CRRC CRC secures loan — via EPCF arrangement — for 630 Railway Car Procurement Project

On January 18, 2017, China Railway Rolling Stock Corporation Changchun Railway Company (CRRC CRC) — a Chinese state-owned railway rolling stock manufacturer — and the Tehran Wagon Company signed an EUR 782.66 million EPC contract for the 630 Railway Car Procurement Project. The purpose of the project is to build and supply 630 railway cars for Tehran’s subway system. The EPC contract was evidently financed through an EPC Plus Financing (EPC+F) arrangement (a common way in which Chinese banks and companies finance EPC contracts in Iran). In March 2018, Hossein Rajab Salahi, Director General of the Urban Rail Transportation Bureau of Iran’s Urban and Rural Municipalities Organization — an organization that is affiliated with Iran’s Interior Ministry — told the media that ‘[w]e are negotiating to sign a contract as we speak. The Chinese company Norinco Group will function as the finance coordinator in this project.’ The EPC contract was temporarily put on hold after the U.S. reintroduced sanctions against Iran in May 2018. Then, on February 5, 2019, Mojtaba Golshani, Executive Director of Tehran Wagon Company, announced that a consortium consisting of CRRC CRC and China North Industries Group Corporation Limited (NORINCO Group) and Tehran Wagon Company had launched the manufacture of 630 wagons. He also noted on February 5, 2019 that ‘[a]bout a month ago, the [Iranian] Ministry of Interior stated that the funds for the production of 630 cars were secured.’ Then, in February 2022, Tehran Wagon Company made an advance payment of EUR 118 million (worth 15% of the total value of the EPC contract) to the Chinese consortium. The 630 Railway Car Procurement Project became a source of local controversy in Tehran in July 2020. At that time, Tehran City Council Chairman Mohsen Hashemi announced that Tehran Wagon Factory had shut down after 17 years due to financial problems and laid off 500 workers. According to Hashemi, the Government of Iran’s failure to authorize Tehran Wagon Factory to build subway wagons (and reliance on NORINCO and CRRC CRC for the provision of subway wagons) forced Tehran Wagon Factory to shut down.

Additional details

1. Under most EPCF (EPC+F) contractual arrangements, a loan is extended to the EPC contractor but with a sovereign guarantee from the host government. Therefore, AidData assumes that the loan issued to Norinco is backed by a repayment guarantee from the Government of Iran (i.e. a sovereign guarantee). 2. The precise face value of the loan that was issued to Norinco, is unknown. For the time being, AidData assumes that the face value of the loan is equivalent to 85% of the value of the EUR 782.66 million EPC+F contract. 3. At least one source (https://en.radiofarda.com/a/tehran-factory-closes-as-city-seeks-buy-metro-wagons-from-china-in-return-for-oil/30735783.html) suggests that the loan was to be repaid and secured with oil export receipts. This issue warrants further investigation 4. The Chinese project title is 德黑兰630辆地铁车项目. The Persian project title is خرید ۶۳۰ واگن از چین.

Number of official sources

1

Number of total sources

9