The EU and the French Development Agency (AFD) has signed a €940m ($1.2bn) deal with the Egyptian government to fund the third phase of the Greater Cairo metro extension.

The financing will support the extension of metro Line 3, also known as Revolution line. The first phase of the line, which connects Attaba to Abbassia was opened in February and the second phase is due to be completed in early 2014. The 18-kilometre third phase will connect downtown Egypt to Zamalek and Giza. Once completed, Line 3 will be able to carry up to 1.8 million passengers every day.

Total costs for the project are estimated to be around €2bn, including rolling stock that is expected to be financed through external funding managed separately by the Egyptian government. The French government has stepped in to finance the feasibility studies.

The signing represents nearly half of the French commitments allocated for Egypt during the G8 Deauville summit held last May 2011, the EU said in a statement.

The project’s €940m financing package comprises a €40m grant from the EU through the Neighbourhood Investment facility (NIF), a €300m soft loan from the French Development Agency (AFD), and a €600m soft loan from the European Investment Bank (EIB).

It carries a 25-year tenor and an interest rate of less than 2 per cent.

International bids for the works should be launched by the beginning of 2013 and the project will take eight years to complete.

Phase one of the metro Line 3 expansion was built by a consortium led by Vinci Construction Grands Projects, comprising Bouygues Travaux Publics, Orascom and Arab Contractors.

Vinci is also working on the construction of phase 2 of metro Line 3, which is expected to be completed in early 2014.