Chinese Government provides RMB 1.95 billion loan for Phase 1 of Karaj Metro Line 2 Project

In November 2018, an unspecified Chinese state-owned bank and Karaj Urban and Suburban Railway Organisation (KUASRO) — an Iranian state-owned company — signed an RMB 1,950,000,000 loan agreement for Phase 1 of the Karaj Metro Line 2 Project. The borrowing terms of the loan are unknown. However, it is known that the borrower was expected to use the loan proceeds to finance a $420 million commercial (EPC) contract with CITIC Group Corporation Ltd. The purpose of this project is to construct the first 15 km of Line 2 of the Karaj Metro, which upon completion will have a total length of 27 km. The 15 km stretch runs from Khwarazmi University Square in the west of Karaj to Shahid Soltani Square in the east of Karaj. CITIC Group Corporation Ltd. is the EPC contractor responsible for implementation. As of September 2017, the project had achieved a 32.31% physical completion rate. By April 2021, the 15 km stretch between Khwarazmi University Square and Shahid Soltani Square had been fully excavated. However, international sanctions eventually slowed the project implementation efforts of CITIC Group Corporation Ltd., which led to litigation with the project owner (KUASRO). The project was originally expected to reach completion within 4 years of the start date of the EPC contract. However, the project has underperformed vis-a-vis the original objectives identified in the EPC contract.

Additional details

1. Some sources suggest that the EPC contractor (CITIC Group Corporation Ltd.) eventually became the creditor, which implies that an EPCF (EPC+F) arrangement or a commercial contract with a deferred payment clause (i.e. supplier’s credit agreement) may have been reached. This issue warrants further investigation. 2. CITIC Group Corporation Ltd., formerly the China International Trust Investment Corporation, is a state-owned investment company of the People's Republic of China, established by Rong Yiren in 1979 with the approval of Deng Xiaoping. Its headquarters are in Chaoyang District, Beijing. 3. International sanctions slowed the project implementation efforts of CITIC Group Corporation Ltd., which led to litigation with the project owner [Karaj Urban and Suburban Railway Organisation (KUASRO)]. However, it is not clear if the loan agreement was ever cancelled. This issue warrants further investigation. 4. The Chinese project title is 伊朗卡拉季地铁2号线. The Persian project title is پروژه قطار شهری کرج or برای ساخت فاز اولخط ۲ متروی کرج.

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