Firms court banks for $5bn trans-Saudi railway
Riyadh, October 4, 2007
Companies from Germany to Japan have approached banks to arrange as much as $5 billion to bid for a 1,100 km railway crossing the Saudi Arabian desert, bankers and executives said on Thursday.
Four groups of Saudi and international firms are vying for a contract to build and operate the rail network linking the Gulf and Red Sea coasts of the world's largest oil exporter. Bidding closes on Nov. 5 with the outcome expected early next year, the executives said.
The so-called Saudi Landbridge project includes a 950 km line between capital Riyadh and the Red Sea port of Jeddah, as well a 115 km link between the industrial city of Jubail and Dammam, the oil capital on the Gulf coast.
The Landbridge is one of the projects Saudi Arabia is using to tap a regional economic boom -- powered by a quadrupling of oil prices in the past six years -- to develop infrastructure, tourism and industry.
The winner of the Landbridge will have a 50 year concession to operate the network and could raise the funds in a mix of conventional and Islamic loans, bonds and project finance.
"Financing will depend on the winning consortiums, but we have started talking to banks and all the financing options are open," said an executive at Saudi Arabia's Binladin Group.
Binladin heads a group including Japan's Mitsui & Co, India's Ircon International, Germany's Siemens, Deutsche Bank and Deutsche Bahn, according to the Saudi Railways Organisation.
The Saudi Railways Organisation expects the winning bid to be less than $6 billion, said Mohammad Afzal Khan, advisor to the organisation's president.
"It will be up to the developers to arrange financing," he said.
The bidders will have to contend with firms raising at least $6.25 billion to finance chemical projects in the kingdom in the coming months and with a market reeling from a global credit crunch.
"All the developers are approaching the big boys of international banking as this will be about $4 billion to $5 billion," said an executive from a consortium led by Saudi Arabia's Al-Rajhi Investment Group.
Rajhi Investment is heading the group with Mada Company for Industrial & Commercial Investment. Other members include Canada's SNC-Lavalin and Saudi Arabia's Samba Financial Group.
Kuwait's Agility heads a third group which includes National Bank of Kuwait and Saudi Arabia's Riyad Bank. The fourth consortium includes South Korea's Samsung Engineering & Construction and French bank BNP Paribas.
The Saudi Landbridge is one of several rail projects the kingdom is planning.
Six international groups are expected to submit proposals by January to build a high-speed link between the Muslim holy cities of Mecca and Medina, Khan said.
Swiss bank UBS and Saudi Arabia's National Commercial Bank are advising the Saudi Railways Organisation on this project and the Landbridge.
The Public Investment Fund is overseeing the construction of a 2,400 km north-south freight railway.
"There is a lot coming up, but I don't think the Landbridge will face a problem," said a Riyadh-based banker from an international lender. "This is a core infrastructure project with a long-term yield and several cycles over its lifetime for the payment." - Reuters