By Andy Sambidge
Dubai Gov't says financing in place for completion of phase 1 of new transport system
The Dubai Government said on Wednesday it has secured a $675m financing deal for the first phase of the Al Sufouh Tram project.
The Department of Finance said the proceeds from the dual currency financing would go towards the completion of phase 1 of the construction of the transport scheme.
The first phase of the project will see the construction of a 10km long track starting from Dubai Marina to the Knowledge Village.
The transaction comprises a 13-year $401m loan which will amortize over 10 years starting 2015, and is guaranteed by the official government export credit agencies of Belgium (ONDD) and France (COFACE).
The second portion of the transaction is a 6-year $274m Islamic Ijara facility, split equally in US dollars and dirhams, and amortizing over three years, also starting 2015, according to a statement issued by Government of Dubai's Media Office.
Abdulrahman Al-Saleh, director general of the Dubai Department of Finance, said: "We have seen a very encouraging response to this financing, which is a testament to the strong confidence that the international banks have in Dubai's economy."
He added that the Dubai Government was continually examining ways to "optimise its funding strategy".
Citibank, Deutsche Bank, and HSBC acted as mandated lead arrangers and underwriters for the financing, the statement added.
Designed to stretch 14km along Al Sufouh Road, the tram is set to be the world’s first to run with ground power feeding the entire line, eliminating the need for overhead wires.
The first phase of the project will span 10.7km and cost AED4bn, the RTA said in April, and will see 13 of the network’s 19 stations open to the public.
On completion, the tram will link with the Dubai Metro at three stations along Sheikh Zayed Road and will also tie-up with the monorail on the Palm Jumeirah. Authorities say the line will include 25 vehicles each capable of carrying 400 passengers.
The tram, which was initially scheduled for completion in 2011, has been troubled by ongoing cash worries as the RTA has grappled with funding demands in the wake of the financial crisis.
Perhaps at last, the dangerous road through the Marina will become the tram track that it is meant to be, and the horrifying accidents caused by the tram works over the last few years will finally be alleviated.
Am I reading this correctly, the first $ 410 million of the loan to the RTA is guaranteed by the French and Belgian governments in order that their own nationality members of the consortium delivering the Al Sufouh Tram system, Alstrom and Besix, will get their invoices dating back to 2009 paid.
Unconventional approach to international finance, we loan you money so you'll be kind enough to pay our private sector bills. Wonder what French and Belgian tax payers think about that? Do they even realise?