Etihad Rail has received approval from the United Arab Emirates (UAE) Government to borrow $1.28bn to finance part of the country’s national railway network.

Etihad Rail, previously Union Railway Company, is the master developer and operator of the UAE’s first railway network, with the government of Abu Dhabi holding a 70% stake in it and the rest owned by the country’s federal government.

The cabinet approval has enabled Etihad Rail to finance its Shah-Habshan-Al Ruwais rail line project. The 1,200km rail network is estimated to cost around $11bn and is to be carried out in three phases. Upon completion, it will connect the UAE to Saudi Arabia through Ghweifat in the west and Oman through Al Ain in the east.

The first 266km phase of the railway network will be built between Al Ruwais and Shah; a link between Ruwais and Habshan will be completed by 2013 and Habshan and Shah by 2014. The Shah-Habshan-Al Ruwais freight line is being built in collaboration with Abu Dhabi National Oil Company.

In October 2011, an Italian-UAE joint venture, comprising Italy’s Saipem, Tecnimont and UAE-based Dodsal Engineering & Construction, was awarded a $900m contract for the construction of civil infrastructure and tracks for this phase of the project. The scope of work includes design, procurement, construction, testing and commissioning of the infrastructure.

The second phase will connect Abu Dhabi with Dubai and will also provide links to Jebel Ali port, Mussaffah and Khalifa port, while the third phase will be the extension to link the northern emirates. Contracts for the second phase are expected to be awarded in the third quarter of 2012 and completed by 2016, while the third phase is expected to be completed by 2017.

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Etihad Rail will be the first national freight and passenger railway network connecting the seven emirates of the UAE and is expected to be ready by 2018.

It is expected to serve about 16 million passengers and 50Mt of freight, and will promote trade and social development in the UAE and across the GCC countries.