TOKYO (Reuters) – A consortium of four Japanese companies and one Turkish company will suspend construction of the Dubai Metro due to a delay in payment from the Dubai government, the Nikkei business daily reported.
The consortium, headed by general contractor Obayashi Corp, has received about 490 billion yen ($5.3 billion) worth of orders to build the metro from Dubai’s Roads & Transport Authority but the actual construction costs are expected to be double that, the Nikkei said.
The consortium decided to halt work and focus on talks with the Dubai government to secure back payments, the Nikkei said.
A spokesman for Obayashi said the company was in talks with the government on additional costs due to design changes.
“The pace of construction has been slowed down. But we have not suspended the work,” the official said.
Dubai sent shockwaves through global markets in November when it said it would request a standstill on billions of dollars of debts linked to the state-held holding firm Dubai World and its property units Limitless and Nakheel, developer of three palm-shaped islands.
Wealthier neighbour Abu Dhabi has bailed Dubai out to the tune of $25 billion in the past year.
The other Japanese consortium members are general contractor Kajima Corp, Turkey’s Yapi Merkezi Insaat Ve Sanati AS, Japan’s Mitsubishi Heavy Industries Ltd and trading house Mitsubishi Corp.
The five companies initially won the deal to build the railways, stations and supply trains and other facilities for 400 billion yen in 2005 but the costs have since ballooned, the official said.
The Nikkei said the consortium’s accounts receivables as of the end of October topped $5.2 billion, but the official denied the figure.
The full completion of the rail system was originally scheduled for this spring but is now expected to be delayed until the end of the year, the business paper said.
(Additional reporting by Yuko Inoue)
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