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Romania's 'Little Paris' to sparkle again

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Related links Romania homepage Municipal and environmental infrastructure homepage Bucharest Multi-Sector Project (Municipality) [Project Summary Document] EBRD issues first multi-sector loan in Romania [Press Release] “Micul Paris” din Romania va straluci din nou [Story]

This arcade is but one example of Bucharest's little-known architectural treasures.

Poor maintenance of city infrastructure takes away from the capital's attractions.

EBRD funding to boost regeneration of Romanian capital

The beauty of Romania's capital, once known as Little Paris, was partly destroyed by the misguided architectural ambitions of the Ceaucescu period. Many eighteenth and nineteenth century buildings were torn down in favour of modern designs of the unattractive, supposedly functional, variety. What remains has been in decline due to a lack of investment in maintenance.

"But many beautiful old buildings have survived and the mayor of Bucharest wants to bring them out of the shadows as part of his efforts at urban renewal," says Phil Cornwell, senior banker on the EBRD's Municipal and Environmental Infrastructure banking team. The EBRD has extended a €51.5 million loan to support Mayor Traian Basescu's plans to initiate regeneration of the historic zone as well as improvements to district heating and other services.

"The expectation is the historic zone component of this investment will focus attention on, and bring private investment to the city's neglected centre," says Sue Goeransson, EBRD's operations leader on the project. "As it stands now, if you ask a Romanian to direct you to the historic centre of Bucharest, they don't know what you're talking about."

Infrastructure upgrade

As a first step the funds will improve basic services. Parking, pedestrian areas, sewerage, gas, electricity, telephone and water provision will be upgraded. These improvements, in conjunction with other initiatives, should encourage the private sector to invest in upgrading the area's historic buildings.

The project will also finance a modern, computer-controlled traffic signal system for the city core. The new system should smooth traffic flows and reduce journey times by 10-20 per cent. Public transport will be given priority at key junctions and new equipment will enable the transport operator to use its vehicles more efficiently.

The district heating component will enable RADET, the municipally-owned district heating company, to improve heating services for 1.2 million residential customers.

Peter Hobson, senior banker with the Energy Efficiency team says: "Renovating the thermal substations of Bucharest's huge district heating network (584 thermal stations) will greatly reduce energy losses and improve service levels. Perhaps more significantly the Bank will also arrange, with Swiss government support, advisory services for improving Radet's commercial performance and introducing private sector involvement in the company's operations."

Package totals €78.2 million

The EBRD loan is part of a total project package of €78.2 million of which €20.6 million will be used for traffic management, €9.5 million will be used to renovate infrastructure and €48.1 million will be applied for thermal station modernisation. Bucharest's municipal government, both directly and through RADET, will contribute €19.3 million while the Swiss government will grant a non-reimbursable €7.1 million for the district heating component. In addition the Bank will seek donor funds of €600,000 to contribute to a credit enhancement programme for the city government and a study on ways to restructure and increase the efficiency of the public transport company.

"The mayor is to be congratulated for this investment as it is the first municipal loan in Romania that doesn't require a guarantee from the national government," says Ms Goeransson. Of the Bank's total loan, €12.5 million has been syndicated to two Austrian banks, Raiffeisen Zentralbank Oesterreich AG and Oesterreichische Volksbanken. That makes this deal the first municipal long-term co-financing (eight years) in Romania.

More to join syndicate

"Part of our interest in doing this deal was to boost commercial financing for municipal projects, and that's already bearing fruit," says Ms Goeransson. Along with the existing co-financiers, Kommunalkredit of Austria and Portugal's Caixa de Depositos will be participating in the loan syndicate.

The term of the loan is 12 years with disbursement to commence by late 2003 or early 2004. It will be another two to three years until the project's completion.

Contact: EBRD Municipal and environmental infrastructure team

25 July 2003