ON DECEMBER 5 the Mexican government accepted a US$1·4bn bid from Transportación Ferroviaria Mexicana for the 50 year concession to operate the Ferrocarril del Noreste (RG 12.96 p805). TFM will also pay 0·5% of net operating income in each of the first 15 years and 1·5% for the remainder. There is also an option for a 50 year extension.
Three groups were shortlisted to submit final bids on November 29: the TFM joint venture of Kansas City Southern Industries (51%) and Transportaciónes Maritimas Mexicanas SA (49%); ICA, backed by Union Pacific; and Grupo Mexico with US short line South Orient. A fourth grouping of Grupo Olmeca, GEC Alsthom and SNCF was eliminated.
TFM’s final bid was nearly three times that of its two rivals. KCSI President & CEO Landon Rowland described the 4000 km Noreste, which moves 40% of Mexico’s rail freight, as the ’premier railway property in the world to be privatised.’ It links Mexico City with the ports of Lazaro Cardenas, Veracruz and Tampico, and the US border towns of Matamoros and Laredo. He said ’it is a powerful link to the most essential railroad market’, whilst Veracruz alone handles 25% of Mexico’s total freight.
TFM General Director Mario Mohar said the company plans to invest US$700m over the first five years of the concession, including US$200m in the first year. Most will go on locos, rolling stock and communications systems, and on expanding capacity to handle the projected traffic growth and create an intermodal network. TFM expects an annual rate of return of 18% to 20%.
- KCS is to take over neighbouring US regional Gateway Western, which links Kansas City and and Springfield, Illinois, and has trackage rights into Chicago. Along with joint ownership of the Texas-Mexican Railway, this gives KCS a corridor from Chicago to Mexico City. o
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