Rail engineering and services

The acquisition of Schreck-Mieves added a leading position in the trackwork market to existing operations in Germany.

Work continued on a range of high-speed electrification projects across Europe, notably in Italy and Germany, and Balfour Beatty is well-placed for further work as part of the drive to connect major urban centres by high-speed rail links.

In the UK, Network Rail's Control Period 3 (CP3) concludes in 2009 with the new Control Period (CP4) running from April 2009 to March 2014. In February 2009, Network Rail announced that it had accepted the Office of Rail Regulation’s rail spending budget and that it would spend £28.5bn on Britain’s rail infrastructure over the next five years.

Progress continues to be made on the planning and financing of Crossrail, the new rail route planned through London. The associated rail work will bring significant future opportunity.

The UNIFE 2008 World Rail Market Report predicted future growth in the rail supply industry and identified the importance of rail as a sustainable means of transport.

There was steady progress in 2008, with profit from operations, before exceptional items and amortisation of intangible assets, rising by 3% to £41m (2007: £40m), and revenues exceeding £1bn for the first time.

There was another good result from our international high-speed rail electrification and power supply business and further improvement in our US business. In the UK, profit was slightly down compared to last year, principally due to some settlements received in 2007.

The acquisition of Schreck-Mieves in Germany enhances our ability to deliver major, multi-disciplinary projects.

Major projects secured in the year included rail systems work for the Gotthard Base Tunnel in Switzerland and the high-speed Madrid-Levante line in Spain, contributing to a 33% increase in the order book to £1.2bn at the end of 2008.

Balfour Beatty Rail focuses on the design, construction, equipping, maintenance, management and renewal of rail assets and systems.

It has a significant presence throughout the UK, Germany and Italy and major projects in Sweden, Norway, Denmark, Spain, Austria, Switzerland, China and Malaysia, as well as its US rail business.

UK rail

UK rail operations consist of three principal businesses:

• Balfour Beatty Rail Services, one of the UK’s largest track renewals and rail plant organisations, providing renewals services for more than 25% of the UK’s rail infrastructure;
• Balfour Beatty Rail Projects, a leader in rail engineering projects for track and electrification in the UK and throughout the world, with operations in Europe, Asia, South America and Australia; and
• Balfour Beatty Rail Systems and Solutions, which designs, manufactures and supplies switches and crossings, as well as other rail products and components.

Balfour Beatty Rail Services had a good year with work continuing for Network Rail as one of its four retained renewals contractors. A significant improvement in renewal efficiency and quality was achieved in the year. The commitment to invest in six new tamping machines to enhance the existing fleet will enable higher quality and quantity of outputs to be achieved in the future.

In Balfour Beatty Rail Projects, progress was made on growing the long-term order book in both UK and overseas markets with notable contract awards for the reconstruction of the Airdrie-Bathgate Rail Link in Scotland; two line extensions for Santiago Metro in Chile; and the rail systems installation for the 57km Gotthard Base tunnel in Switzerland – which will be the longest railway tunnel in the world when it opens for commercial services in 2017 – working in tandem with Balfour Beatty Rail Germany as part of the Transtec Gotthard consortium.

Balfour Beatty Rail Projects is involved in many of the UK’s major rail schemes: the joint venture for the delivery of the East London line, with progress on the first of two phases to extend the existing line at both the north and the south ends; a large portfolio of rail enhancements for London Underground; and electrification works on the West Coast Main Line, which were completed in December 2008.

Other projects successfully completed in the year included the double-tracking of the railway between Gretna Station and Annan in Scotland for Network Rail and 12 new sidings at Orient Way in East London, including overhead line equipment and signalling for the ODA (Olympic Delivery Authority).

In engineering services there is a full programme of track and electrification design work both in the UK and overseas. Work on the design of the electrification of suburban lines in Auckland, New Zealand commenced during the year.

Signalling Solutions, the joint venture with Alstom, performed satisfactorily and completed signalling upgrade works at Trent Valley and Milton Keynes.

Work in Australia continued on upgrading the railway between Brisbane and Sydney. In early 2009, further work in Singapore was secured.

Balfour Beatty Rail Systems and Solutions recorded a creditable performance and built on its position as one of the few companies with the in-house expertise and resources to develop new solutions for rail infrastructure, aimed at measuring, monitoring and improving network safety and reliability.

Development of products focused on the design and manufacture of trackwork and a number of technology-based products and services. Laser Rail, which specialises in the development of small-scale solutions for track and other rail infrastructure, has been successfully integrated into the business, following its acquisition in 2007.

The move from Bathgate to a new factory in South Queensferry was completed early in 2009. This enhances the company’s ability to be a core supplier of cast manganese products, such as trackwork and crossings, for Network Rail and other customers around the world.

