Dubai negotiates funding for transport schemes

28 September 2010

Transport authority attempts to settle funding issues on two of its largest projects

Dubai’s Roads & Transport Authority (RTA) is working on a funding deal that would allow work to re-start on the stalled $1.1bn Al-Sufouh tram project. The talks follow a deal being reached to settle the outstanding AED9.6bn ($2.6bn) payments due on the Dubai Metro.

The RTA said the tram project has been delayed due to a change in the alignment of the tram, although contractors on the project have complained of payment issues (MEED 13:06:10).

Abdul Redha Abu al-Hassan, director of planning and development of the rail agency at the RTA, says, “We had some changes in the alignment. It was supposed to go straight along Al-Sufouh road, but the ridership on Al-Sufouh road was not enough to [support] the line.”

A deal to finance the project is also under discussion with the contractor, a consortium led by France’s Alstom and the local/Belgian Belhasa Six Construct. As a result of the realignment and funding negotiations the tram will now be completed in 2014, considerably later than the original April 2011 completion date.

The RTA has also reached a settlement with the Dubai Rail Link Consortium (Durl) over outstanding payments on the AED29.6bn Dubai Metro. Under the terms of the repayment deal, the RTA will pay AED3.77bn in monthly instalments of AED169m between May 2010 and September 2011. The remaining AED5.82bn will be repaid over the next seven years. The prospectus for Dubai’s sovereign bond, published in late September, said the repayment deal had been reached “recently”.

It added that AED20bn had already been paid to the contractors for the project. The settlement brings to an end a long-running series of talks between the RTA and the contractor on the Metro. The Talks between the RTA and the Durl consortium, which includes Mitsubishi Corporation, Mitsubishi Heavy Industries, Obayashi Corporation and Kajima Corporation, all of Japan, and Turkey’s Yapi Merkezi, have been under way since late 2009.

The government has provided a guarantee for the final AED9.6bn in payments, according to the bond prospectus.

The Durl consortium won the contract to build the Metro after submitting a price of $4.5bn for the work. Costs spiralled however, leading the total budget for the development of the project to nearly double that initial price.

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