Abbas Akhoundi made the remarks on the sidelines of the ongoing Sixth International Exhibition of Rail Transportation and Related Industries & Equipment, also known as “RailExpo 2018”.
The minister explained that the locomotives will be manufactured for a private firm (Alborzniroo Railroad Fleet Company), noting that the type of sukuk issued is ‘Ijarah’.
Ijarah bonds are securities representing the ownership of well-defined assets tied up to a lease contract, the rent for which is the return payable to sukuk holders, according to Financial Tribune.
Akhoundi added that the bonds are guaranteed by the Islamic Republic of Iran Railroads.
Wagon Pars, located in the city of Arak in the central Markazi Province, is a subsidiary of the Industrial Development and Renovation Organization of Iran and the largest manufacturer of freight, passenger and subway wagons in the Middle East.
ANC is an Iranian company founded in 2007, specialized in investing in supplying locomotives, wagons and rail fleet spare parts. The 100% private company also offers engineering and technical services as well as rebuilding and manufacturing services in the rail sector.
This is not the first time financial instruments are being used in Iran to fund rail projects. As a case in point, the Economy Ministry issued 10 trillion rials ($220 million) worth of bonds late last year to finance the electrification of Tehran-Mashhad Railroad.
With a 17% yield to maturity, 10 million two-year bonds were offered on the over-the-exchange Iran Fara Bourse exchange, guaranteed by the Plan and Budget Organization.
Isfahan Municipality issued the second batch of its so-called “Participation Bonds” worth 5 trillion rials to finance the construction of Subway’s Line-2 last month.
The four-year bonds bear 20% interest and the government is set to undertake 50% of the buyback and yield payment to develop public transportation.
The municipality issued the first batch in the closing days of the last fiscal year on Tehran Stock Exchange.