voestalpine Subsidiaries VAE and BWG Establish Joint Venture for Turnout Construction in China for Biggest Project Contract in their History

• New greenfield production company with a total investment of more than EUR 21 million and approximately 300 employees. 
• Production of high-speed turnouts for three Chinese railway companies with a contract value of EUR 120 million. 
• Already the third significant engagement of the voestalpine Group in China.
  

The listed voestalpine Group continues to expand its turnout technology sector in growing international railway markets. The VAE Group, the world’s leading supplier of switches and turnout systems, has established a Joint Venture company in China based on the high-speed turnout technology of its German subsidiary BWG. Initially, the Joint Venture will gradually build up the local production of high-speed turnouts within a major contract awarded by several Chinese railway companies.

The Chinese partner CRSBG—China Railway Shanhaiguan Bridge Group Co., Ltd.—and the VAE Group (VAE GmbH and its German subsidiary BWG GmbH & Co KG) each have a 50% stake in the new turnout construction company CNTT Chinese New Turnout Technologies Co. Ltd., whereby VAE/BWG assumes the industrial leadership. Within this Joint Venture, a new tournout production facility will be built on the Chinese partner’s site in Qinhuangdao, approximately 300 km east of Peking. Total investments in the new company will amount to EUR 21.5 million, half of which is accounted for by each of the two Joint Venture partners. The new company is intended to have approximately 300 employees, 210 of them working in production. Thus it represents one of the biggest direct investments of an Austrian company in China so far.

The background of the new Joint Venture, which was fixed contractually by the partner companies in China today, Tuesday, is a large-scale contract awarded to BWG, the subsidiary of VAE GmbH which specializes in the engineering and production of special high-speed turnouts.

The order from various Chinese railway companies covers 320 special high-speed turnouts for three Chinese railway companies, based on the globally leading high-speed turnout technology of BWG. With a value of EUR 120 million, it is the biggest project package order so far in the history of not only BWG but also the VAE Group.

All tracks on which these turnouts will be laid (263 of them on “non-ballasted track”) are already under construction. The supply contract runs until 2009; assembly of the turnouts, which will still be supplied initially from German BWG production, will begin in the newly constructed factory already in late summer 2007; from the beginning of 2008 further production steps in the parts fabrication will be relocated to the Chinese Joint Venture factory. From 2009 on, the high-speed turnouts will finally be completely produced in China. Chinese and German engineers will subsequently work on developments destined exclusively for the Chinese railway market. BWG will contribute the required know-how, and BWG experts will support the Joint Venture technologically in the start-up phase with their experience already acquired in numerous projects in Germany, the Netherlands and Taiwan.

Since the early 1990s and the first deliveries of turnouts in 1994, the Division Railway Systems of voestalpine Group has been consistently striving to enter the Chinese railway market—a market with an enormous growth potential. With the signing of the Joint Venture contract and the turnout supply contracts, the employees of the VAE Group, and particularly of the German company BWG, have also laid the foundation for the utilization of the new factory in the next years. Furthermore, this success underlines the attractiveness of voestalpine’s high-speed technology for the railway industry, as—in addition to the turnout sector—the rail segment has also been able to conclude a large supply contract for high-speed rails.

“With this step in China and following acquisitions in recent years in the USA, Brazil, and India, voestalpine Group is successfully continuing its growth strategy in the railway sector, while at the same time reinforcing its local presence on the Asian market in the business area of turnout technology,” said Josef Muelner, member of voestalpine AG’s management board and head of Division Railway Systems.

Following the Joint Venture established by voestalpine Gießerei in May 2004 and a production facility of the Dutch subsidiary Flamco for pressure vessels, which is currently under construction, the turnout Joint Venture is already the third significant engagement of voestalpine Group in China. (27.2.2007)