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BKV receives Alstom bank guarantee in full

A HUF 30 billion bank guarantee on an order for underground carriages from French engineering giant Alstom has been transferred to the account of the Budapest public transportation company (BKV), communications director for the mayor's office Mária Szűcs Somlyó said on Wednesday.

Bayerische Landesbank transferred HUF 21 billion of the guarantee on Friday, June 10, and Credit Agricole Corporate and Investment Bank transferred the remaining amount by late Tuesday, Somlyó Szűcs said.

Budapest mayor István Tarlós announced on Friday that a French court had ruled BKV could call down the bank guarantee. The second-instance ruling by a court in Nanterre overturns a first-instance ruling in December in which another French court accepted a plea by Alstom to prevent BKV from calling down the guarantee.

Alstom must pay court costs under the ruling.

Under a contract signed in May 2006, Alstom was to deliver 22 trains for Budapest’s number two metro line for €150 million and 22 trains for the fourth line, under construction at present, for €114 million.

BKV canceled the contract in October 2010 because Alstom "failed to do all that was expected of it in the interest of fulfilling the contract".

Alstom's application for permits for the vehicles it was to deliver was hampered because the brake systems used differed from those stipulated in Hungarian regulations.

Tarlós earlier said Hungary's National Transportation Authority told Alstom four times in 2007 and 2008 that the brakes on the trains it was to deliver were unsuitable according to Hungarian safety rules.

BKV tried to call down a bank guarantee on the order, but a French court in December accepted a plea by Alstom blocking the attempt. The Budapest local council appealed the decision and the first hearing in the case was on Wednesday.

BKV made a 50% advance payment on the trains of about HUF 30 billion. Alstom's indemnity was worth 10% of the order.

Alstom acknowledged the ruling in a statement on Friday but said it still believed the cancellation of the contract was illegal. Alstom said it remained committed to settling questions on the dispute over the carriages at talks between the two sides.

Tarlós said in a television interview a week ago that he and National Development Minister Tamás Fellegi would meet with the head of Alstom on June 17.