HAC Restructuring Project

Location:

Croatia

Project number:

47716

Business sector:

Transport

Notice type:

Public

Environmental category:

B

Approval date:

16 Dec 2015

Status:

Repaying

PSD disclosed:

28 Jul 2015

Translated version of this PSD: Croatian

Project Description

EBRD is considering a sovereign guaranteed loan to HAC in the amount of up to EUR 250 million to Hrvatske autoceste ("HAC"), which will be provided in two tranches as follows: Tranche A - a committed tranche in the amount of up to EUR 200 million to refinance a portion of HAC's debt falling due in 2016 as part of a EUR 2.0 billion refinancing programme planned by HAC and the Government of the Republic of Croatia (the "Government").

Tranche B - an uncommitted tranche in the amount of up to EUR 50 million to finance (i) labour restructuring costs in the amount of up to EUR 30 million; (ii) capex in the amount of up to EUR 16.5 million as part of the operational restructuring programme; (iv) operational restructuring and privatisation consultant in the amount of up to EUR 3 million. The commitment of Tranche B shall be at the Bank¿s sole discretion and achievement of certain reform milestones.

The proposed project will support the restructuring and modernisation of HAC and its subsidiary HAC-ONC, encompassing operational and financial restructuring, which is needed prior to any future privatisation.

Project Objectives

The proposed project will support the restructuring and modernisation of HAC and its subsidiary HAC-ONC, encompassing operational and financial restructuring, which is needed prior to any future privatisation.

Transition Impact

The transition impact is expected to be derived from: (i) demonstration of successful restructuring of state-owned entities through financial and operational restructuring of HAC/HAC-ONC; (ii) setting standards for corporate governance and business conduct through development and implementation of corporate governance improvements; (iii) facilitation of more widespread private ownership; (iv) development of a performance based contract between HAC and HAC-ONC; and (v) establishing a clear toll setting mechanism.

Client Information

HAC-CROATIAN MOTORWAYS

Hrvatske autoceste d.o.o. is a Croatian state-owned limited liability company in charge of management, construction and maintenance of the motorways.

EBRD Finance Summary

EUR 250,000,000.00

Sovereign guaranteed loan of up to EUR 250 million.

Total Project Cost

EUR 2,050,000,000.00

Up to EUR 2 billion.

Environmental and Social Summary

Categorised B (ESP, 2014). Independent environmental and social due diligence (ESDD) has shown that the environmental and social impacts associated with the restructuring of HAC's (the Company) balance sheet are limited. Operational impacts of the Company's activities, and those of its maintenance and tolling subsidiary HAC-ONC, are site specific and readily addressed through the implementation of standard mitigation measures.

The ESDD included a review of corporate environmental and health and safety (EHS) and HR management systems as well as a sample audit of current operational and maintenance practices, operational EHS and social performance, labour and road safety practices, contractor management and monitoring arrangements. Both the Company and HAC-ONC are certified to ISO 9001, ISO 14001 and OHSAS 18001 standards although following the establishment of the HAC-ONC subsidiary the Company no longer has a centralised environmental management system in place.

Environmental issues are typical managed at the departmental level. The Company will be required to develop and implement an integrated, overarching environmental management system drawing on existing provisions and that extends to the Company¿s and HAC-ONC's activities. Previous HAC projects that have been financed by the EBRD were prepared in line with the PRs and the relevant EU Directives and standards. Internal health and safety provisions, including those for emergency situations, are appropriate and performance is acceptable although some minor improvements are required to bring all operations in line with PR4 and national requirements. EHS requirements generally apply to contractors and performance is confirmed through regular audits.

HR provisions are in line with local labour law and PR2 requirements. Although not expected at this stage, the Project may potentially result in a further reduction of the labour force. Any labour reduction planning will need to be conducted in line with PR2 requirements for collective dismissals. General environmental performance is satisfactory although there are areas for improvement. Sanitary and oily water is treated on each site (e.g. maintenance or rest areas) or through local sewage systems. Motorway storm water run-off is not treated except in protected areas. Some Company facilities require upgrades to ensure compliance with local standards. Hazardous substances such as motor oil and diesel are stored appropriately, with secondary containment, and no losses or spills have been recorded. There are various opportunities for the more efficient use of resources as well as waste minimisation and recycling. The Company will be required to develop various initiatives and programmes to reduce energy and water consumption, minimise the amount of waste produced and directed to landfill and further develop an inventory of GHG emissions.

Motorways managed by HAC are designed and operated in line with national standards (aligned with EU) with respect to road safety. Various provisions are in place to ensure an adequate level of road safety including, road surfacing and markings, barriers, signage, lighting, video surveillance, road and interchange design, emergency response, tunnel safety and emergency measures, etc. Overall traffic incidents are declining. Some of the Company's motorway network pass through, or close to, protected and Natura 2000 areas. Specialist infrastructure such as green bridges, fencing and tunnels are in place to limit impacts to wildlife and also reduce habitat fragmentation. Key motorway crossing points are monitored on a continuous basis for the presence of wildlife.

The Company regularly engages with, and discloses information to, the public and other stakeholders through various platforms. This is supported by a robust grievance mechanism. The Company has in past received various noise complaints which have been investigated and mitigation measures, such as noise barriers, installed or are under consideration. Some complaints have been received with respect to land acquisition as a result of new motorway construction. It is understood that these cases have been resolved. As part of the ESDD, a stakeholder engagement plan (SEP) has been developed which will be implemented by the Company in parallel to its current engagement and disclosure activities.

An Environmental and Social Action Plan (ESAP) has been developed and has been agreed with the Company to bring the Project and existing operations fully in line with the EBRD PRs. Key actions are described above. The Company will be required to provide the Bank with annual environmental and social reports. The Project will be monitored by the Bank in line with the commitments in the ESAP, regulatory requirements and the EBRD's Performance Requirements.

Technical Cooperation

The Project is expected to benefit from consultancy services to support the development of restructuring and labour restructuring action plans for HAC ONC provided under the Bank's Infrastructure Project Preparation Facility in the estimated amount of up to EUR 500 thousand.

Company Contact Information

Mr Igor Guja

igor.guja@hac.hr

+385 1 4694 436

Sirolina 4 10 000 Zagreb

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)

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Text of the PIP

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