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CRCC facing $640m loss on Mecca Light Rail Project

Chinese contractor faces $640 million loss on Mecca Light Rail Project

Talks are underway to discuss the Mecca Light Rail Project's future. Photo: Getty.
Talks are underway to discuss the Mecca Light Rail Project's future. Photo: Getty.

One of China’s largest construction contractors, the China Railway Construction Corporation (CRCC), is set to record a CNY 4.15 billion ($640 million) loss on the 'Mecca Light Rail Project' in Saudi Arabia, according to reports in China.

In a statement to the stock-exchange, CRCC said it is in talks with Saudi Arabia’s Ministry of Municipality and Rural Affairs (SAMIRAD) to discuss compensation after changes in the project requirements, delays in land expropriations and the need for “large amounts” of manpower and resources to ensure on-time completion sent cost spiralling upwards.

Due to changes requested by SAMIRAD, the actual costs of the project rose to $2.4 billion, in addition to the initial financial expenditure of $23 million, which will result in losses of $640m. The company is currently in discussions with the client to resolve issues with compensation.

China Railway said: “The company has been in negotiations with the owner for the compensation for the above variations in accordance with accounting standards, the company has not included the amounts of such compensation claims in the estimated total revenue from the contract.”

CRCC, is the second largest state-owned construction enterprise in China, just after China Railway Engineering Corporation. It is headquartered in Beijing.

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