It is reported that consortium led by local firms set to win contract for rail link after submitting lowest of three bids. As per report, a joint bid by the consortium led by local firms Acwa Power and Saudi Binladin Group is poised to win the much delayed contract to build the Saudi Landbridge, linking the kingdom's Gulf and Red Sea coasts by rail. The group was formed by members of the Tarabot and Tracc consortiums, which had previously competed with each other for the contract.
The enlarged group submitted the lowest of three bids. The winning entry is understood to be worth USD 7 billion to USD 9 billion.
One senior official at the consortium said that "We expect to be announced as the winner. The bid is now with the government."
However, banks attached to the winning bid have continued to raise concerns over the project. One banker in the financing group said that "There are still concerns about how you can raise money against the current risk profile on the project."
The banks have two main areas of concern associated with raising debt to finance the project. One is the term of the concession. At 50 years, it is well beyond the time period over which any bank will lend, so there is a risk with refinancing the deal in the future. The other is the risk over the level of traffic on the line, which remains uncertain.
The banker said that "The banks continue to support the project but now is not the time to use an aggressive structure. No one wants to take on any exposure to long tenors, refinancing risk or traffic risk in the market at the moment."
The cost increase has been mitigated by a sharp fall in the cost of raw materials, but the consortium official said that the group's bid was still significantly higher than those submitted in February last year.
The official confirms that the companies in the winning consortium are still in negotiations with banks. The merged group has appointed France's BNP Paribas and Deutsche Bank as co-advisers on the financing and is expected to finalize a financing group of nearly 20 banks.
The bid is now undergoing a technical and financial assessment by the Saudi government, although no timetable for a formal contact award has been put forward.
(Sourced from MEED)
