Light Rail Tel Aviv.
(photo credit: Courtesy)
After a year and a half of renegotiations between the Finance Ministry and
Metropolitan Transportation Systems (MTS) consortium over the financing of the
Tel Aviv light rail project, Finance Minister Yuval Steinitz announced on
Thursday that the government was backing out of the deal.
The ministry is
due to foreclose on MTS’s bank guarantees in two weeks.
parties in the Finance Ministry completed a precise and accurate process, and at
the end of it a clear decision was reached that the Tel Aviv light rail project
should be completed without the company that had won the bid [to build and
operate it]. I am convinced that this decision will lead to an end to the
foot-dragging in the implementation of this important project and that the state
will be able to complete it as fast as possible in a safe and alternative
fashion,” Steinitz said.
The announcement came hours after MTS rejected
the Finance Ministry’s final offer for building the project. The two sides have
been holding intermittent negotiations for months, with the gap between them on
the estimated at roughly NIS 250 million, mainly in government guarantees, out
of a NIS 10 billion budgeted for the 22-km. Red Line. Several more lines are
The threat of nationalization has been hanging over the deal for
months and each side has accused the other of underhanded actions.
won the tender to build one of the country’s most ambitious infrastructure
projects in 2006 and was supposed to start physical work on the line in 2008,
but then the global economic crisis hit.
MTS was forced to find
alternative funding after its main lender went bankrupt. MTS eventually
succeeded in finding new lenders, but said that the terms of the deal with the
ministry had to be changed.
Initially the Finance Ministry refused to
discuss any substantial changes to the contract, but in July it began
renegotiating in earnest. After marathon talks it became clear that the sides
could not find middle ground and the deal was broken off.
They will now
enter arbitration to determine the compensation MTS will receive for the
cancellation of the deal.
It is unclear what the cancellation of the
agreement with MTS will mean for the light rail project, but in any case it will
not meet its original 2013 deadline for the Red Line to become operational.