloomberg News and Reuters news service contributed to this report.
