China North Industries Company (Norinco)is renegotiating its $680 million price for building Tehran metro?s line 4, to reflect rising procurement costs. At the same time the changeover in government has delayed the development of line 3, where a local state-affiliated company has failed to find a suitable foreign partner almost a year after winning the contract (MEED 3:3:05).

Negotiations between Norinco and the client, Tehran Urban & Suburban Railway Company (TUSRC) slowed as problems emerged with the letter of credit. While the situation was being resolved, procurement costs rose and the Chinese increased their price. Supply of rolling stock is understood to comprise the most expensive element of the engineering, procurement and construction (EPC) package.

Line 3 was won by the local Rail Transportation Industry Company (Rtico), a subsidiary of Industrial Development & Renovation Organisation (IDRO). However, TUSRC made it a condition of winning the contract to bring on board an experienced foreign contractor. So far, it has been in negotiation with France?s Bombardier, China International Trust & Investment Corporation (CITIC)and Germany?s Siemens, but has failed to reach agreement.

Industry sources say the changeover in government has delayed matters as the client and Rtico wait to assess transport policy. TUSRC head Mohsen Hashemi, son of the presidential runner-up Akbar Hashemi Rafsanjani, is now expected to stay in his post, after extensive rumours that he would be forced to leave.

Lines 3 and 4 are already behind schedule, but work is ongoing for the extensions to lines 1 and 2. New tenders for lines 6 and 7 are expected later this year or early in 2006, once the new administration decides on cash allocations for major transport projects.