VZCZCXRO9751
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHEG #0539/01 0590708
ZNR UUUUU ZZH
R 280708Z FEB 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 3795
INFO RUEHEE/ARAB LEAGUE COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 CAIRO 000539 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA, EEB/ECA, EEB/TRA 
NEA PLEASE PASS USTDA (L. AFAS) 
NEA PLEASE PASS USDOT/FRA (B. PELLETIER) 
COMMERCE FOR ADVOCACY CENTER 
 
E.O. 12958: N/A 
TAGS: ELTN ECON PREL EG QA
SUBJECT: EGYPT RAIL: U.S. COMPANIES SWEEP LOCOMOTIVE TENDER 
 
REF: A. 06 CAIRO 6666 
     ¶B. CAIRO - NEA/ELA EMAILS 
 
Sensitive but unclassified.  Please protect accordingly. 
 
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Summary 
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¶1. (SBU) U.S. companies General Electric (GE) and 
Electromotive Diesel (EMD) recently beat out Chinese 
competition, with each company selling forty new locomotives 
to Egyptian National Railways (ENR) as part of Egypt's 
multi-billion dollar transport infrastructure development 
plan.  The GE portion of the deal, which is reportedly worth 
USD 120 million, will be financed entirely by a Qatari 
government grant.  The EMD portion, which is likely to carry 
a similar price tag, will come from funds allocated to MoT 
from the sale of Egypt's third mobile telephone license. 
Strong advocacy, USTDA support, and USDOT engagement on rail 
safety cooperation, in addition to the producers' reputations 
for safety, likely helped swing the deal in GE's and EMD's 
favor.  End summary. 
 
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U.S. Companies Sweep Locomotive Tender 
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¶2. (SBU) Egyptian Minister of Transportation Mohamed Mansour 
announced on February 14 the purchase of forty new General 
Electric (GE) locomotives for USD 120 million.  The purchase 
is to be financed through a grant from the Qatari government, 
thereby not tapping the USD 5.5 billion the GOE had allocated 
from the sale of the third mobile phone license for the 
Minister's plan to renovate and develop Egypt's transport 
infrastructure.  Ministry contacts also tell us that MoT will 
purchase an additional forty locomotives from U.S.-based 
Electromotive Diesel (EMD) for a similar price, although 
final details have not yet emerged.  The Ambassador and other 
Embassy offices advocated directly and repeatedly with the 
Minister and senior MOT and Egyptian National Railways (ENR) 
officials regarding the sale. To the surprise of many 
Egyptian observers, the Chinese competitors, who were 
shopping far cheaper locomotives, lost on all counts. 
 
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Benefits of Cooperation 
----------------------- 
 
¶3. (SBU) The MOT decision to go with GE and EMD comes on the 
heels of a series of successes in U.S.- Egyptian cooperation 
in the rail sector.  Stemming from the positive relationships 
developed during a September 2006 visit by U.S. Federal 
Railroad Administration (FRA) rail safety officials in the 
wake of several fatal rail accidents, the MoT and FRA 
recently agreed to a three-month secondment of one of the 
FRA's senior technical experts to assist the MoT and ENR in 
constructing a new rail safety framework.  In mid-February 
2007, USTDA approved a USD 600,000 Grant Agreement for a 
Railway Traffic Management System Technical Assistance 
project to be awarded to the MoT.  A USTDA contractor visited 
Egypt alongside the FRA team in September 2006 and, in 
conjunction with MoT, ENR, and the Embassy offices, 
identified the grant opportunity in the traffic management 
side of ENR operations.  We expect to conduct a signing 
ceremony for the grant in late February or early March. 
 
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Spare Parts/Refurbishment Deal 
------------------------------ 
 
¶4. (SBU) An additional opportunity for U.S. companies is on 
the horizon with the re-tendering of a proposal to refurbish 
120 ENR locomotives.  Five companies expressed interest in 
the original tender: GE, GM, Progress (Prosylab), National 
(United Transportation Services), and Canadian manufacturer 
Bombardier (Orascom).  According to industry sources, 
however, ENR significantly underestimated the cost during the 
original tendering process, valuing the job at USD 800,000 
while the five companies' bids ranged between USD 1.3 million 
and USD 1.4 million.  ENR has not yet set a date for the new 
tender to go out.  ENR currently operates only about 300 of 
its 700 locomotives due to maintenance problems. 
 
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Comment 
 
CAIRO 00000539  002 OF 002 
 
 
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¶5. (SBU) Despite intense Chinese lobbying, the combination of 
safe, quality products, strong U.S. commercial advocacy, and 
enhanced policy-level cooperation between the U.S. and the 
Egyptian MoT likely swung the deal in our favor.  With the 
tragic ferry sinking of February 2006 and a series of fatal 
rail accidents setting the political backdrop, Minister 
Mansour was apparently not willing to gamble on Chinese 
manufacturers' questionable safety record for the development 
of Egypt's railways, regardless of Egyptian public 
perceptions and media hype caused by President Mubaraks's 
visit to China in November 2006.  In addition, offers of U.S. 
technical assistance from FRA and USTDA likely gave the MoT 
the impetus to stick with U.S. equipment. 
 
RICCIARDONE