'THE GOVERNMENT is strongly committed to this project, which will bring to fruition the vision of a visionary leader. This is your opportunity to participate in an historic dream.'
With these words, Saudi Arabia's Minister of Transport Dr Jobarah Al-Suraisry invited potential partners to take a stake in the nascent Saudi Landbridge rail link (RG 3.04 p157). He was addressing delegates to a project day organised in London on January 31 by Saudi Railways Organisation and its financial advisors UBS Investment Bank.
The purpose of the event was to brief potential investors, contractors and customers about progress with preparing the build-operate-transfer concession, and to facilitate networking and encourage the formation of bidding consortia. Preliminary guidelines for the prequalification process were issued on the same day.
A rail link from the Gulf to the Red Sea was the dream of the founding father of modern Saudi Arabia, King Abdulaziz, explained the minister. The king lived to see the completion of the first line from Riyadh to Dammam in 1951, and now his successors are keen to complete the vision.
'The Landbridge project will create a new dimension in land transport across the Saudi Arabian peninsula, transforming the existing rail network into a world-class freight and passenger rail system', enthused Al-Suraisry. 'It will be one of the largest BOT projects ever undertaken in the Middle East and is a key initiative in the Railway Expansion Programme approved by the Kingdom's Supreme Economic Council.'
SRO President Khalid Alyahya confirmed that prequalification documents would be sent out within the next two months, followed by invitations to tender in the third quarter of 2005. With bids due back in the first quarter of 2006, he hoped to be able to select a preferred bidder for final negotiations by mid-2006 and award the concession in the third quarter of next year.
The project covers construction and operation of a 945 km railway from Riyadh to the Red Sea port of Jeddah and a 115 km line from Dammam port to the industrial city of Jubail along the Gulf coast. The concession company will also take over SRO's existing two lines linking Riyadh and Dammam to complete the rail corridor.
Jeddah Islamic Port is the principal regional calling point for shipping services between Europe and Asia via the Suez Canal. However, shipping companies are using Jebel Ali in UAE as a second hub to serve the Gulf countries, which requires eight or nine days extra to sail around the peninsula. Offloading Gulf traffic at Jeddah for transfer via the landbridge and feeder ships from Dammam would reduce shipping costs by an estimated US$100m for every vessel saved.
Container traffic in the Middle East-Gulf region reached 11·6 million TEUs in 2003, up by 124% since 1995. At present each port has its own hinterland, mostly served by road. The exception is Dammam, where the majority of traffic moves by rail.
Around 50% of all containers landed at Dammam today are destined for the burgeoning Saudi capital, which now has a population of over 5 million. SRO has an 85% share of this market, aided by the provision for shippers to send containers under bond to Riyadh Dry Port by rail, but not by road.
The number of containers moved between Dammam and Riyadh by rail has grown steadily from 172000 TEUs in 2000 to 283000 in 2004, lifting SRO's total freight traffic from 1·6 to 2·5 million tonnes and 1 billion tonne-km. Container traffic now contributes 65% of SRO's annual revenue, which totalled 235m riyals last year.
Implementation of the Saudi Landbridge is being overseen by an inter-ministerial steering committee, chaired by Alyahya. SRO has been designated Executing Agency for the project.
SRO has retained a team of international advisors to help with planning and structuring the Landbridge concession. UBS and Saudi Arabian banking company NCB are the financial advisers, with Linklaters and the Law Office of Abdulaziz Al-Fahd providing legal services. SNCF International is acting as technical consultant.
As well as undertaking technical and financial analysis of the project, the advisers are structuring the BOT project to attract private investment and proposing a regulatory framework and concession structure to allow the effective privatisation of Saudi Arabia's railways. The advisers will also assist SRO in drawing up the tender documentation and managing the award of the concession.
Due diligence is well advanced, with reviews of the financial and legal structures completed and a valuation of SRO's current assets nearing completion. Detailed traffic forecasts are at an advanced stage. The optimal route corridor has been identified, and Parsons Brinckerhoff has been appointed to define the route alignment more accurately within the corridor. Preparation of a new operating rule book, timetable structure and operating plan are also underway.
