French company Alstom is entering a joint venture with two Iranian companies to manufacture 1,000 subway wagons in three years.

The French multinational company signed a trilateral “shareholders agreement” with Industrial Development and Renovation Organization of Iran and Iranian Rail Industries Development Company in a ceremony held in Tehran late Sunday to manufacture the wagons in IRICO facilities.

The amount to be invested by Alstom has not been publicized, but an IDRO source, who declined to be identified, told the Financial Tribune that about €1.3 billion will be invested in the JV whose main shareholder is Alstom with 60%, while the Iranian companies each will own 20% stakes. Considering Alstom’s majority shares, it will be leading the joint venture company by appointing a chief executive of its own.

Alstom is a French multinational company operating worldwide in rail transport markets, active in the fields of passenger transportation, signalling and locomotives, with products including the AGV, TGV, Eurostar, and Pendolino high-speed trains, in addition to suburban, regional and metro trains, and Citadis trams.

Iran’s Minister of Industries, Mining and Trade Mohammad-Reza Nematzadeh was quoted as saying in the ceremony that the agreement pertains to “investment partnership, transfer of knowhow, manufacturing, exports and maximum use of Iran’s domestic capabilities.”

Since General Electric took over its power equipment-making unit in November 2015, Alstom has focused on the manufacturing of locomotives and rolling stock, as well as railroad servicing.

The firm said in January 2016 that it signed a preliminary deal with the Iranian government to start talks on the development of railroads in the country.

The company said it would start discussing ways to address Iran’s needs for mainland and urban transportation, as well as the production of trains in the country.

Siemens to Follow Suit

Nematzdeh said a team of representatives of German engineering giant Siemens is scheduled to visit Tehran later this week for “investment and transfer of technology.”

Deputy head of IRICO Majid Talachian, told us a “similar deal will be signed with Siemens”, referring to the Alstom agreement.

He said “two other companies will be involved” in cooperation with Siemens, declining to give more details.

Siemens has perhaps been one of the most proactive German firms in pursuit of opportunities in Iran after January 2016 when Tehran and the world powers implemented a deal they had reached earlier to resolve a long-standing dispute over Iran’s nuclear program.

The company has been present in Iran since it built the Indo-European telegraph in the 19th century. It officially stopped doing new business in the country in 2010, international economic sanctions were tightened against Iran, but continued to service existing contracts as long as they did not contravene the sanctions.

Siemens has been cooperating with Iran’s major industrial conglomerate MAPNA Group for years. It signed a contract with the Iranian giant in 2011 to supply 150 locomotives to the Islamic Republic of Iran Railways. MAPNA successfully acquired the technology and delivered the order in time.

Now the German company is expanding its presence in the Iranian market, which is in dire need of modern equipment as thousands of kilometers of new railroads, subways and electric and high-speed routes are being laid across the country.

Furthermore, MAPNA signed a preliminary deal in October 2016 with Siemens to manufacture 50 diesel electric locomotives for passenger trains. Another agreement was signed between MAPNA and Siemens last year for joint manufacture of 70 electric locomotives to be used in the 926-km Tehran-Mashhad railroad, which is being electrified.

The IRIR and Siemens’ transportation subsidiary Siemens Mobility signed several memoranda of understanding January last year to develop Iran’s railroads.

The agreements concern electrification of the Tehran-Mashhad railroad and Tehran-Isfahan high-speed train, supply of 500 wagons, development of Iran’s railroad infrastructure and provision of consultation and technology.

Should the new deal be signed, IDRO and IRICO will be added to the list of Siemens’ major Iranian partners.

The new deals are part of a plan, based on which IDRO is tasked to manufacture 2,000 passenger wagons to be used in the subways across Iran. The company was supposed to find partners through a tender.

IDRO’s chairman Mansour Moazami said in the Sunday ceremony that Iran will need 8-10,000 wagons by the end of the Sixth Five-Year Development Plan (2017-22).

“But one of our problems is the inability to manufacture the wagons domestically, making use of our own financial resources, without access to latest modern technologies,” he said.

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