Three years of negotiations between the Tel Aviv light rail franchisee Metro Transport Solutions (MTS) and the Ministry of Finance reached a head yesterday, after the project supervisory committee notified the company that the May 2007 franchise agreement was cancelled. At the same time, the ministry sent MTS a counter-proposal on the outstanding issues, and gave it 12 days to respond.
If MTS accepts the government's proposal, the parties will sign to a new franchise agreement.
As a result of yesterday's cancellation of the franchise, MTS's NIS 120 million guarantees will be foreclosed in 30 days. The project supervisory committee cancelled the franchise after last Thursday's meeting between Accountant General Shuki Oren and MTS chairman and Africa-Israel CEO Izzy Cohen and MTS vice chairman Muesluem Yakisan of Siemens.
During the meeting, MTS submitted its final offer to Oren, which the Ministry of Finance rejected. The parties are now readying legal huge compensation claims against each other in the event that the negotiations fail.
The MTS consortium comprises Africa-Israel Investments Ltd. (TASE:AFIL), Egged Israel Transport Cooperative Society Ltd. and Siemens AG (NYSE: SI; XETRA: SIE), China Civil Engineering Construction Corporation (CCECC), and Sociedade de Construcoes Soares da Costa SA of Portugal.
Sources inform ''Globes'' that the main bone of contention between MTS and the Ministry of Finance is over the bank financing for the project. The nine foreign banks due to finance the railway want the NIS 7 billion government set-up grant to be paid as early as possible.
There are also disagreements on the financial closing and construction timetables. Among other things, MTS want to extend the construction time by six months to 5.5 years. While the Ministry of Finance is prepared in principle to amend the timetables, it insists that MTS finance the cost.
Africa-Israel's share price fell 2% by early afternoon to NIS 20, giving a market cap of NIS 2.16 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 11, 2010
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