Egyptian National Railways Restructuring

Location:

Egypt

Project number:

45284

Business sector:

Transport

Notice type:

Public

Environmental category:

B

Target board date:

07 May 2014

Status:

Repaying

PSD disclosed:

07 Mar 2014

Translated version of this PSD: Arabic

Project Description

EBRD is considering a sovereign loan of up to EUR 126 million to the Arab Republic of Egypt, to be on-lent to Egyptian National Railways (“ENR”).

The project is expected to substantially improve the quality of train services between Cairo and Alexandria by providing new, energy-efficient rolling stock to replace the existing ageing stock. This upgrade will provide over 2 million passenger kilometres of train services per day, and will contribute to the Bank’s Sustainable Energy Initiative through both the move to new energy efficient rolling stock and through the introduction of an Energy Efficiency Action Plan.

The project envisages the purchase of new rolling stock (six new units – each comprising 10 carriages plus locomotive traction.) This investment will replace the current rolling stock as part of a much-needed modernisation of ENR’s fleet and will aim to reduce overcrowding on the Cairo-Alexandria route.

Given the complex operating environment in Egypt, the Bank has coordinated closely on the project’s reform aspects with the World Bank and with managers from Italian Railways who have been seconded to ENR under a long term programme to support in reform implementation.

The project will support ENR’s transformation into a more efficient and transparent operator and will contribute to the improvements of safety standards to the services provided to its users through the following elements which are anticipated to be introduced:

(i) rolling stock renewal replacing outdated existing fleet (with benefits for safety, operating costs and energy efficiency);

(ii) increasing the role of private sector service providers in support of ENR’s operations through implementing the outsourcing of maintenance of the new vehicles to the private sector through a ‘Supply and Maintain’ contract;

(iii) developing an Energy Efficiency Action Plan in order to improve ENR’s practices on fuel usage;

(iv) introduction of a comprehensive ESAP; and (v) strengthening transparency of ENR’s operations and corporate governance performance through a Corporate Governance Plan and annual preparation of a Business Plan.

The project also envisages technical assistance support to ENR to improve its services to better take account of higher security for all travellers but also to better address the needs of women travellers in the design, delivery and management of train operations through a gender-informed safety and security assessment.

Proposed technical assistance will support a range of activities to address key issues, anticipated to include

(i) understanding how different individuals experience safety and security while using railway transport in Egypt (including women’s specific needs);

(ii) researching international best practices on mechanisms to improve family safety in railway transport; and

(iii) developing customized operational recommendations to improve railway transport safety for families in Egypt, potentially including some tailored training.

This is in line with the EBRD’s Strategic Gender Initiative (SGI), which mandates the Bank to

(a) support access to services and equal opportunities in employment and skills for all and to ensure that both women and men benefit equally from the Bank’s investments, and to

(b) target assistance particularly to those countries of operations where the gender gaps are larger, such as Egypt.

Transition Impact

Transition impact of the project is expected to derive from:

(i) the deployment of a new contract type - a Supply and Maintenance contract for all six train units, which is intended to improve the life-cycle quality of the asset compared to the traditional separate supply contracts. This approach would represent significant private sector participation in ENR’s operations, as the supplier would provide maintenance services to ENR under long-term availability-based contracts and this approach could be replicated by ENR as part of its fleet management strategy going forward;

(ii) improvements in corporate governance and corporate behaviour through the development of a comprehensive corporate governance strategy and the adoption of a business plan on an annual basis (to improve financial planning); an

(iii) energy efficiency improvements through the adoption of an energy management framework (energy audit, establishment of an energy management department with dedicated staff, introduction of energy KPIs).

The Client

Egyptian National Railways “ENR”.

ENR is a General Authority under the Ministry of Transport and carries out both service operation and infrastructure management, under the 1980 Railway Law.

The railway sector plays a significant role in the Egyptian economy and is an essential mode of transport for low-income Egyptians. ENR operates an extensive network covering all major population centres and concentrations including the Nile Delta and providing a North-South connection for the country and connections to major ports (9,500 km of tracks, running 1,100 trains per day), and is a nationally important transport mode in particular for passengers. ENR is predominately a passenger railway with passenger revenues accounting for 86 per cent of total revenue in 2011-12.

EBRD Finance

A sovereign loan of up to EUR 126 million.

Project Cost

EUR 171 million.

Environmental Impact

Categorised B. The environmental and social impacts associated with the purchase of new rolling stock and implementation of organisational changes relating to fleet management are readily identified and addressed through appropriate management and mitigation measures.

Independent consultants completed the environmental and social due diligence (ESDD) which included site visits to selected stations and maintenance depots to assess their compliance with EBRD's Performance Requirements. The ESDD included a review of the regulatory compliance history of the company, the Company's existing environmental and social management systems and procedures being applied to its operations in the areas of environmental protection, occupational health and safety, human resources, contractor management and stakeholder engagement. An Environmental and Social Action Plan (ESAP) has been agreed with the Client to address requirements the Company will need to address to structure the project to meet the Banks PRs.

The ESDD identified that environmental management arrangements are currently very limited within ENR, with no formal management system in place and lack of operational controls for prevention of pollution, waste and hazardous materials management. As a result the ESAP has included a number of recommendations targeted at improving environmental management including establishing an Environmental Management function within ENR, and allocation of resources and budget for the development of an Environmental Management System (EMS) to support implementation of operational environmental controls.

Development of a comprehensive safety management system at ENR is one of the objectives of a number of twinning improvement projects which have been or are being undertaken with EU funding by French and Spanish railways experts, and the effective implementation of such a system to international standards is needed to consistently improve the health and safety performance of ENR, both within maintenance depots and on the broader network. The actions included in the ESAP support the on-going implementation of these existing projects that are focused on safety management, building capacity and developing a safety culture within the organisation.

The ESAP actions are largely focused on the continued development and improvement of the management systems and operational controls, but specifically include: the requirement to specify environmental, health, safety and social requirements for the new rolling stock financed by the Bank in tender requirements; procedures for accident reporting and investigation and emergency response; contractor management improvements; company-wide training on environmental, health and safety awareness as well as targeted training for relevant staff; and provision of a worker grievance mechanism and a plan to formalise stakeholder engagement activities. A Technical Co-operation assignment is planned to strengthen the implementation of the ESAP that has been prepared for the project, with a focus on capacity building with the aim to develop and improve the current standards for environmental, health and safety matters within ENR operations, while avoiding overlap or conflict with the work that has been or is intended to be carried out by others.

ENR will provide to the Bank an annual environmental and social report, including updates on the implementation status of the ESAP and notification on any material accidents or incidents. The Bank may also conduct monitoring visits on a risk driven basis, as required

Technical Cooperation

The project is expected to benefit from the following Technical Co-operation assignments

  • Procurement implementation assistance for the rolling stock supply and maintenance contract, with an estimated cost of EUR 500,000;
  • Assistance with the development of a Corporate Governance Strategy, with an estimated cost of EUR 250,000;
  • Development of a comprehensive support package to assist in implementation of the ESAP, with an estimated cost of EUR 300,000; and
  • Assistance with conducting a gender-informed safety assessment, with an estimated cost of EUR 67,535

The TC programme is still subject to further confirmation.

 

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

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