UAE to Oman Hafeet Rail project secures $1.5bn financing from a consortium of banks

The Hafeet Rail project, which will link the UAE with Oman's Port of Sohar, has secured $1.5 billion in project financing, backed by a consortium of Emirati, Omani, regional and international banks, state-owned news agency Wam reported on Wednesday.

The $2.5 billion joint project, which is being implemented and operated by Hafeet Rail, will play a key role in boosting the development of the strategic railway network built to enhance trade and connectivity between the two Gulf states.

Hafeet Rail, a joint venture between UAE's Etihad Rail, Oman Rail and Mubadala Investment Company, is developing the project. The UAE's Etihad Rail and Oman's Asyad Group held the largest shareholder stakes in the joint venture.

The deal was announced during the inaugural Global Rail Transport Infrastructure Exhibition and Conference – Global Rail 2024, in Abu Dhabi, in the presence of Sheikh Theyab bin Mohamed, chairman of Etihad Rail, and deputy chairman of the Presidential Court for Development and Fallen Heroes' Affairs.

The 238-kilometre railway network will include 60 bridges, some up to 34 metres tall, and tunnels 2.5km long. It will connect five major ports and various industrial and free zones across the two nations.

Once operational, the railway will cut the travel time between Abu Dhabi and Sohar to 100 minutes, with freight trains reaching speeds up to 120 kph. Passengers will be able to ride on the network, with one train being able to accommodate up to 400 travellers at a speed of 200 kph.

A single freight train journey on the network is expected to transport more than 15,000 tonnes of cargo, or approximately 270 standard containers, benefiting industries such as mining, iron and steel, agriculture, retail, e-commerce and petrochemicals.

“The joint Emirati-Omani rail network project will undoubtedly enhance the competitiveness of both countries and the region as a vital commercial and investment hub, connecting them to global markets through the ports and state-of-the-art airports,” Wam quoted Abdulrahman Al Hatmi, chief executive of Asyad Group, as saying.

The consortium of banks in the financing agreement include Abu Dhabi Commercial Bank, Arab Bank, Commercial Bank of Dubai, First Abu Dhabi Bank, National Bank of Kuwait, Standard Chartered Bank, Abu Dhabi Islamic Bank and Ajman Bank.

The agreement also involved nine banks from Oman, including Ahli Bank, Bank Dhofar, Bank Muscat, National Bank of Oman, Oman Arab Bank, Ahli Islamic Bank, Bank Muscat, Bank Nizwa, and Alizz Islamic Bank.

The project is “creating a vital artery for trade, unlocking new efficiencies and solidifying the region's position as a global logistics hub”, Shadi Malak, chief executive of Etihad Rail, said.

The Middle East and North Africa has a pipeline of about $340 billion worth of railway projects covering thousands of kilometres across the region, according to a senior executive from Standard Chartered.

“Algeria has 14,000km in various stages of pre-execution, feasibility and execution. Egypt has a pipeline of 4,300km and Saudi Arabia has 4,000 [km], so between Algeria, Saudi [Arabia] and Egypt, we've got more than 20,000km of pipeline in the rail sector,” Abbas Hussein, managing director and head of project and export finance, Middle East and Africa at Standard Chartered Bank, said.

He made the remarks while speaking at the rail conference on Tuesday.

Etihad’s rail project in the UAE covers a distance of 900km from the border of Saudi Arabia to the border of Oman.

“Besides the rail, we now have metros all across GCC. The GCC will be interconnected very soon. There is already discussions 900km between Saudi [Arabia] and Kuwait as well. So all across we are seeing a lot more activity, activity in this part of the world than we have in the past,” Mr Hussein, said.

Jasem Al Budaiwi, secretary-general of the GCC, affirmed that the UAE fulfilled all its commitments related to the GCC Railway project and is now ready to connect with its neighbours.

The strategic GCC project is expected to begin operations in 2030, according to the scheduled plans, he told Wam on the sidelines of the conference.

“It aims to transport six million passengers at the start of operations, with that number expected to rise to eight million by 2045. The anticipated volume of goods to be transported upon the project's launch is 201 million tonnes of commercial goods, increasing to 271 million tonnes by 2045,” Mr Al Budaiwi added.

Spain-based multinational transport infrastructure company is investing in projects that comply with ESG (environment, social and governance) fundamentals, Javier Fortea, chief executive of Globalvia, said.

“We look for projects that will definitely change the environment for good, with zero emissions, but also the social aspects of the people that we serve. So choosing the project is extremely important for us to get that support from our shareholders.”