Chinese Government provides RMB 4.4 billion loan -- via EPCF arrangement -- for Section 1 of 446 km Shiraz-Bushehr Railway Construction Project

In January 2016, Iran’s Deputy Minister of Road and Urban Development and Managing Director of the Construction and Development of Transportation Infrastructures Company (CDTIC), Ali Nourzad, announced that an MOU had been signed with a Chinese company for the financing of the 446 km Shiraz-Bushehr Railway Construction Project. Then, on March 7, 2018, CDTIC and China Machinery Industry Construction Group Inc. (SINOCONST) signed an Engineering, Procurement, Construction and Financing (EPCF) agreement for Section 1 of the 446 km Shiraz-Bushehr Railway Construction Project. An unspecified Chinese state-owned bank issued a loan worth RMB 4,440,000,000 to SINOCONST to facilitate the implementation of the project. The loan’s final maturity date is in 2028 (implied maturity length: 10 years). The other borrowing terms of the loan are unknown. However, it is known that the borrower expects to make payments for principal, interest, fees, and insurance worth RMB 5,914,000,000 (RMB 4,440,000,000 in principal RMB 1,474,000,000 in interest, fees, and insurance) — in nominal terms — over the lifetime of the loan. It is also known that the borrower expects to use the loan proceeds to partially finance the RMB 5 billion ($790 million) EPCF contract that was signed on March 7, 2018. The purpose of the project is to construct a 250 km section of a 446 km railway that runs from Shiraz to Bushehr. The 250 km section includes 13 km of tunnels and 2,600 bridges. The project’s earthworks include 17 million cubic meters of excavation and 13 million cubic meters of embankment. SINOCONST is the EPC contractor responsible for project implementation. However, Jahanpars Engineering and Construction Company — an Iranian subcontractor — is also involved in the implementation of the project. The project had achieved a 5% completion rate as of March 2018 and a 12% completion rate as of January 2022.

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 SINOCONST is backed by a repayment guarantee from the Government of Iran (i.e. a sovereign guarantee). 2. Jahanpars Engineering and Construction Company, which is also known as Jahanpars Group, is a private general contractor specialized in the engineering, procurement, construction and manufacturing of oil, gas and petrochemical industries as well as infrastructure, industrial and building projects. 3. The Persian project title is «احداث راه آهن شيراز – بوشهر».

Number of official sources

4

Number of total sources

16