China Railway predicts loss in Saudi contract
By Feng Jianmin |
October 27, 2010, Wednesday
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Print Edition
Print Edition
CHINA Railway Construction Corp, which has built more than 50 percent of the railway system in the country, predicted a loss of more than 4.1 billion yuan (US$616 million) on its Mecca light-rail contract.
China Railway signed the contract, originally valued at 6.7 billion Saudi riyals (US$1.8 billion), with the Saudi Arabian government in early 2009 to build an 18-kilometer light rail connecting religious sites near Mecca and Medina. By September 30, costs, excluding financing, had risen to about 16.1 billion yuan from an expected 12.4 billion yuan at the end of last year, the builder said.
It explained that the cost overrun was to ensure punctual completion of the project after the owner had imposed new requirements during the construction phase.
The firm said the loss, equal to about 63 percent of its annual profit last year, was also due to a delay in laying an underground pipeline and land expropriation undertaken by the owner.
"If approval for compensation could not be obtained before the 2010 annual results are published, the project will have a material impact on the company's profit for 2010," China Railway said.
China Railway signed the contract, originally valued at 6.7 billion Saudi riyals (US$1.8 billion), with the Saudi Arabian government in early 2009 to build an 18-kilometer light rail connecting religious sites near Mecca and Medina. By September 30, costs, excluding financing, had risen to about 16.1 billion yuan from an expected 12.4 billion yuan at the end of last year, the builder said.
It explained that the cost overrun was to ensure punctual completion of the project after the owner had imposed new requirements during the construction phase.
The firm said the loss, equal to about 63 percent of its annual profit last year, was also due to a delay in laying an underground pipeline and land expropriation undertaken by the owner.
"If approval for compensation could not be obtained before the 2010 annual results are published, the project will have a material impact on the company's profit for 2010," China Railway said.
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