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Thu 28 Feb 2008 04:45 PM

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$5bn Saudi railway deal to be awarded in June

Four groups of Saudi and international firms are vying for 30-year contract.

Saudi Arabia's railway organisation said it would name by June the winner of its estimated $5 billion project to build a 1,100 km railway across the Saudi desert.

Four groups of Saudi and international firms are vying for the 30-year contract to build and operate the rail network linking the Gulf and Red Sea coasts of the world's largest oil exporter, and final bids are now being invited.

"We will know the winner by June," Mohammad Afzal Khan, advisor to the president of the Saudi Railways Organisation (SRO) told newswire Reuters by telephone from Dammam.

"The group which asks for the minimum grant from the government and meets the financial models will be the preferred bidder."

Khan said the minimum grant requested was about 6.5 billion riyals ($1.73 billion), declining to name the consortium.

Two executives from Saudi construction firms bidding for the project said the minimum grant requested ranged from 6.5 billion riyals to 16 billion riyals, with total project costs estimated at more than $5 billion.

Khan declined to say how much the project would cost, but said the consortiums would have to put in 20 percent equity with the remainder coming from bank loans and the government grant.

The so-called Saudi Landbridge project includes a 950 km line between the capital Riyadh and the Red Sea port of Jeddah, as well as a 115 km link between the industrial city of Jubail and Dammam, the oil hub 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.

Kuwaiti logistics firm Agility leads one consortium with US firms KBR, General Electric and Saudi Arabia's Al Rajhi Bank.

Saudi Binladin Group heads a group including Japan's Mitsui & Company, India's Ircon International, Germany's Siemens, Deutsche Bank and Deutsche Bahn, according to the SRO website.

Rajhi Investment leads the group with Mada Company for Industrial & Commercial Investment. Other members include Canada's SNC-Lavalin and Saudi Arabia's Samba Financial Group.

The fourth consortium, led by Saudi family owned business Al-Muhaidib & Sons, includes South Korea's Samsung Engineering & Construction and French bank BNP Paribas. (Reuters)

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