Texas Central: Contractor Secured. Funding? (Updated)

Written by Marybeth Luczak, Executive Editor
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Privately funded high-speed rail developer Texas Central has signed a $16 billion “final agreement” with Italian firm Webuild Group and its U.S. subsidiary Lane Construction Corp. to build its 236-mile line connecting Dallas and Houston. Funding, however, is still yet to be secured.

Webuild Group (formerly known as Salini Impregilo) and Lane Construction Corp. (a wholly owned subsidiary of Lane Industries, Inc.) will oversee civil engineering, including design and construction of the line, viaducts, buildings and services for maintenance and other equipment, industrial buildings, train depots and facilities.

The agreement with Webuild “consolidates the results of four years of work and analysis by Webuild and Lane, bringing the project to the advanced design stage,” and “updates the value of the preliminary agreement,” Webuild reported on June 15. In September 2019, Texas Central signed a $14 billion design-build contract with Webuild.

The agreement is also the “final step ahead of the financial closure—foreseen in the coming months—and the start of construction,” Webuild said.

Throughout its history, Texas Central has provided only general information on critical matters such as project financing, as illustrated, for example, by this passage from the FAQ section of its website:

How is this project different from past and current high-speed train projects? This is the right train, being developed the right way and finally at the right time. Unlike other high-speed train projects in the U.S., this project is backed by entrepreneurial investors employing a market-led approach to infrastructure construction where every decision is driven by data. No state or federal grants will be used. Specifically, to contrast, the project in California is a public-owned project, while the Texas high-speed train is being developed as an investor-owned system. This investor-led approach to financing the project changes everything. It is the first project to put commercial success at the heart of the project focusing on ridership and the customer experience. It requires fiscal discipline and accountability for every decision made during the development of the project.

Seeking greater detail, Railway Age posed several questions to Texas Central, through its general media inquiries email address, and Allyn Media, Texas Central’s Dallas-based public relations firm: “We understand that Texas Central has signed a final agreement with Webuild and its U.S. subsidiary, Lane Construction. Would you be able to provide any information on financing? Last fall, you said, ‘Now that the RPA and ROD have been released, Texas Central is focused on securing funding, followed by the start of physical construction. Texas Central Railroad [the operating subsidiary of Texas Central] has already secured letters of intent from banks in Japan and Europe, reflecting the financial viability of the project, and now is working toward achieving formal commitments from these entities, as well as others in the United States.’ Where does that stand now? Do you have formal commitments? If so, with whom?” 

We received a response from Allyn Media, mostly duplicating information provided late in 2020. “Our answer on the topic of financing is the same as it was in the fall,” said Allyn Media Executive Vice President and Partner Erin Ragsdale. 

We followed this up with another question: “Do you have an anticipated construction start date? The answer: “Late 2021 or early 2022.”

We also asked: “When does Texas Central expect to have financing in place, and is it full or partial financing? Going forward, given the Biden Administration’s emphasis on funding infrastructure and projects like high speed rail, will Texas Central be approaching the federal government for grants?” No response was received on June 16. On June 17, Texas Central told Railway Age: “Exact timing of [financing] execution will depend on how fast the formal commitments are secured,” and noted that “[w]e have not applied for any grants, but we are constantly evaluating financing options.”

WeBuild said the Texas Central HSR system is being designed to replicate the Japanese Tokaido Shinkansen operated by Central Japan Railway Co., and to run at speeds up to 200 mph. The system is planned to link Dallas and Houston, with an intermediate station west of Roans Prairie in Grimes County and near Texas A&M University, on a dedicated right-of-way. Travel time is being advertised at less than 90 minutes. Webuild estimates that approximately 6 million riders will use the train by 2029 and 13 million by 2050. Download WeBuild’s project fact sheet:

The proposed $20 billion, 236-mile rail line connecting Dallas (potential station rendering above) and Houston has completed key regulatory processes.

The Webuild contract with Texas Central “is expected to generate approximately 17,000 direct jobs and more than 20,000 indirect ones,” Webuild’s press release said. “Some $7.3 billion in materials from U.S. suppliers across 37 states will be used, plus services provided by Italian suppliers.”

Texas Central has said the following companies have been selected for the project:
• Bechtel (rail program manager).
• JRC (technology provider) and Spain-based Renfe (system operator).
• Team Shinkansen United (Hitachi, Mitsubishi Heavy Industries, Toshiba, NEC and JRC), which will supply high-speed rail technology.
• Kiewit (Nebraska) and Mass Electric Construction Co. (Massachusetts), which will install the core systems that will power the train line, in partnership with the International Brotherhood of Electrical Workers. On May 3, 2021, Texas Central announced the signing of a $1.6 billion contract with Kiewit and Mass Electric to provide the core systems, including critical safety and systems elements such as traction power, signaling and communications equipment.
• Matthews Southwest (a Texas-based real estate developer) and Suffolk Construction (Massachusetts), which will develop and build the Texas Central stations.

