Far Eastern Rail

Location:

Russia

Project number:

45202

Business sector:

Transport

Notice type:

Private

Environmental category:

B

Target board date:

17 Dec 2013

Status:

Repaying

PSD disclosed:

08 Nov 2013

Translated version of this PSD: Russian

Project Description

The proposed Project involves participation in financing of the acquisition of up to 10,000 railcars, mostly new innovative 25-tonne/axel gondolas to be leased to major Russian coal producers (the Lessees). The railcars will be used to service Lessees’ coal transportation needs. The Project will address two of the Lessees’ key logistic objectives: (i) to accelerate the development of integrated coal logistics operations to meet Lessees’ growing transportation needs in an effective and cost efficient manner and (ii) to secure the use of a modern railcar fleet under long term operational lease contracts. The Lessees’ are expected to benefit substantially from the operational efficiencies offered by the new generation railcars.

It will also support key objectives of the Russian Rail sector reform: (i) wider private sector participation in the rail operations and (ii) rolling stock fleet renewal.

The Project will support overall coal transportation sector strategy to increase the use of block trains, in particular to benefit from the higher empty run speeds offered by new generation gondola block trains and reduce cycle times thus contributing to increasing the efficiency of the Russian Rail network.

Transition Impact

The transition impact of the project will be derived from:

a) Demonstration of new technologies - New Generation Railcars. Use of new generation of gondolas for coal transportation maximises economic benefits by ensuring i) higher payloads, ii) longer service intervals of up to 500,000 km, and iii) higher empty run speeds in block trains allowing for a reduction of cycle times, etc. These would allow for the provision of more efficient services and have the potential to reduce energy use through fuel savings.

b) Transfer and dispersion of skills: the project will support development of an integrated coal logistic operation setting new industry wide standards in the coal transportation sector. The main goal is to increase the efficiency of rail operations through the use of new generation gondolas for the most important export routes via ports. With a new generation railcar fleet, the Lessees will focus on achieving shorter cycle times by using more block trains with higher capacity railcars with an objective to transport higher volumes with less railcars in shorter periods of time at a lower overall cost.

c) Increase in competition: development of a highly efficient integrated coal logistics operation will have a positive impact on competition in coal rail transportation sector. Whilst the first stage integrated coal logistics operation development will be focussed on serving the Lessees’ transportation needs, given the scale of coal transportation activities, it is expected to have an impact on the level of competition in the sector.

The Client

“Far Eastern Rail Company” Limited, a company owned by a group of Russian investors and incorporated in Cyprus. The company will conduct its activities solely in Russia with the strategy to become a leading provider of railcar leasing services to various coal producers.

EBRD Finance

EUR 133 million senior loan.

Project Cost

EUR 378 million

Environmental Impact

The proposed project has been categorised B in accordance with the 2008 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.
The environmental and social due diligence for the project, which is on-going, includes an environmental and social audit to assess the Client’s management capacity and systems to manage environment, health, safety and labour issues in its operations and an analysis of the potential (future) E&S impacts and benefits. It will also assess the 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 project, and a Stakeholder Engagement Plan will be developed that will include a grievance mechanism. and information on environmental and social performance and a summary of the agreed Action Plan will be released to stakeholders.

This PSD will be updated when the results of due diligence are known.

Technical Cooperation

None.

Company Contact

Kuroles Sergey, Director
Tel +357 25 50 90 20
Email: ksv@erglis.com

 

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