Japan Offers Calif. Loan for $40B High-Speed Train

Monday, 13 Sep 2010 08:57 AM

 

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Japan said it’s ready to loan California money to help pay for a planned high-speed railroad as trainmakers compete to work on a project that will cost at least $40 billion.

The state-owned Japan Bank for International Cooperation is prepared to lend funds, Japan’s Transport Minister Seiji Maehara told reporters today after meeting with California Governor Arnold Schwarzenegger. He declined to comment on the size of the possible loan.

Schwarzenegger is tomorrow set to ride on a Japanese bullet train able to hit speeds of 275 kmph (171 mph) as part of an Asia tour that includes looking for contractors and funds to help with the 432 miles Los Angeles-San Francisco railway. Japan is offering a loan to California, which is wrestling with a $19.1 billion deficit, to help exporters compete with Chinese, Korean and European trainmakers.

“They have to get money from some place,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion in assets. “Japanese trains are going to cost more but they’re going to last.”

Schwarzenegger rode on a Chinese high-speed train yesterday and he is also set for a similar trip in South Korea. California has encouraged Asian companies including East Japan Railway Co., China South Locomotive & Rolling Stock Corp. and Hyundai Rotem Co. to bid on the high-speed rail project.

“Japan’s strength lies not only in being able to provide finance but also in the quality of the product,” said Ryota Himeno, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. “China and South Korea lag behind in terms of operating experience.”

U.S. Trip

Maehara also said he may go to the U.S. next year to help stoke sales of Japanese bullet trains. He has already visited the country twice this year after U.S. President Barack Obama awarded $8 billion of federal funds to help support high-speed rail projects nationwide.

Japan also earlier this year made it possible for the Japan Bank for International Cooperation to provide financing for U.S. high-speed train lines to help the sales push.

“By exporting Japan technology we can strengthen ties with another country and help Japanese companies,” Maehara said today. “JBIC is prepared to help finance the project” in California, he said.

Schwarzenegger also met with Japan Prime Minister Naoto Kan, Mehara said, without elaboration.

California Funding

California won $2.3 billion of federal funds to help build the high-speed train, the largest award in Obama’s program. The state also approved in 2008 a $10 billion bond sale to help fund the rail line, which is due to start services in 2020.

The California State Auditor has said that the state’s business plan for the high-speed rail network does not include steps to replace all of the $17 billion to $19 billion in federal funds initially envisioned for the system.

“The program risks significant delays without more well ‑ developed plans for obtaining or replacing federal funds,” the April 2010 report signed by State Auditor Elaine Howle said.

California expects bids from about 10 trainmakers for the project and construction may start as early as the first half of 2012, the California High Speed Rail Authority said earlier this year. The train will whisk passengers between Los Angeles and San Francisco in less than 2 hours and 40 minutes, according to the state-backed group’s website. The railway would eventually be extended to San Diego.

U.S. Transport Secretary Ray LaHood visited Japan earlier this year and road aboard a JR East bullet train.

--With assistance from Edmond Lococo in Beijing. Editors: Dave McCombs, Neil Denslow

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

© Copyright 2014 Bloomberg News. All rights reserved.

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