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XpressWest, seeking to build U.S. high-speed rail, ends deal with China group

[June 09, 2016] By Robin Respaut

(Reuters) - XpressWest, the private U.S. firm proposing to build a high-speed rail link between Las Vegas and Los Angeles, terminated a joint venture with Chinese companies less than nine months after the deal was announced, citing delays faced by its partner.

Las Vegas-based XpressWest said the decision to end the relationship stemmed from problems with "timely performance" and challenges that the Chinese companies, grouped under a consortium called China Railway International (CRI), faced "obtaining required authority to proceed with required development activities".

XpressWest was started by Las Vegas developer Marnell Companies. It formed the venture with the Chinese consortium in September, infusing $100 million into the project. XpressWest had expected to break ground as soon as this year on the project, which one analyst estimated to be worth $5 billion.

The announcement is a blow to China, which has built the world's largest high-speed rail network in less than a decade. The XpressWest project was seen as a foothold into a burgeoning U.S. high-speed rail market and an opportunity to showcase China's technology.

China's CRRC Corp <601766.SS> <1766.HK>, the world's biggest train maker by revenue, joined the consortium in September.

XpressWest chief executive Tony Marnell said in a statement that his company's "ambitions outpace CRI's ability to move the project forward timely and efficiently".

Calls, emails and a fax to the Chinese group seeking comment were not answered during a public holiday in China.

But China's official Xinhua news agency cited an unnamed manager at CRI as saying XpressWest was "irresponsible" to make such a statement while its talks with CRI were still going on.

The "unilateral" announcement also violated the cooperation framework agreement signed by the two sides, which stipulates that one side should not release related information without approval by the other, Xinhua mentioned the executive as saying. It said the executive was "responsible" for the joint venture.

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XpressWest said it will now aggressively pursue other development partnerships and options.

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A CRRC worker walks past an unfinished metro train car in the company's Kunming factory, Yunnan province, April 11, 2016. REUTERS/Brenda Goh

The biggest challenge has been a federal funding requirement that high-speed trains be manufactured in the United States, even though no such trains are produced in the country, Marnell said.

"This inflexible requirement has been a fundamental barrier to financing high-speed rail in our country," Marnell said. "Is our leadership going to force projects throughout the United States to seek financial support for infrastructure in our country from foreign governments?"

XpressWest said it was anticipating the completion of environment work to develop the Southern California portion of the rail line, with environmental approvals expected by September.

XpressWest is one of at least three privately financed high-speed trains proposed to be built in the United States over the next few years. Companies in Texas and Minnesota also plan to tap private cash from investors globally, with help from foreign train makers and governments eager to export train technology.

The projects rely primarily on partnerships with Japanese or Chinese firms that face saturated train markets at home.

(Reporting by Robin Respaut in San Francisco; Additional reporting by Brenda Goh in Shanghai and Ben Blanchard in Beijing; Editing by Leslie Adler and Muralikumar Anantharaman)

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