Tel Aviv light rail delayed until 2023

CEO and "investor group" buying out Reshet 13

The project is six years behind the schedule set when it was nationalized in 2010, and NIS 3 billion over budget.

The Tel Aviv light rail's red line will not be ready before 2023, states the project's Dutch auditor, Aegis, in an internal report sent to the Ministry of Finance. The new date is six years behind the current date of 2017.

The highly critical report is based on continuing delays in the project's timetable, NIS 3 billion in cost overruns, and the dismal relationship between NTA Metropolitan Mass Transit System Ltd. general manager Itzhak Zuchman and employees whom he suspects are close to the company's former chairman.

The Tel Aviv light rail project was originally a BOT (build-operate-transfer) project until the franchisee, Metro Transport Solutions (MTS), a consortium led by Africa-Israel Investments Ltd. (TASE:AFIL), was nationalized in December 2010, after it failed to secure financing. The government handed the project over to NTA, a government company which had been responsible for the light rail's infrastructures work. Minister of Transport Yisrael Katz urged the nationalization of the project, overcoming strong objections by then-Prime Minister's Office director general Eyal Gabay, who argued that the government could not do a better job than the private franchisee.

The decision to nationalize the Tel Aviv light rail states, "The project will be fully operational no later than 2017", and set a budget of NIS 10.7 billion. A few weeks ago, NTA estimated the project's budget at NIS 14 billion, saying that the cost overrun was due to the rise in the Consumer Price Index (CPI). However, a simple calculation shows that this factor added only NIS 600 million to the project's cost, leaving an unexplained gap of NIS 3.3 billion.

Under the timetable set in the government's nationalization decision, NTA was due to publish tenders for the main part of the light rail by the end of 2012, including for the procurement of rolling stock, the procurement of traffic and command and control systems, and the digging of subway tunnels by tunnel boring machines (TBM). None of the tenders have been published yet. At the last minute, publication of the rolling stock tender in the first quarter of 2013 was pushed back to September.

The Ministry of Finance said in response, "In line with the government decision, NTA is authorized to build the Tel Aviv light rail project. The company is therefore moving forward on the planning of the Red Line, and recently submitted the planning concept in which NTA will carry out the detailed planning. This concept was reviewed by an auditor on behalf of the Ministry of Finance and the Ministry of Transport, which recommended it. The communications procedures are not the responsibility of NTA by law."