Passengers Trains Purchase Project

Location:

Montenegro

Project number:

51812

Business sector:

Transport

Notice type:

State

Environmental category:

B

Approval date:

14 Dec 2023

Status:

Passed Final Review, Pending Approval

PSD disclosed:

04 Oct 2021

Project Description

Provision of a sovereign loan of up to EUR 14 million to Passenger Trains Company of Montenegro (the "Borrower" or the "Company")  guaranteed by the state of Montenegro. The loan proceeds will be used to finance the purchase of two new electric passenger trains to replace the existing 50-year old ones that are still in operation on the rail network (the "Project").

Project Objectives

The Project will support the development of the Montenegrin railway sector through the modernisation of the passenger rail fleet. With the delivery of new, modern and safer passenger trains, the Project will contribute to enhancement of the quality of rail passenger services, lifespan of the railway fleet and, ultimately, to the growth of rail passenger transportation in the country.

By supporting a modal shift from road transport to passenger rail transport and by replacing old and inefficient trains with new and efficient ones, the Project will have a significant impact on the reduction of carbon emissions.

The Project will also help reduce the Company's operational and maintenance cost  and increase its fare revenues through increased capacity, frequency, and  level of service), contributing to the enhancement of the Borrower's financial sustainability. 

Transition Impact

ETI score: 63

Primary quality: Well-governed.

The Project will contribute to introducing a five-year public service contract between the government and the Company in line with international best practice. The Project will also covenant the adoption of a new law on passenger safety and rights, developed as part of the Rail Action Plan agreed  between the Transport Community supported by the EU and the Western Balkan countries. Furthermore, the Project will include the development of a corporate governance action plan ("CGAP") in order to assist the Company to address issues to be identified and improve its corporate governance.

Secondary quality: Green.

The Project will result in lower carbon emissions by enabling a modal shift from road to rail passenger transportation and by replacing old and energy inefficient trains with new modern ones.

Client Information

RAILWAYS PASSENGER COMPANY OF THE REPUBLIC OF MONTENEGRO

Railways Transport Company of Montenegro - ŽPCG

The Company is the only railway passenger transport company in Montenegro. It was established in 2008, supported by the EBRD, following the unbundling of the then Railways of Montenegro Company ("ŽCG") that was founded in 1908. The Company operates three local routes and one international route to Belgrade, Serbia.

The state owns 94.52% of the Company's shares, while the remainder is held by investment funds (2.79%), individual investors (2.53%) and others (0.15%). The Company has 380 employees.

EBRD Finance Summary

EUR 14,000,000.00

Up to EUR 14 million to finance acquisition of two new electric passenger trains.  

Total Project Cost

EUR 14,000,000.00

The total project cost of up to EUR 14 million will be financed entirely by the EBRD loan backed by the sovereign guarantee provided by Montenegro.

Additionality

Financing structure: The EBRD offers financing that is not available in the market from commercial sources on reasonable terms and conditions. 

Standard setting: The client will make use of the EBRD's expertise on best international procurement standards and higher environmental standards above "business as usual".

Knowledge innovation and capacity building: The EBRD will provides expertise, innovation and capabilities that are material to the timely implementation of the Project's objectives, including support to strengthen the capacity of the client.

Environmental and Social Summary

Categorised B (ESP 2019). The Environmental and Social Due Diligence (ESDD) for the Project has been undertaken internally and included an environmental and social (E&S) assessment of the project, review of the current operations, as well as the E&S management systems and the capacity of ZPCG as it relates to rail operations. ESDD was carried out by means of questionnaires and a review of previous annual E&S reports submitted to the Bank.  Other relevant documents were also reviewed including the ISO certifications, the recent annual report on railway transport safety and other labour related documentation.  

Previous annual E&S reporting by ZPCG has been satisfactory and ZPCG has well established Human Resources policies.  A collective agreement is in place and was last revised in July 2021.  ZPCG complies with national legislation related to labour and working conditions which are aligned with PR2.  Some updates to existing labour arrangements are needed which includes the preparation of an updated retrenchment plan and further development of the worker grievance mechanism. The Bank will require both these documents to be submitted for review prior to any future retrenchment.  

ZPCG has a certified integrated management system (IMS) including ISO 14001 Environmental Management and ISO 45001 Occupational Health and Safety (OHS) which has been certified since 2016.  The last independent audit was carried out in 2020 and included the migration from the OHSAS 18001 to ISO 45001.  Annual E&S reports confirmed regular inspections take place annually by the relevant labour and environmental authorities, with no significant issues raised.  The existing policy document for the IMS is available on ZPCG website and requires updating to take account of recent migration to ISO 45001. 

ZPCG evaluates contractors E&S arrangements prior to selection and appointment although further development on contractor monitoring is needed to confirm implementation. ZPCG has an employee OHS rulebook which is also made available on their website and  the operational safety, an formal safety management system has been implemented and is audited annually. ZPCG has an existing Stakeholder Engagement Plan (SEP) developed under the previous EBRD Project and this requires a review and update to reflect the protection measures during the Covid19 pandemic and any other changes since its original development.  

It is estimated that the Project will generate average savings of 944 tonnes of CO2 annually. ZPCG will also develop arrangements on Energy Efficiency (EE), which include establishing an EE team, establish performance indicators and objectives and produce annual report on energy consumption. The above requirements have been included in the Environmental and Social Action Plan (ESAP) which has been developed and will be agreed with the ZPCG prior to the Board approval. The Bank will continue to monitor ZPCG activities through annual E&S monitoring reports and site visits if necessary.

Technical Cooperation and Grant Financing

Capacity building TC to support establishment of a project implementation unit ("PIU") at the Company and support it with the preparation of tender documentation, tendering process, monitoring of the use of proceeds and the project implementation.

Following detailed due diligence, detailed assessment of TC needs will be available and additional postsigning TCs may be included at a later stage.

Company Contact Information

Dorde Kaluderovic, Jovana Jovanovic
djordje.kaludjerovic@zpcg.me, jovana.jovanovic@zpcg.me
+382 63 228 089
www.zcg-prevoz.me
Trg Golootockih zrtava 13, 81000 Podgorica, Montenegro

PSD last updated

15 Dec 2021

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

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Email: projectenquiries@ebrd.com

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General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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