Under an agreement, Greenbrier Companies and Saudi Railway Company (SAR) intend to establish a joint venture company in Saudi Arabia to execute railway projects and supply railcars. The two companies signed the agreement under which they will invest and generate investments totaling 1 billion Saudi riyals (USD 270 million) in the Saudi rail industry.
Through the JV, Greenbrier and SAR will establish a new multi-modal business centered on creating and maximizing existing and new rail routes for freight transport throughout the Kingdom and, ultimately, the Gulf Cooperation Council (GCC) region.
“The JV will benefit the people of Saudi Arabia by enhancing the capacity and efficiency of freight and logistics systems in the Kingdom while contributing to local job growth, economic development and national defense mobility. As the Kingdom advances economic diversification to improve the life of its people, it will significantly grow its transportation infrastructure,” William Furman, CEO of Greenbrier said.
The JV will invest in assets and infrastructure required to expand profitable rail service offerings to the Saudi market. The JV will operate similar to the model of TTX in North America on car supply and can expand to serve GCC countries. 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.
Greenbrier will provide the JV up to USD 100 million (370 million Saudi riyals) 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 USD 170 million (630 million Saudi riyals) in collaboration with SAR and international public and private investment communities.
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 railway’s competitiveness with road 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 objectives of the JV include accelerating the development of Saudi Arabia into a regional logistics center by fully integrating rail into the freight transport sector, maximizing in-country employment opportunities in railcar manufacturing, railcar asset support services and supply chain logistics related to the Saudi rail system and increasing safety and improving the livability of Saudi cities.
The JV is intended to create a self-funding business which will reduce reliance on government funding for the rail sector over time and enhance value.
In 2015, Greenbrier was awarded a contract to manufacture nearly 1,200 tank wagons for SAR to use in transporting molten Sulphur and phosphoric acid. These are commodities that the National Mining Company uses to produce fertilizer as part of the Wa’ad Al-Shammal development project.
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