Transport for Greater Manchester has activated an option to borrow £500m from the European Investment Bank, the European Union's long-term lending institution.
The 30-year EIB loan will go towards the cost of phase three of the Metrolink light rail system in and around Manchester. The infrastructure project was one of 15 identified in May 2009 as key priorities for Greater Manchester, for which it would pursue funding including prudential borrowing. Talks with the EIB have been ongoing for over a year.
The loan will finance new trams and additional infrastructure, and represents in excess of one third of the overall investment cost.
Among EIB's lending policies is supporting sustainable public transport in leading European cities and reducing private car use.
Simon Brooks, EIB vice president for the UK, said: "Extension of Greater Manchester's Metrolink network will transform tram links across the conurbation. The European Investment Bank is committed to supporting sustainable transport and successful completion of the project will improve the lives of Greater Manchester's residents for years to come."
Cllr Andrew Fender, chairman of the Transport for Greater Manchester Committee, which is overseeing the investment on behalf of the Greater Manchester Combined Authority, the joint cabinet of ten local councils, said: "The Metrolink expansion is the single largest investment in public transport in the UK, outside of London. It will deliver a legacy for Greater Manchester that will regenerate and transform key district centres and provide new connections to the labour market for businesses. As such, it will play a vital role in keeping the region's economy growing now and long into the future. I'm pleased that we've been able to work with the European Investment Bank to realise this ambitious vision on a sound financial footing and I look forward to seeing the network grow and spread to new destinations, across the region, in the coming years."
Manchester Metrolink Phase 3 will deliver a network three times the size than it is now, covering a total of 97km of track, with 99 stops and served by a fleet of 94 trams. Metrolink passengers will benefit from frequent and high quality transport links across the second largest conurbation in the UK, via new lines to Oldham and Rochdale town centres, Ashton-under-Lyne in Tameside, East Didsbury, and Manchester Airport, via Wythenshawe. A second, additional line across Manchester city centre is also being developed. The expansion as a whole is due to be completed in 2016.
European Investment Bank financial support for Metrolink will lower the overall cost of the project through cheaper financing costs, fixed interest rates and diversification of finance.