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Bombardier's Fla. rail project not a given

(Dow Jones circulated the following story on October 28.)

TORONTO -- While Bombardier Inc.'s win of a Florida high-speed rail project may raise the profile of its new JetTrain technology, analysts say there's no guarantee the line will ever be built.

Analysts noted Tuesday that Bombardier and its partner Fluor Corp.(NYSE:FLR) (FLR) have yet to negotiate a final contract with the Florida High Speed Rail Authority to build the Tampa-to-Orlando railroad. They also need to finalize financing. Florida Gov. Jeb Bush is against the project and there are elections looming. Earlier versions of the project have been cancelled.

The project "has the potential to position the company well for future high- speed-rail opportunities in North America which would be positive, but given the timeframe, economics and risks of this project we don't believe it will be a major factor in the current valuation of the stock," Robert Fay of Canaccord Capital said in a morning note.

"There is no guarantee the Florida transportation authority will go forward with the project," said Pierre-Yves Terrisse of Desjardins Securities, while Cameron Doerksen of Dlouhy Merchant noted there are "hurdles" to overcome before the line is built.

"I would say it's still somewhat iffy given the fact that they don't have funding," he said. "But the optics are good."

Bombardier's win after last year's highly publicized problems with its Acela commuter train between New York and Washington is a positive and could boost the profile of high-speed rail in the U.S., Doerksen said. Nevertheless, the consortium needs "significant federal and state funding to make this thing go ahead."

Doerksen doesn't own Bombardier shares and Dlouhy Merchant doesn't have an investment-banking relationship with the company.

The project is expected to be worth $4.3 billion, including designing, building, maintaining and operating the railway.

It is expected to use Bombardier's new JetTrain technology, which uses existing rail infrastructure. The train is powered by a jet engine and can attain speeds of about 150 miles an hour.

"This has been a long process and there are undoubtedly many steps ahead," Lecia Stewart, the head of high-speed rail for Bombardier Transportation, told Dow Jones. But she said the company's principal objective had been to be selected to negotiate a contract with the authority, and said the decision would boost high-speed rail in the U.S.

"We think it augurs well for the development of high-speed rail," she said.

Canaccord's Fay said funding for the project remains uncertain, but if the project proceeds, it would position Bombardier well for future projects, especially in signalling and rolling stock.

It was unclear whether Fay owns Bombardier shares or if Canaccord has an investment-banking relation with the company.

Terrisse also appeared cautious over the Florida project but said the announcement was positive for the JetTrain technology and it could hold " significant potential for revenue growth in the long run" if the subsequent phases of the proposed state high-speed rail network are built.

It was unclear whether Terrisse owns Bombardier shares or if Desjardins has an investment-banking relationship with the company.

In Toronto Tuesday, Bombardier is up 19 Canadian cents to C$5.86 on 1.86 million shares.

Wednesday, October 29, 2003

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