Narrative
Full Description
Project narrative
On July 25, 2017, China Eximbank and the Government of Iran’s Bank of Industry and Mine — an Iranian state-owned bank— signed a RMB 10,079,127,539,730 ($1.5 billion) loan agreement for the Tehran-Mashhad High-Speed Electrification Upgrading Project. The loan carried a 16-year maturity and a 6-year grace period. Its interest rate is unknown. However, it is known that the borrower expected to make payments for interest, fees, and insurance worth RMB 4,337,000,000 — in nominal terms — over the lifetime of the loan. It is also known that the proceeds of the Sinosured-backed loan were used to finance approximately 85% of the cost of an RMB 11.5 billion commercial contract ($1.67 billion) with China National Machinery Import and Export Corporation (CMC), which was signed in June 2015. A sovereign guarantee was issued by Iran’s Ministry of Economy in support of the loan. The purpose of the project was to electrify a 926 km railway that runs from Tehran to the eastern city of Mashhad in Khorasan Razavi Province (after passing through the cities of Garmsar, Semnan, Damghan, Shahroud, and Neishabour). Project implementation was originally expected to take 48 months. Upon completion, the project was expected to increase speed of the line from the current 160 km per hour to 200 km per hour, reduce pollution and increase the railroad’s transportation capacity. The route is already double-tracked and both tracks will be electrified through the project. According to CEO of Islamic Republic of Iran Railways Saeed Mohammadzadeh, the railroad will have the capacity to transport 25 million passengers and 10 million tons of cargo per year as soon as it is electrified. CMC is the contractor responsible for project implementation. Mapna (an Iranian infrastructure engineering group) and Sudian Group also seem to be involved in project implementation (most likely as contractors). A formal groundbreaking ceremony took place on February 6, 2016. However, as of June 2019, the project had only achieved a 3% completion rate. Then, in January 2021, there were reports that CMC had withdrawn from the project. It is not yet clear if this means that the China Eximbank loan was suspended or canceled.
Staff comments
1. This project is also known as the Iran 926km Railway High-Speed Upgrading EPCF Project. The Chinese project title is 德黑兰-马什哈德电气化项目. The Persian project title is برقی کردن راهآهن تهران - مشهد or راه آهن تهران – مشهد/. 2. Sources disagree about the total cost of the project, with estimates ranging from $2.1 billion (People's Daily, 2016) to $2.56 billion (Financial Tribune 2017, Reinsurance News 2017). 3. This project may be supported by a ‘mixed credit’ package of GCLs, PBCs, and/or BCLs. Note that the placard at the opening ceremony (see "Ambassador PANG Sen Attended the Loan Agreements Exchange Ceremony for Tehran-Mashhad High Speed Railway Electrification Upgrading Project") refers to multiple loan agreements rather than a single loan agreement. The Government of Iran’s sovereign guarantee announcement also refers to concessional and commercial loans for the project. This issue merits further investigation. 4. Several sources claim that the project is being financed through an EPC plus Financing (EPC+F) contract, which suggests that China Eximbank may have extended a loan to the EPC contractor (CMC) but with a sovereign guarantee from the Iranian Government. This issue merits further investigation. 5. One source (an individual involved in the implementation of the project) notes that ‘[b]y using China Exim Bank’s RMB loan, this project is another milestone of RMB going global.’ The same source refers to the total cost of the project as RMB 11.5 billion ($1.67 billion). 6. The loan’s maturity and grace period are based on the loan amortization table provided in an official source (https://qavanin.ir/Law/TreeText/257245). 7. One official source (https://qavanin.ir/Law/TreeText/257245) suggests that the face value of the loan was RMB 9,775,000,000 rather than RMB 10,079,127,539,730. RMB 9,775,000,000 is equivalent to approximately 85% of RMB 11.5 billion (the underlying value of the commercial contract). This issue merits further investigation. 8. Given that China Eximbank agreed to provide a loan to finance 85% of the cost of the commercial contract, AidData assumes that the loan was issued in the form of a buyer's credit. This issue warrants further investigation.