Iran Gov't Bonds Worth $227m to Finance Rail Project

The Economy Ministry plans to issue 10 trillion rials ($227 million) worth of bonds on Tuesday to finance the electrification of Tehran-Mashhad Railroad.

With a 17% yield to maturity, 10 million two-year bonds will be offered on the over-the-exchange Iran Fara Bourse exchange with the underwriting window continuing on to Saturday.

The bonds are guaranteed by the Plan and Budget Organization and will be paid back by the treasury, Bourse 24 reported.

China signed a contract with Iran on July 25, 2017, to finance the electrification of the 926-km railroad from the capital city Tehran to the eastern city of Mashhad in Khorasan Razavi Province with a $1.5 billion loan.

This is said to be the first and largest line of credit to have been made available for Iran after international nuclear-related sanctions against the country were lifted in January 2016, following the signing of a landmark agreement between Tehran and world powers a year earlier.

The electrification project will be carried out by China National Machinery Import and Export Corporation, otherwise known as CMC.

According to Iran's Minister of Roads and Urban Development Abbas Akhoundi, Iran has already injected $200 million into the project, which is expected to increase the speed on the line from the current 160 to 200 kph.

The project is expected to take up to 48 months.

For Iran, the electrification of Tehran-Mashhad line is part of its wider rail development plan to electrify all railroads by 2025.

The railroad is a strand of the so-called New Silk Road–a 2,300-kilometer Chinese railroad that ultimately links Urumqi, the capital of China’s western Xinjiang Province, to the Iranian capital Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way.

From Tehran, the grand project will join Iran’s east-west network leading to Turkey and East Europe. It could also open a way to Europe via a developing rail route from southern Iranian ports to Azerbaijan and Europe.