The EBRD is considering providing a loan of up to EUR 20.3 million to the city of Arad.
The project involves two components. The first component consists of a loan of EUR 9.3 million for: (i) acquisition of up to 5 energy efficient modern trams; (ii) modernisation of the main depot infrastructure; (iii) introduction of an e-ticketing system for the public transport in the City of Arad (the “Project”).The second component of EUR 11 million will be used to re-finance the Bank’s existing loan, on the basis of the loan agreement dated 16 May 2009.
The proposed project is part of a wider objective of the municipality to restructure the public transport system by reducing the traffic congestion and air pollution in the city centre while reducing energy consumption of the public transport. The restructuring of the Bank’s existing loan is meant to allow a better cash management for the City faced with a large investment programme across sectors, as well as reflect market conditions.
The proposed project will improve the performance of the public transport system through:
- Restructuring of the public transport company. The rolling-stock assets will be transferred from the City to APTC via a ‘concession’ agreement.
- Private sector involvement. A new e-ticketing system, to be carried out on an out-sourced basis, will be designed technically and prepared for tender as a small scale PPP using the Bank’s TC Funds.
- Commercialisation of the regional bus services: In order to improve the commercial approach to this sub-sector, the City will receive TC Funds to provide the necessary analysis of the regional bus route network and prepare a tender strategy to introduce private sector in these regional operations, with a view to providing subsidy-free regional bus operations post-tender with the private sector.
- Improve business practices and procurement. Acquisition of new tram rolling-stock, as opposed to the Company’s long-standing practice of wholesale refurbishment/rebuild of out-dated trams, as is currently done by APTC through its heavy maintenance unit, will contribute to substantially increased private sector contracting for assets, better fleet management, better safety, improved quality of services, and improved operational performance.
Arad Municipality, located in the western part of Romania, has a population of 173,000.
A sub-sovereign loan to Arad Municipality of EUR 20.3 million.
The Project has been categorised B in accordance with the Bank’s Environmental and Social Policy 2008. The due diligence has been undertaken by independent consultant and comprised the environmental and social analysis of the proposed and previous projects, a review of all key EHSS background information and project documentation and meetings with local regulators and other key stakeholders.
The investigations showed that the future adverse impacts of the project will be site specific and addressed through appropriate mitigation measures. The transaction will enable Arad municipality to continue to implement a comprehensive tram transport rehabilitation programme, financed partly by the original loan. The project implementation is limited to urban area within the boundaries of the City and no sensitive ecological receptors or protected zones are affected. It is confirmed that the project will not have adverse social impacts to local communities or other project affected parties, while a number of very tangible environmental and social benefits are likely to arise.
The due diligence confirmed that the Company and the City have efficient public communication, consultation and disclosure policy and that in general meets the EBRD's requirements. In order to avoid, minimise and mitigate the potential adverse E&S impacts of the project and ensure full compliance with national regulations and EBRD's PRs an Environmental and Social Action Plan (ESAP) has been developed to address the necessary improvements in the Company's and contractors’ E&S management systems and capacity and improvements in managing construction activities.
The project will be monitored in terms of its environmental and social performance and implementation of the ESAP through annual E&S reports and site visits when deemed necessary.
Technical Cooperation assistance is provided as follows:
- Technical and economical due diligence (EUR 20,000 financed from the Bank’s own resources)
- Environmental and social due diligence (EUR 15,928 financed from the Bank’s own resources);
- Support for e-ticketing out-sourcing (EUR 180,000, to be financed from an International Donor or EBRD Shareholder Special Fund);
- Design of out-sourcing of regional bus operations (EUR 80,000, to be financed from an International Donor or EBRD Shareholder Special Fund);
- Support for project implementation (EUR 120,000, to be financed from an International Donor or EBRD Shareholder Special Fund).
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