Budapest Automated Fare Collection

Location:

Hungary

Project number:

44630

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Target board date:

23 Jul 2013

Status:

Repaying

PSD disclosed:

25 Jan 2013

Translated version of this PSD: Hungarian

Project Description

The EBRD is considering a senior, secured loan of up to €54.2 million to co-finance development of an automated fare collection (“AFC”) system for public transport (the “Project”) in the City of Budapest (the “City”). The borrower will be the public transport authority, Budapesti Közlekedési Központ Zrt (“BKK”). According to initial estimates of BKK, an improved AFC system would result in total benefits of €15 million annually mainly related to increased revenues from tickets, reduced ‘cash-leakage’ and lower operating expenses.

Transition Impact

The transition impact of this specific project will be achieved primarily through:

(1) Increased competition and private sector participation. The proceeds of the loan will co-finance expenditures related to the future implementation of an AFC system in the City on a design, build, operate and maintain (“DBOM”) basis. The DBOM contract will be signed between BKK and a private operator to be selected by BKK by competitive tender.

(2) Demonstration effects – DBOM contract. DBOM contracts are a particularly interesting form of public-private cooperation, in which a specialised private party takes construction, technical, operations and maintenance risks of a project and guarantees operational performance to its public client, in exchange for a fee set competitively at the time of tender.

(3) Demonstration effects - Successful demonstration of non-recourse lending based on a strong public service contract (“PSC”) framework. In order to provide more robust creditworthiness to the transaction, the need for enhancements to the initial PSC to close the possibility of any future financial gap from appearing. An amendment to the PSC will be signed as a condition precedent to the first disbursement under the loan. As a major capital city, the demonstration effect of the proposed PSC structure is important as it establishes a ‘commercial’, sustainable and performance-based approach for any public support payments.

(4) Frameworks for markets: Improved Regulation. The Project and the improved approach to urban transport regulation more generally, will feature BKK as a strong transport authority in line with the international best practice.

The Client

Budapesti Közlekedési Központ. BKK is owned 100 per cent by the City. Within the institutional model, BKK is located between the City and transport providers and operators, responsible for regulation, the implementation of the Budapest transport strategy and for determining and contracting for public transport services and road transport.

EBRD Finance

Senior EBRD secured loan of up to €54.2 million to co-finance development of an automated fare collection system for the public transport in the City. The possibility to syndicate up to 50 per cent of the Bank’s loan to commercial banks either in the form of A/B loan structure or through a parallel loan is currently under evaluation.

Project Cost

€67.7 million.

Environmental Impact

Categorised B. The provision of an automated fare collection system is expected to result in some environmental and social benefits and have limited adverse impacts. The ESDD focused on assessing the E & S issues associated with the client's existing assets and operations as well as its corporate Environmental, Social and Occupational Health & Safety management systems and capacity to manage the project in accordance with the Bank's Performance Requirements. An Environmental and Social Action Plan (ESAP) and Stakeholder Engagement Plan (SEP) have been drafted and agreed with the Client. These contain provisions to train staff to operate the new equipment, on communications with all relevant stakeholders and the public, and on handling issues related to cultural heritage. The Due Diligence found that the Client is well resourced to fulfill all EBRD requirements both during the construction phase and the operational phase.

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

(1) Environmental and social due diligence to include an environmental and social analysis of the Project. (€10,000 – funded from the Bank’s own resources)

(2) Technical Due Diligence (€20,000 – funded from the Bank’s own resources)

 

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP 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. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.