New high-speed network: Deutsche Bahn gets Egypt moving

Deutsche Bahn (DB) has landed a major international order in Egypt.

After India and Toronto, this is the third time this year.

The German state-owned company is to operate and maintain the first section of a new high-speed line for a billion euros over the next 15 years.

Representatives of DB and Egypt signed a corresponding contract at the UN climate conference in Sharm el-Sheikh, Egypt, on Wednesday.

Ralph Bollman

Correspondent for economic policy and deputy head of business and “Money & More” for the Frankfurter Allgemeine Sunday newspaper in Berlin.

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Corinna Budras

Business correspondent in Berlin.

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Thiemo Heeg

Editor in Business.

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The subsidiary of Deutsche Bahn, DB International Operations (DB IO), will thus take on the largest rail project in Egyptian history.

According to Deutsche Bahn, it is the sixth largest high-speed network in the world with 2,000 kilometers of track.

A consortium led by Siemens Mobility is building the infrastructure and delivering the vehicles for passenger transport and freight locomotives.

This means that trains will soon be running in Egypt that are very reminiscent of the German ICEs: high-speed trains of the Siemens Velaro model, which travel at 230 kilometers per hour, but on a completely new infrastructure.

And that could make the decisive difference in punctuality compared to Germany: Egypt is building a completely new rail network for 12 billion euros, first from east to west, then along the Nile and finally to the Mediterranean.

"The Egyptian government has big plans," says Niko Warbanoff in an interview with the FAZ. He is CEO of the responsible DB subsidiary, the DB Eco Group.

In a country with a rapidly growing population and completely congested road traffic, people are increasingly being lured onto modern trains.

"The Egyptians need infrastructure, they need a modern railway system for the enormous volume of traffic," stresses Warbanoff.

This saves travel time – line 1 alone is said to cut it in half for 30 million people – as well as emissions that are harmful to the climate.

Siemens reacted to the project with as much euphoria as the railways.

The Munich-based company will deliver 41 eight-car Velaro high-speed trains, 94 four-car Desiro regional trains, 41 Vectron freight locomotives and infrastructure facilities.

In an interview with the FAZ in August, Siemens Mobility boss Michael Peter was proud to have outperformed the big Chinese rival CRRC in the competition for the Egyptian network.

For Siemens, the order, which totals more than 8 billion euros, is the largest in the history of the company, according to CEO Roland Busch.

Court of Auditors criticizes risks

Deutsche Bahn, on the other hand, is promoting its foreign business with its involvement on the Nile, for which it has already been severely reprimanded, not least by the Federal Audit Office.

"Deutsche Bahn has increasingly lost sight of its core business of railroading in Germany," says a report from March.

Instead of making a "stabilizing contribution" to the finances, these activities had the opposite effect: the risks of this foreign activity could have an adverse effect on the federal government, which as the sole shareholder is indirectly involved in the foreign business.

In fact, the railway was already active on a considerable scale beyond the borders before Egypt.

This is primarily reflected in the two large subsidiaries DB Schenker (international logistics) and DB Arriva (European rail and bus services).

The two areas contribute significantly more than half of the group's total turnover, the actual train traffic in Germany only plays a secondary role in business.

DB's broad international portfolio is reflected in black and white in the annual report on seven densely written pages.

The holdings here range from Ireland to Uruguay and from Saudi Arabia to Singapore.

The fact that Deutsche Bahn has “lost sight of its core business” in its home country, as the Federal Court of Auditors put it, could possibly also be seen by millions of rail customers.

In the past summer months, they have suffered from the fact that the trains are more unpunctual than ever before.

Punctuality fell below the 60 percent mark for the first time.

Rail traffic in Germany is considered to be heavily overloaded.

There are currently more trains running on the routes than ever before, and many construction sites are causing problems for the railways.

Deutsche Bahn sees the order as an opportunity

The state-owned company does not see the new order as a burden, but as a great opportunity to continue growing internationally.

This is also reflected in the structure of the subsidiary.

From the current 7,000 employees, it wants to increase to 10,000 employees in the coming years.

The business model that is being pursued with orders such as that in Egypt is relatively low-risk, rail manager Warbanoff assures.

"We don't invest in the infrastructure and vehicles, nor are we dependent on ticket sales." Technology transfer is also important for work in Germany: "We can use some technologies there for the first time and then use them for the strong rail system in Germany. In addition, the profits generated would be reinvested in Germany.

In any case, the federal government supported the project.

The first line of the transport network will connect the metropolitan areas of Cairo, New Administrative Capital and Alexandria from 2025.

Cairo and Abu Simbel as well as Luxor with Hurghada on the Red Sea will be developed with two further routes and 60 stations.

In the end, 90 percent of the Egyptian population should have access to the new network.

An order that also caused a stir came from the Canadian metropolis of Toronto this year.

The railway is to take over the regional traffic there.

With an order volume in the tens of billions, this is actually the largest foreign contract to date.