The Ministry of Finance and the Ministry of Transport have agreed to an extension of the guarantee deposited by the Metro Transport Services (MTS) consortium, headed by Africa-Israel Investments (TASE: AFIL) and Siemens in the Tel Aviv light railway tender. The extension is by a further three months, to September 30, 2009, sources inform "Globes".
The guarantee was due to expire next week (June 30). The state's agreement to an extension amounts to de facto agreement to a further extension of the deadline for financial closure of the project, which ahs already been postponed four times.
"Globes" has learned that MTS and the state's negotiating team, headed by Deputy Accountant General Ami Landau, agreed that, over the next six weeks, intensive negotiations will take place between the two sides in an attempt to reach commercial understandings about the project, the largest infrastructure project in Israel's history, worth NIS 10-12 billion.
The concession agreement between MTS and the state for building the Red Line of the light rail system was signed two years ago, in May 2007. According to the original timetable, financial closing was supposed to have been completed within a year. However, because of the worsening credit crisis and the withdrawal of some foreign banks from financing of the project, the financial closing was postponed several times. The final date for it was April 30, 2009, but the date went by with no arrangement, and no new date has been set.
Senior government sources close to the matter said the decision to extend the guarantees was made with MTS's agreement, in an attempt to exploit fully the possibilities of negotiation. "There has been some progress in negotiations with the concessionaire on building permits and spreading of the project risks. It was therefore decided to continue talks to bring about financial closing by September.
The MTS consortium comprises Africa-Israel (20%), Siemens of Germany (20%), Egged Israel Transport Cooperative Society Ltd., Chinese company CCECC (20%), Soares da Costa of Portugal (20%), and Dutch company HTM, which is a partner without an equity share.
The Ministry of Finance confirmed the report, saying, "An extension of the guarantee for a few months has indeed been agreed. MTS has not been required to raise the amount, but in the light of the complexity of the project, and the fact that negotiations have not yet run their course, the company was asked to extend the validity of the guarantee."
MTS declined to comment.
Published by Globes [online], Israel business news - www.globes.co.il - on June 24, 2009
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