Greenbrier and Saudi Railway Company reach agreement to form joint venture

The Greenbrier Companies and Saudi Railway Company (SAR) announced that they have signed an agreement under which the parties will invest and generate investments totaling 1 billion Saudi riyals ($270m) in the Saudi rail industry.

Greenbrier and SAR intend to establish a joint venture company in Saudi Arabia to execute railway projects and supply railcars for profitable growth of the Saudi freight rail market. Together through the JV, Greenbrier and SAR will establish a new multi-modal business centred on creating and maximising existing and new rail routes for freight movement throughout the Kingdom and, ultimately, the Gulf Cooperation Council (GCC) region.

The JV will invest in assets and infrastructure required to expand profitable rail service offerings to the Saudi market. Based on achieving identified milestones, Greenbrier will provide the JV up to $100m in new railcars, lift equipment and other terminal investment necessary to place railcars in revenue service, and will operate intermodal and other freight terminals. SAR will provide the JV locomotives, rail access and service schedules to facilitate line haul services. Using its investment syndication model, Greenbrier will facilitate raising an additional $170m in collaboration with SAR and international public and private investment communities. The JV will operate similar to the model of TTX in North America on car supply, and can expand to serve GCC nations. Greenbrier will have a first right to manufacture and provide railcars for the JV’s railcar pool and establish a Saudi-based manufacturing/assembly presence.

Pooling brings several benefits to SAR including technology and knowledge transfer, advanced railcar designs and efficient network service design. The JV will promote supply chain efficiencies by increasing local content, reducing the capital burden on SAR, lowering SAR’s operating costs and improving the railroad’s competitiveness with highway transport. Freight traffic in Saudi Arabia is predominantly transported by truck or by pipeline. The JV will help SAR meet its customers’ needs by providing well-maintained railcars in an efficient, network system for general freight traffic.

The JV is consistent with and will serve the Kingdom’s Vision 2030 National Priorities, the National Transformation Program Strategic Objectives and the National Industrial Clusters Development Program adopted by the Saudi Arabian government. Among other goals, the objectives of the JV include: (i) accelerating the development of Saudi Arabia into a regional logistics centre by fully integrating rail into the freight transport sector; (ii) maximising in-country employment opportunities in railcar manufacturing, railcar asset support services and supply chain logistics related to the Saudi rail system; and (iii) increasing safety and improving the liveability of Saudi cities. The JV is intended to create a self-funding business, following the North American railroad model, which will reduce reliance on government funding for the rail sector over time and enhance value.

For more information visit: www.gbrx.com

30th October 2018