China Railway Con sees $623m loss on Saudi rail deal

Costs have “significantly exceeded the estimated figures" the firm said
China Railway Con sees $623m loss on Saudi rail deal
The planned monorail will link Saudis holy cities, and is scheduled to start operation next month
By Staff writer
Tue 26 Oct 2010 02:43 PM

China Railway Construction has said it expects to post a
loss of about 4.2 billion yuan ($623m) in unforeseen costs on a rail line for
Muslim pilgrims in Saudi Arabia.

The $1.8bn A1-Mashaaer Al-Mugadassah metro light rail
project in Saudi Arabia is set to incur losses as the costs have “significantly
exceeded the estimated figures at the time of signing the contract,” the
company said in a statement to the Shanghai Stock Exchange.

China Railway Construction signed a contract worth 12.1
billion yuan in February 2009 with the Saudi government to construct the monorail.

The project, which links Saudi’s holy cities, is
scheduled to start operation on November 13.

The firm said the Saudi government had substantially
increased the transportation capacity of the project for 2010, as compared with
the capacity laid out in the contract.

An underground pipeland network, land expropriation and
relocation managed by the client were also substantially delayed, the company
said in the statement.

The company said it would book a 3.6 billion yuan loss on
the project in its third-quarter financial results and it is expected to have a
"material impact" on its full-year earnings.

The firm already recorded a loss of 294 million yuan from
the project in 2009 and 254 million yuan in the first half of the year,
according to the statement.

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