Will Israel nationalize the Tel Aviv light rail project?

Official says franchisee has yet to obtain financing, so state considering "alternatives."

May 26, 2010 13:10
3 minute read.
Light rail in Jerusalem

Light rail in Jerusalem 311. (photo credit: Sybil Erlich)


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The Accountant-General’s Office is working on alternative solutions to complete the NIS 11 billion Tel Aviv light rail project, in case the state’s agreement with the private company contracted to build and operate the project falls  through, Accountant-General Shuki Oren told the Knesset’s Economic Affairs Committee on Tuesday.

The committee heard testimony from Oren as well as from representatives of the company, Metropolitan Transportation Solutions (MTS), in response to a request for an urgent debate issued by Hadash MK Dov Henin and Likud MK Carmel Shama.

As the MKs heard, the project, which has been on hold since May 2008, when the global economic crisis caused MTS to lose its financing, is currently at an impasse due to the inability of the two sides to agree on the financial arrangements of the project.

MTS is jointly owned in equal parts by Israeli construction giant Africa Israel, German Siemens, the Egged bus cooperative, Chinese civil engineering cooperative CCECC and Portuguese infrastructure firm Da Costa Soares.

Negotiations between the two sides have been frozen since March 16, when MTS sent a letter to the accountant-general proposing what it thought were reasonable solutions to the financial hurdles.

“Today is the 70th day since we sent the letter and we have heard nothing from the Finance Ministry,” said MTS CEO Yohanan Or, referring to the Accountant-General’s Office as a sphinx.

“We have a conglomerate of nine international banks willing to finance the project’s construction and a local bank willing to back the operation phase. We can guess at the three issues that are holding things up, but we are waiting for feedback from the ministry to hear what the problems on their side is.”

For his part, Oren said he was willing to meet with MTS as he had done in the past, but was waiting for a concrete proposal that would signify a breakthrough in the dealings. In the mean time, he said, “We are working on alternatives.”

While Oren didn’t agree to go in to the details of the possible alternatives, saying it would be improper to do so in the midst of negotiations, failure to complete the contract with MTS could only mean one of two options: either the state issues a new tender, or it decides to nationalize the project. Both cases would mean further delay of a project that was supposed to start two years ago.

The committee’s MKs expressed their frustration with the situation, with committee chairman Ofir Akunis describing the projects collapse as “a tragedy on a national scale.”

“According to my counting, MTS has been given five separate extensions to ensure financing, but enough is enough. Even Leviev has to honor agreements,” said Henin, referring to Africa Israel owner Lev Leviev. “The state has gone above and beyond to assist MTS. No other body would do the same.

“This is a major project and I can understand the hesitancy to cancel it. If it was the first extension I would say ‘give them a chance,’ but no more.”

Henin said that the conclusion that the accountant-general was reaching – and according to him, should have reached months ago – was that there was no choice but to nationalize the project.

Kadima MK Yulia Shamolov Berkovich said she thought it was too late to move back the clock and restart the tender. She urged the two sides to enter intensive negotiations.

“The state should have put an end to this after the first extension, but since it didn’t, I want to see the parties put aside their egos and close themselves in a hotel room and talk until white smoke comes out,” said Berkovich.

Oren said that the he was currently waiting for Prime Minister Binyamin Netanyahu to weigh in on the matter and that a meeting with Netanyahu and the finance and transportation ministers was scheduled for early June.

Akunis concluded the meeting by urging the sides to meet and talk before the prime minister’s meeting in hopes that a workable solution could be found.

The Tel Aviv light rail project will be the largest infrastructure project ever undertaken in Israel. The first line, the red line, the backbone of the system, starts from Petah Tikva, runs through Bnei Brak, Ramat Gan, Tel Aviv and Jaffa and ends up in Bat Yam.

The line, which spans 23 kilometers (half of it underground), will take passengers from one end to the other in about 45 minutes and is expected to carry nearly 400,000 passengers every day.

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