Jonathan Inman of Linklaters emphasised that the intention was to create a vertically-integrated railway, except for the operation of passenger services which will be transferred to a separate franchisee. The passenger franchise will not be tendered until after the line is completed, and until that time the concession company will have an obligation to continue operating SRO's existing Riyadh - Dammam passenger services.
Design of the regulatory framework and concession structure has been completed. SRO's intention is to set up a new concession company by Royal Decree under Saudi law. The existing assets and staff will transfer to the new company, in which the winning consortium will acquire a majority shareholding. Most of the regulatory requirements will be set out in the concession contract, but the government plans to set up an independent regulatory authority.
The concessionaires are expected to carry risks related to asset condition, construction and operating costs, freight traffic volumes and revenues and any financing risk. The government has agreed to expedite the necessary building permits, and will guarantee the capacity and throughput efficiency at the state-owned ports. The government will also formally commit not to build a competing railway in the same corridor during the life of the concession. The length of the concession term has not been predetermined, and bidders will be free to suggest their own preferences.
Capital and operating cost estimates for the project are now being prepared, together with investment requirements and revenue projections. The government will acquire and provide the land for the rail link and terminals, as well as handing over SRO's existing assets and 1600 staff. The government has also indicated that financial support may be available, but it is not clear whether this would come in the form of an equity injection or operating subsidies.
Asked whether the government had a fallback position, Al-Suraisry emphasised that 'the government believes the project is very important - the government is dedicated to seeing the project through. We see investors seeking options and are keen to allow the private sector to do the project, but if this first route does not succeed, of course the government will pursue other options.'
SNCF International is currently drawing up the technical specifications for the Landbridge, which will carry up to 40 double-stack container trains per day, running at 120 km/h, and four or five 220 km/h passenger services operated by the franchisee. All trains will be diesel-powered. Each container train is expected to carry around 400 TEUs.
According to Project Manager Guy Trocellier, the standard gauge line is being designed for 250 km/h operation, with a minimum radius of 3500m and a maximum cant of 150mm. The route will initially be built as single track with 20 km long dynamic passing loops every 50 km. High speed turnouts are envisaged to suit both passenger and freight trains. The whole line will be controlled by CTC, with signalling designed to ERTMS Level 2 specifications. SRO is currently assessing bids from Siemens and Invensys for resignalling its existing network.
Civil works will be designed to permit double-tracking in the future. The route includes around 28 km of tunnels through the hills to the east of Jeddah, and around 100 bridges which will be built to take double track.
The line is being specified for 25 tonne axleloads, which Trocellier says is the optimum compromise between the differing freight and passenger requirements. Saudi mining company Ma'aden had hoped to adopt 30 tonne axleloads for phosphate trains running from its proposed northwest mineral line to reach processing plants at Jubail, but Trocellier says that engineering the structures to take 30 or 35 tonnes would generate unacceptable vertical forces for high speed passenger trains.
More than one delegate was concerned about the profitability of the passenger operation, given that SRO's existing passenger service business does not cover its costs. Asked whether the government would consider making the landbridge freight-only, Simon Paine of UBS insisted that 'the passenger element is absolutely critical'. The 6 h Riyadh - Jeddah journey time will be very competitive with today's 12 h bus trip, and construction of the Western Railway to serve the holy cities of Makkah and Madinah could generate a lot more business. Paine believed that having a mixed-traffic railway 'is manageable, as any number of railways around the world will demonstrate.'
Alyahya explained that this was why two separate concessions were envisaged. 'The profitability of the main project will stand on the freight revenues; the passenger franchise will be finalised on its own merits. We recognise that they will probably be different players, and we accept that the passenger service may need government support. But technically, I don't see a problem.'
Saudi Landbridge in figures
Section Length Journey times
km passenger freight
Jeddah - Riyadh 950 6 h 12 h
Riyadh - Dammam 449 3 h - direct line
556 - 6 h via Haradh
Dammam - Jubail 115 1 h 3 h
'The Landbridge project will create a new dimension in land transport across the Saudi Arabian peninsula.'
Dr Jobarah Al-Suraisry
Minister of Transport
Kingdom of Saudi Arabia
'The Saudi Landbridge project is one of the largest BOT schemes in the rail sector at present.'
Saudi Railways Organisation