Ministry of Finance sources told "Globes" that the government is considering a compromise deal with Tel Aviv light rail franchisee Metro Transport Solutions (MTS). The sources said that a deal could be based on the return of NIS 138 million in bank guarantees deposited by MTS and foreclosed by the state. In return, MTS will withdraw its lawsuit claiming NIS 2 billion in damages, which it filed against the state in the framework of mediation between the sides.
On October 5, MTS filed a lawsuit against the state, amounting to over NIS 2 billion, in response to the cancellation of its franchise by the Ministry of Finance on August 10. In addition to financial compensation, MTS wants the arbitrators - judges emeritus Boaz Okun and Yehudit Tzur, and Adv. Eli Zohar - to require the government to return to the negotiating table and renew talks on securing financing for the project.
MTS is also seeking an injunction preventing the Ministry of Finance from taking any action on the ground, including funding the project from the state budget. Ministry of Finance sources said that the injunction is not a real threat, and that the project would almost certainly be managed by Metropolitan Mass Transit System Ltd. (NTA) after that firm has some "changes."
The Ministry of Finance also says that it intends to countersue MTS for the delays in the project. The ministry adds that it believes that MTS cannot carry out the project, which will cost at least NIS 11 billion, and has even described the consortium as a "corpse".
As proof, the ministry cited the possibility once raised by MTS to replace Africa-Israel with another development company. Names of potential replacements included Shafir Civil and Marine Engineering Ltd. and Shikun u'Binui Holdings Ltd. (TASE: SKBN). The treasury said that raising that option was in some ways an admission by MTS of its inability to carry out the project under the terms of the franchise.
MTS said in its lawsuit that it expected to make a profit of NIS 1.5 billion from the BOT (build operate transfer) project to build the railway line over five years and operate it for an additional 27 years.
MTS is a consortium comprising Africa-Israel Investments Ltd. (TASE:AFIL; Pink Sheets:AFIVY), 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.
This article corrects a previous article on the subject (posted October 18th) which mistakenly presented MTS's plans.
Published by Globes [online], Israel business news - www.globes-online.com - on October 19, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010