Tehran seeks to raise $4bn in private finance for city metro

07 November 2008
Funding plan expands on pilot scheme encouraging private sector participation.

Iran is seeking to raise up to $4bn in private sector investment to assist with the construction of the Tehran Metro, after deciding to expand a pilot scheme launched earlier this year to fill a funding shortfall on the project.

Under the pilot scheme, local firms are offered development land around the site of a proposed station in exchange for building the station itself (MEED 25:4:08).

This is now being expanded to potentially cover all 350 inner-city and suburban stations planned for the 370 kilometres of new lines. At an average cost of $11m for each station, the total bill for the stations is almost $4bn.

At present, the cost of the metro is due to be split evenly between national and local government.

“I do not think we will get developers for every station, but the stations are one quarter of the total cost [of $16.7bn] so we want to cut the government’s share of the cost,” says an official at the Tehran Urban & Suburban Railway Company (TUSRC), which is overseeing construction of the new lines on behalf of the Transport Ministry

The TUSRC struck a $300m deal with local finance group Fina in October, which will see Fina build three stations over three years in central Tehran, the fourth such deal this year.

Companies signing these deals also agree to share the profits from the subsequent development on the land for the duration of the contract.

“The profit-sharing element of the contract is still under negotiation but it will be somewhere between 70:30 and 50:50,” says the official.“We are also close to signing another similar deal. Final negotiations are ongoing.”

Iran is struggling to attract foreign capital due to international sanctions and progress on the metro has been extremely slow.

Four lines - 3,4,6 and 7 - are under construction or development, along with extensions to lines 1 and 2. Short new sections of track tend to open at sporadic intervals.

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