Brasov Urban Transport Project - Company Loan

Location:

Romania

Project number:

36207

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

26 Oct 2005

Status:

Completed

PSD disclosed:

26 Jun 2005

Project Description

 
The objectives of the project were to finance the purchase of up to 130 new buses for the Regia Autonoma de Transport Brasov (the Company) and to finance a street upgrading programme with the City of Brasov (the City).
 
The EBRD also extended a financing to the City of Brasov to complement an existing loan signed in 2005. The operation will enable the City to continue a comprehensive street rehabilitation programme, along key public transport corridors in the City centre, financed by the original loan.
 
The Bank is now considering an extension of up to RON 105 million to continue the renewal of the Company’s fleet of buses and trolleybuses. Through this extension the objectives are to further enhance the quality of urban transport and mobility of the citizens of Brasov, through acquisition of 85 new EURO-6 buses and 10 trolleybuses, which is expected to create considerable social, environmental and financial benefits to the community.
 
In addition to the extended investment, the Bank will facilitate a twinning arrangement with a bus operator from the EU that will support the Company with the commercialisation of its operations, based on a sound business plan. Also, an EU compliant performance-based public service contract (“PSC”) will be introduced and this contracting modality would be replicated by the City when tendering certain routes to private sector operators.
 

Transition Impact
 

  • Demonstration effect
The team explored with the City and the Company, the possibility to structure the loan without a full financial guarantee from the City, which was then the Bank’s first such municipal loan in Romania. As such the Operation was the first transaction where the Bank lent directly to a municipal transport company in Romania.
 
  • Support to the corporatisation of the Company and organisational improvements
Transition impact was delivered through restructuring of the public transport network; restructuring of the Company to adapt to the new service model and reduction of transport modes, and increased productivity and possible out-sourcing of services to realise efficiencies.
 
  • Client-Supplier Relationship through the Public Service Contract (the PSC)
The Operation supported the development of one of the first Romanian comprehensive PSCs for a public transport company. The PSC defined the scope of services provided by the Company and set the level for service payments by the City for the services it purchases. The service payment replaced the system of direct, untargeted subsidies, and provided incentives for the Company to improve its financial and operational performance.
 
  • Development of Regulatory Framework and Institutional improvements
The consultants for the technical and environmental due diligence reviewed the regulatory and institutional framework for public transport in the City and provided recommendations how to structure and develop the central public transport unit (authority) in the City.
 
Transition goals of the extension will include the following:
 
  • Improved framework for markets:
Through introducing a PSC with performance standards and payment conditions in full compliance with EU Regulation 1370/2007, the Project will create a sound and transparent relationship between the Company and the City of Brasov, which will enable a solid framework for service delivery and regulation of a key public service.
 
Moreover, the Project aims to promote transport integration measures across the Brasov metropolitan area. This will be achieved via the use of TC Funds, to be provided to the Intercommunity Development Association for Transport (ADI-T), to strengthen its institutional, legal and regulatory structure.
 
  • Successful demonstration of new structures and ways of financing:
The fleet renewal will be performed in accordance with EU environmental exhaust emission standard EURO 6, as per Regulation (EC) 595/2009, and will include options for reduced emissions such as diesel hybrid and electric, notably for routes through the historic centre of Brasov.
 
The twinning agreement with a high quality operator will serve as a means of introducing additional commercial discipline and corporate systems, as well as providing support for the implementation of the restructuring plan.
 
Lastly, through TC Funding, the Project will assess the possibility to develop a bus leasing model for operators in Brasov county, considering legal, regulatory, institutional, operational and financial requirements and with sufficient consultative assessment of market structure and capacity of bus operators.
 
 

The Client

Regia Autonoma de Transport Brasov (the Company)
The City of Brasov (the City)
 

EBRD Finance

 
The initial project comprised the following facilities:
 
  • Up to EUR 15 million senior loan to the Company
  • Up to EUR 15 million loan to the City
  • Up to EUR 7.5 million additional finance to the City
The extension will consist of a senior loan of up to RON 105 million (EUR 24 million) to the Company.
 

Project Cost

 
The total cost of the initial project has been estimated to EUR 45 million.
 
The extension will add RON 128 million to the cost of the Project (EUR 28 million).
 

Environmental and social categorisation, impact, and mitigation
 

The project was screened B/1 requiring an Environmental Analysis and audit.
 
The proposed project contributed to improving public transport reliability, safety and efficiency, reduced congestion, and helped maintain the market share of public transport, with associated air quality benefits. The environmental investigations, were meant to identify all potential environmental impacts and develop an environmental action plan (EAP), to ensure compliance with both national and European Union environmental, health and safety requirements.
 
The proposed extension has been categorised B in accordance with the 2014 EBRD Environmental and Social (E&S) Policy, as the potential impacts are expected to be site specific and readily identifiable and addressed through mitigation measures.
Purchase of the new modern EU compliant low emission buses and trolleybuses is expected to have environmental and social benefits and improve quality, efficiency, safety and accessibility of the local transport in Brasov. Environmental and social due diligence for the project will include a review of the Client’s E&S management systems and operations, and an analysis of the potential (future) E&S impacts and benefits of the proposed investment.‎ ESDD will also assess Client's ‎ability to carry out the Project in compliance with the Bank’s Performance Requirements.
An Environmental and Social Action Plan (ESAP) will be prepared for the extended project, if necessary, and a gender specific Stakeholder Engagement Plan including a grievance mechanism.
This PSD will be updated when the results of due diligence are known.
 

Technical Cooperation

 
Pre-signing
 
Technical and Environmental due diligence (€60,000), financed under an existing framework contract with DHV, i.e. Framework for Municipal and Environmental Consultancy Services (Phare Region).
 
Post-signing
 
Project management and institutional building in preparation for EU accession (€300,000).
 
The Extension will mobilize further TC Components:
 
Pre-Signing
 
  • Due diligence and procurement support (up to EUR 60,000) to include (i) a technical review of existing studies, including financial and economic appraisal of the investments and a Greenhouse Gas (GHG) assessment of the Project (ii) an environmental and social assessment of the Project, and (iii) support in conducting the procurement process for acquiring the proposed vehicles.
Post-Signing
 
  • Twinning partnership support for corporate development and commercialisation. (Estimated at EUR 150,000). The TC would cover support for preparation of business development plan, twinning with a private sector operator as a means of introducing additional commercial discipline and a corporatised system towards operations.
     
  • Preparation of Public Service Contract and assessment of leasing structures (Estimated at EUR 75,000,). The objective is to (i) amend the existing PSC for RAT Brasov and bring it in full compliance with EU Regulation 1370/2007 and (ii) prepare an additional PSC contract for operators in Brasov County along the same principles and considering bus leasing options and duration of PSC related capital costs borne by the operators.
     
  • Support ADI-T to reinforce its function as a coordinating body (Estimated at EUR 100,000). The TC shall focus on promoting institutional, legal and regulatory structures and developing technological solutions and implementation methods for integration of both bus routes and services and fare structures and ticketing.

Company Contact

 
Cristinel Florea, Economic Director, Cristinel.florea@ratbv.ro
 

Business opportunities

For business opportunities or procurement, contact the client company.

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