Rail operations outside the UK
Balfour Beatty Rail Germany/Austria performed strongly.

Three major electrification projects were secured from Deutsche Bahn, with a total value of approximately €80m. Towards the end of the year, the Hamburg-Lübeck high-speed line was inaugurated following the completion of the double-track electrification project begun in 2006.

Good progress was made on the rail link at Berlin Brandenburg international airport where Balfour Beatty Rail is working with Deutsche Bahn to supply the mass transit and mainline utilising traditional catenary, overhead conductor rail and medium-voltage equipment.

In Germany, a joint venture was established with Bombardier called Inosig, combining Balfour Beatty Rail’s infrastructure expertise with Bombardier’s signalling know-how, and work began on a project at Kreiensen.

Together with Balfour Beatty Rail Projects in the UK, and as part of the Transtec Gotthard consortium, a major contract was secured for the rail systems work for the Gotthard Base Tunnel in Switzerland. The contract is likely to be worth approximately €250m in total to Balfour Beatty. The project will involve the design, installation and commissioning of rail infrastructure equipment for the tunnel and includes the equipping of both single track tunnels which are each 57km long, as well as the adjoining open north and south sections totalling approximately 11km in length. Balfour Beatty’s responsibilities for the installation programme include project management, complex logistics, trackwork, overhead catenary and part of the medium-voltage supply lines for the tunnel works.

Schreck-Mieves, a German rail engineering group, was acquired in 2008 for €32m. Schreck-Mieves is a track construction business, which manufactures switches and crossings and supplies specialist plant and equipment. It supplies Deutsche Bahn and numerous mass transit and industrial customers in Germany. Schreck-Mieves has performed in line with expectations at the time of the acquisition. Looking ahead, there are opportunities for the business to add volume through market share growth and geographical expansion in Germany.

Balfour Beatty Rail International, which comprises the Group’s rail interests in Italy, Spain, Sweden, Norway, Denmark, Malaysia and China, made good progress.

In Italy, Balfour Beatty was awarded the €40m power supply and electrification works on the entire 20km section by the Metro “C” consortium, which has secured the contract to build a new line on Rome’s existing underground metro. A €17m contract for renewal works on the North-West region’s railway network was also secured.

Balfour Beatty is working on a number of electrification projects in Italy, including the high-speed rail link programme to connect all the main cities and incorporating links from Turin to Milan and Bologna, and Florence and Rome to Naples. The Milan to Bologna line, which now has a journey time of one hour, was inaugurated in December 2008 and the business is well-placed to win further contracts. Milan is hosting the 2015 Expo, and is aiming to transform its transport network, creating further project opportunities.

In Spain, Balfour Beatty won a €93m contract, with its partners, to deliver catenary and associated systems on the Madrid-Motilla del Panacar section of Spain’s high-speed Madrid-Levante line.

In Sweden, work continues on the Bothnia line track, electrification and power supply project. A number of contracts, with a value of around €100m in total, were won in Sweden, Norway and Denmark for electrification and multi-disciplinary projects.

In Malaysia, a letter of intent was signed to design, supply and install electrification, power supply, signalling and communications on 330km of double track between Ipoh and Padang Besar. The project will be carried out in joint venture with ansaldo STS and is the Group’s largest rail project to date in Malaysia. Work is expected to be completed by January 2013.

This award follows the completion of the electrification and signalling systems from Rawang to Ipoh in Malaysia and is part of a large railway infrastructure investment by the State of Malaysia to create a modern and efficient railway connection between Kuala Lumpur and the Thai border, with the long-term objective of establishing a Pan-Asian Link connecting Singapore to China.

In China, delivery of the high-speed electrification project Tianjin-Shenyang was completed and preferred bidder status was secured for a catenary project.

Performance in Balfour Beatty Rail Inc in the US continues to improve.

A $62m contract for the West Corridor Light Rail systems and signals and a $58m on-call contract for upgrades to existing systems were secured in Denver.

The three-year West Corridor project comprises a 12-mile extension to the existing light rail system and includes the supply, installation, testing and commissioning of the systems elements of the project.

Other project wins included the Expo line/Los Angeles light rail systems with additional signal and communications work on the Metro link. The services division won a significant ballast cleaning contract with the Burlington Northern Sante Fe freight company.

Opportunities for light rail and transit systems are being pursued in Seattle, Los Angeles, San Francisco, Orlando and Denver.

The business is now headquartered in Atlanta, the location of both Heery and Balfour Beatty Infrastructure head offices, and is well-placed for growth, based on its now stable foundations and a strengthening market.

In the medium term, the outlook for rail is very positive, as a result of both new requirements and the replacement of ageing infrastructure. In the short term, we anticipate further modest progress in 2009.