Chinese Miners Claim NIS 50m More for Carmel Tunnels

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Three weeks after the inauguration of the Carmel Tunnel in Haifa, a dispute between the partners who built it may end up in court. Chinese infrastructure firm CCECC, which dug the tunnels, is demanding NIS 50 million compensation for finishing the NIS 1.22 billion project early from the Carmel Tunnels' franchisee, Carmelton. Carmelton is owned equally by Ashtrom and Shari Arison's Housing and Construction.

Entrance to Carmel tunnels, HaifaCredit: Hagai Fried

CCECC claims that since it finished the work early, it deserves a share of extra profits from the early completion. The two sides have been negotiating for the past few weeks to reach a compromise. Sources say CCECC has agreed to lower its demands from NIS 100 million to half that amount, but it seems Carmelton has still refused to pay, and is talking about only NIS 30 million to NIS 40 million. As a result, CCECC may go to court.

Carmelton signed its NIS 400 million agreement with CCECC in October 2006. But rising raw material prices and a drop in the dollar quickly eroded the company's profit margin. It seems that in 2008 CCECC did not properly hedge its exposure to volatile foreign currency exchange rates and had to absorb losses as the dollar weakened, said sources. The Chinese also had to pay much larger incentives to workers than it had budgeted for as the work progressed.

Two years ago 500 Chinese workers on the project stopped work for three weeks, and ultimately the workers were promised the lion's share of the bonuses for finishing the project early.

TheMarker was unable to receive a response from CCECC. Carmelton said the company will continue to meets all its commitments.