Iran issues bonds to finance rail electrification

18 January 2018
Export and Import Bank of China (Exim) will provide the majority of funding for the Tehran-Mashhad rail electrification project

Iran’s Economy Ministry is issuing IR10 trillion ($227m)-worth of bonds this week to finance the electrification of the 926km Tehran-Mashhad railroad.

The 10 million two-year bonds carry a 17 per cent yield to maturity and are being offered on the over-the-counter Iran Fara Bourse, according to a local media report.

It is understood the bonds are guaranteed by Iran’s Planning and Budget Organisation.

In July last year, Export and Import Bank of China (EXIM) signed a $1.5bn deal with Iran’s Bank of Industry and Mine to finance the electrification of the railway, which links the capital Tehran with Mashhad, the country’s second largest city.

China National Machinery Import and Export Corporation is the main contractor for the project, with local Mapna to serve as subcontractor.

Mapna has earlier signed a contract with Germany’s Siemens for the manufacture of 50 diesel-electric locomotives that are understood are destined for the Tehran-Mashhad railway line.

It is not clear what percentage of the total budget will be ultimately financed by the Iranian government.

The project is expected to be completed within four years.

The railroad is a key segment of the new Silk Road, which is envisaged to connect Urumqi in China’s western Xinjiang province to Tehran and connect to railway lines in the Kazakhstan, Kyrgizstan, Uzbekistan and Turkmenistan in Central Asia.

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