The French firm Bouygues-led Tram-Tiss consortium has signed a €1.55bn contract in the country's Indian Ocean island of La Reunion to build a train and tramway system.
The contract involves building a 40km rail section of the coastal route linking Sante-Marie and the airport to the east of the capital Saint-Denis with Le Port and Saint-Paul in the north-west by 2014.
The project will be funded by a public-private partnership with €435m of state funds, a loan from the EU and the government's economic stimulus package.
The project had recently run into trouble after the economic crisis-hit La Reunion authority threatened to cancel the deal if the French Government did not provide more funds.
The government has now said it would consider offering more financial support to the project, with the financing expected to be finalised within six months.
The consortium includes Veolia and Bombardier, among other partners.