Of significance, the Federal Railroad Administration (FRA) released the final Rule of Particular Applicability (RPA) and Record of Decision (ROD) that established federal safety standards for the project’s operation and gave environmental clearance for the selected alignment (Build Alternative A, below):

Texas Central says riders will be able to travel between Dallas and Houston on a dedicated right-of-way in less than 90 minutes. The FRA’s Record of Decision in 2020 gave environmental clearance for the alignment pictured, Build Alternative A.
Carlos Aguilar, CEO, Texas Central Railroad

In related developments, Texas Central Railroad CEO Carlos Aguilar testified at a May 6 hearing of the House Subcommittee on Railroads, Pipelines and Hazardous Materials. Its theme: “When Unlimited Potential Meets Limited Resources: The Benefits and Challenges of High-Speed Rail and Emerging Rail Technologies.”

As reported by Railway Age Contributing Editor David Peter Alan, Aguilar called his project a “WIN-WIN opportunity for our country on multiple fronts: WIN on SAFETY and EFFICIENCY, WIN on JOBS and ECONOMIC COMPETITIVENESS, WIN on ENVIRONMENTAL, SOCIAL JUSTICE and ECONOMIC EQUITY, [and] WIN on CLIMATE CHANGE” (emphasis in original). He praised his prospective route as a safer alternative to Interstate Highway 45, saying: “That 240-mile stretch between Houston and North Texas is in the sweet spot of ‘too far to drive, too short to fly.’” Aguilar also called it a “job creator” and said it would have a “low impact”—at least on the environment.

Editor’s Commentary: Speaking from my position as a long-time railway industry journalist covering U.S. high- or higher-speed rail programs, most of which have gone nowhere (largely due to politicians lacking vision who define themselves as “fiscal conservatives” and preach about “wasted taxpayer dollars” and “boondoggles”) and have only resulted in expensive studies and shelved plans, there are a lot of things about this project that don’t make sense, and/or don’t add up.

Texas Central HSR is touted as a privately financed “investor-owned system.” Really? What private investors in their right financial minds would sink billions in capital into a passenger rail system? Who are these purported investors? What’s the projected ROI, in dollars? What is the timeline for an operating break-even, or an operating profit? What about ongoing capital maintenance (state-of-good-repair) costs? In other words, show me the money, because I’m having a hard time trying to follow it. I see big contracts, as detailed in the above story, and key developments, like the FRA RPA. All well and good, even encouraging. But again, show me the money.

Passenger railways can be operated as businesses—efficiently, with a high farebox recovery percentage for operating (“above the rail”) costs—but not as profit centers, when capital costs are included. Anyone who believes they can is smoking funny cigarettes (legal, by the way, in some states). Should they be held to those standards? Of course not! They’re public transportation, a public service—just like government-built highways, or government-built airports controlled by a government-provided air traffic control system. Somebody has to pay for them, through user fees, fuel taxes, whatever.

Let’s stop kidding ourselves, extinguish the smoke and cover the mirrors. There isn’t an HSR system in the world that hasn’t been government-financed. China invested $500 billion in its HSR network. France’s TGV is a source of national pride. So is Germany’s, and Italy’s. The United States? Supporting a bare-bones service like Amtrak, whose higher-speed, shared-use Northeast Corridor is the only system that remotely resembles HSR, is an annual battle. I and many others have been watching it for decades.

The current emphasis on climate change and green technologies and the environmental friendliness of railroads, freight or passenger, is spot-on, among the best possible solutions to a lot of serious global problems. Should the Texas Central system be built? Is it a good project? Absolutely! But again, let’s stop kidding ourselves. Embrace reality, build it with the level of government investment it requires, and the riders will come. I think that’s why Carlos Aguilar testified before the House T&I Railroad Subcommittee, which is trying to help Joe Biden push forward his agenda on domestic infrastructure investment. If Texas Central doesn’t need public dollars, why would Aguilar waste his time testifying before Congress? Perhaps to prime the pump for some federal grant money. OK, fine, but that could expose the project to the distinct possibility of anti-passenger-rail state politicians sending HSR money back to Washington, as was done in Florida and Ohio during the Obama Administration by the governors of those states. It’s happened before, and it could happen again. Why? Because we as a sadly divided nation have lost the will to do ambitious things.

As well, if Texas Central were to pursue federal funding—something it has never officially ruled out—it would be subject to stringent Buy America requirements that could nix the project’s foundation: building a copy of the Japanese Shinkansen in the United States. If that happens, Texas Central’s purported financial backing from Japanese banks may dry up.

Somebody who is qualified to do so prove me wrong—please. Submit an editorial devoid of pie-in-the-sky platitudes and descriptions of HSR utopia and why it’s so great. We all know that. We’ve been preaching it, ad nauseam, for a long time. Show me where the commitment is. Show me how somewhere, somehow in these United States of America, an HSR line will get built, and how the Neanderthal politicians who try to stamp it out won’t be let out their caves, unless they’re in straight-jackets with their big mouths duct-taped. Show me the money. It’s there. We just need to invest it. – William C. Vantuono

Additional Insight:

Texas Choo-Choo a Pain on the Range

STB Rejects Texas Central Petition

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