Japan Bank for International Co-operation (JBIC) is in talks with Dubai’s Roads & Transport Authority (RTA) to provide funding for the Dubai Metro, in a move which could resolve a dispute between the RTA and Japanese contractors building the network.

In May 2005, the consortium of Mitsubishi Corporation, Mitsubishi Heavy Industries, Obayashi Corporation and Kajima Corporation, all of Japan, and Turkey’s Yapi Merkezi submitted an initial price for the work of $4.5bn.

But since then the group has put in claims for additional costs, which the RTA disputes. The extra costs could take the price of the project to as much as $7.6bn. The talks are still at an early stage and it is not yet clear how much funding the Japanese export credit agency might provide, but sources close to the talks indicate it may be willing to fund all of the additional cost.

If a deal is agreed, it would enable the RTA to swap its existing short-term liabilities to the contractors for a longer-term financing obligation to JBIC, with repayments staggered over time.

Sources close to JBIC say the talks were given a boost by Abu Dhabi’s $10bn bail-out of Dubai World in mid-December 2009, demonstrating Abu Dhabi’s willingness to continue to provide financial support to its debt-laden neighbour.

“Talks with the RTA are still ongoing and at an early stage,” says one of the sources. “But it has been a comfort to see fresh support from Abu Dhabi.”

The talks are part of wider plans by the RTA to restructure its liabilities. “The RTA has plans on a number of schemes to swap its contractor debt for more manage-able, longer-term financing,” says one Dubai-based lawyer. “The most likely source for funding is multilateral agencies.”

The latest financing talks follow comments in November 2009 by Seiichi Otsuka, the Japanese consul in Dubai, that Japanese contractors working on the Metro were facing payment problems.

The RTA was not available to comment on the talks.