Active Mixed AidData Chinese Aid

China Eximbank provides RMB 10.07 billion loan for Tehran-Mashhad High-Speed Electrification Upgrading Project

¥10.08M RMB

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Iran Bank of Industry and Mines
Country	Iran
Start Date	Jul 25, 2017
End Date	May 14, 2027
Duration	3,580 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`67389`

Grant Description

China Eximbank provides RMB 10.07 billion loan for Tehran-Mashhad High-Speed Electrification Upgrading Project On July 25, 2017, China Eximbank and the Government of Iran’s Bank of Industry and Mine — an Iranian state-owned bank— signed a RMB 10,079,127,539,730 ($1.5 billion) loan agreement for the Tehran-Mashhad High-Speed Electrification Upgrading Project.

📋 Loan / Grant Terms

💰 Loan Amountcarried a 16-year maturity and a 6-year grace period

📅 Maturity16 years

⏳ Grace Period6 years

Its interest rate is unknown.

However, it is known that the borrower expected to make payments for interest, fees, and insurance worth RMB 4,337,000,000 — in nominal terms — over the lifetime of the loan.

It is also known that the proceeds of the Sinosured-backed loan were used to finance approximately 85% of the cost of an RMB 11.5 billion commercial contract ($1.67 billion) with China National Machinery Import and Export Corporation (CMC), which was signed in June 2015. A sovereign guarantee was issued by Iran’s Ministry of Economy in support of the loan.

The purpose of the project was to electrify a 926 km railway that runs from Tehran to the eastern city of Mashhad in Khorasan Razavi Province (after passing through the cities of Garmsar, Semnan, Damghan, Shahroud, and Neishabour). Project implementation was originally expected to take 48 months.

Upon completion, the project was expected to increase speed of the line from the current 160 km per hour to 200 km per hour, reduce pollution and increase the railroad’s transportation capacity. The route is already double-tracked and both tracks will be electrified through the project.

According to CEO of Islamic Republic of Iran Railways Saeed Mohammadzadeh, the railroad will have the capacity to transport 25 million passengers and 10 million tons of cargo per year as soon as it is electrified. CMC is the contractor responsible for project implementation.

Mapna (an Iranian infrastructure engineering group) and Sudian Group also seem to be involved in project implementation (most likely as contractors). A formal groundbreaking ceremony took place on February 6, 2016. However, as of June 2019, the project had only achieved a 3% completion rate. Then, in January 2021, there were reports that CMC had withdrawn from the project.

It is not yet clear if this means that the China Eximbank loan was suspended or canceled.

📋 Staff Comments

This project is also known as the Iran 926km Railway High-Speed Upgrading EPCF Project. The Chinese project title is 德黑兰-马什哈德电气化项目. The Persian project title is برقی کردن راه‌آهن تهران - مشهد or راه آهن تهران – مشهد/.
Sources disagree about the total cost of the project, with estimates ranging from $2.1 billion (People's Daily, 2016) to $2.56 billion (Financial Tribune 2017, Reinsurance News 2017).
This project may be supported by a ‘mixed credit’ package of GCLs, PBCs, and/or BCLs. Note that the placard at the opening ceremony (see 'Ambassador PANG Sen Attended the Loan Agreements Exchange Ceremony for Tehran-Mashhad High Speed Railway Electrification Upgrading Project') refers to multiple loan agreements rather than a single loan agreement. The Government of Iran’s sovereign guarantee announcement also refers to concessional and commercial loans for the project. This issue merits further investigation.
Several sources claim that the project is being financed through an EPC plus Financing (EPC+F) contract, which suggests that China Eximbank may have extended a loan to the EPC contractor (CMC) but with a sovereign guarantee from the Iranian Government. This issue merits further investigation.
One source (an individual involved in the implementation of the project) notes that ‘[b]y using China Exim Bank’s RMB loan, this project is another milestone of RMB going global.’ The same source refers to the total cost of the project as RMB 11.5 billion ($1.67 billion).
The loan’s maturity and grace period are based on the loan amortization table provided in an official source (https://qavanin.ir/Law/TreeText/257245).
One official source (https://qavanin.ir/Law/TreeText/257245) suggests that the face value of the loan was RMB 9,775,000,000 rather than RMB 10,079,127,539,730. RMB 9,775,000,000 is equivalent to approximately 85% of RMB 11.5 billion (the underlying value of the commercial contract). This issue merits further investigation.
Given that China Eximbank agreed to provide a loan to finance 85% of the cost of the commercial contract, AidData assumes that the loan was issued in the form of a buyer's credit. This issue warrants further investigation.

📚 Sources & References

China
Germany to participate in Iran's electric railway project
Chinese insurer Sinosure backs Iran deal to fund railroad construction, $2.3b Chinese Deal Finalized for Iranian Rail Project
伊朗内阁同意为中国融资协议出具担保
Ambassador PANG Sen Attended the Loan Agreements Exchange Ceremony for Tehran-Mashhad High Speed Railway Electrification Upgrading Project, عبور 12 طرح از هفت خان تأمین مالی خارجی/ 38 درصد فاینانس‌ها به نیمه‌راه رسید+جدول, 12 میلیارد دلار فاینانس‌های برجامی در مرحله نهایی جذب, http://cabinetoffice.ir/files/fa/news/1396/8/24/11654_417.pdf, صدور ضمانت نامه برای لازم الاجراء شدن موافقت نامه‌های مالی بین بانک صنعت و معدن و اگزیم بانک چین در ارتباط با پروژه برقی کردن راه آهن تهران – مشهد
驻伊朗大使庞森参加德黑兰—马什哈德高速铁路电气化改造项目开工仪式
焦点：伊朗制裁解除后中国企业与之在铁路及造船方面展开合作, ارائه گزارش بانک مرکزی در خصوص توافقات تأمین مالی با چین در جلسه هیئت
China to provide $1.5b finance for Iran railway project, $1.7b Chinese LOC for Iranian Rail Project
伊媒称中国进出口银行签署15亿美元交易资助伊朗兴建高速铁路
陆瑾：伊朗发展战略怎样对接“一带一路”
中国承建造价21亿美元的伊朗926公里高铁项目开工
Tehran – Mashhad electrification loan signed
德黑兰-马什哈德铁路_百度百科
MAPNA _ Tehran-mashhad Railway Electrification Project
China quits Tehran-Mashhad railway electrification project - Mehr News Agency, طرح های دوخطه و برقی کردن شبکه ی ریلی موجود, طرف چینی موفق به ارائه تضامین برای پروژه برقی کردن راه_آهن تهران – مشهد نشد _ منتظر فاینانس آذری_ها برای راه آهن رشت – آستارا نمی_مانیم _ خبرگزاری ایلنا, قطار برقی مشهد-تهران در در گیر_و_دار مباحث تأمین مالی _ شهرآرانیوز, برقی سازی خط_آهن تهران-مشهد متوقف شد - مشرق نیوز
BU_PITCH_ENGLISH_2019-clean5.xlsx
China's EXIM inks $1.5b deal for high-speed rail in Iran
Tai Zheng Profile, صدور ضمانت_نامه فاینانس راه_آهن تهران- مشهد کلید خورد _ اتاق ایران آنلاین, بانك صنعت و معدن و اگزيم بانك چين برقي كردن راه_آهن تهران - مشهد كليد خورد
Iran Newspaper, سامانه ملی قوانین و مقررات Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.