This transaction is part of the Bank’s Public Transport Reform Project covering essential areas of Sofia’s urban transport system and including 4 loans worth a total €24.96 million to Sofia Municipality, Urban Mobility Centre Ltd (UMC), Sofia Electric Transport Company JSC (SETC) and Metropolitan JSC (Metropolitan). The project IDs for the projects are: 42140, 42559, 42561, 42562.
Under this transaction the Bank is considering providing a senior working capital loan to Metropolitan JSC of up to €6 million to consolidate reform efforts.
It is expected that the combined transition impact potential of the four proposed transactions under the Bank’s Public Transport Reform Project should come from the following factors:
- Framework for market functioning will be strengthened by the introduction of a new contractual arrangement (Master PSC) between the Municipality and UMC which will provide a transparent division of responsibilities to achieve a sustainable level of public transport services, secure stable funding for operators and establish a clear methodology for managing the demand risk. The Master PSC will effectively create a seamless relationship between the City as owner of public transport assets, UMC as its transport agency and regulator, and public transport operators. This Master PSC will detail the roles and obligations of UMC in respect of regular and substantive reporting to the City Council concerning operational planning, performance indicators, revenues flows (actual versus projected), tariff proposals, ticketing management and management efficiency of the various operators.
- Private Sector Participation will be increased in the context of the expanded e-ticketing system. TC support will provide the City and UMC with a range of options to introduce an out-sourcing of ticketing control on public transport fleets. This type of measure is expected to be cost effective and also raise revenues over time by reducing fare evasion. By ensuring the main part of fare revenue is distributed and collected with an e-ticketing system through privately operated retail outlets and kiosks, UMC will enter into a contractual arrangement to operate a new ticket distribution network which will be given the right to sell electronic fares to passengers.
- Commercialisation of services will be furthered by the introduction of a fully integrated electronic ticketing system which will enable much needed tariff reform to be achieved. In contrast to the blanket single fare charge operating today, the new system will allow UMC to introduce various tariff enhancements that allow users to choose between time and distance-based travel options. These enhancements can be fashioned to boost revenues while also facilitating collection of detailed passenger travel information and monitoring, a fact which will allow for future PSC operational plans to be precisely adjusted in line with demand and provide for better inter-modal coordination. Additionally, the real-time passenger information boards at surface public transport stops will provide for a more customer-oriented service overall.
- Demonstration Effect: The range of enhancements to the public transport system, from the integrated, technology-led investments in traffic management to enhance travel times, to the expansion of the ticketing system and the introduction of a Master PSC arrangement with UMC as transport agency and regulator, provides a strong example to other major cities in the Bank’s region. Strengthening UMC will provide for a better, more predictable commercial platform for private and public companies to provide operationally and financially sustainable services. During an era of fiscal austerity and public sector restrictions, the package of investments and measures supported by the EU and the Bank in Sofia should have a positive demonstration effect to other municipalities as they work through the economic downturn.
Metropolitan JSC, a company wholly owned by Sofia municipality.
Metropolitan was established in 1999 to run the metro system. It operates one line of 18 km and 13 stops and transports 170,000 passengers daily. The company is implementing a major EU-grant supported EUR 247 million project for a new 6.4 km line including 7 new stops which is to be completed by the end of 2012.
The size of the Bank loan to Metropolitan is up to €6 million.
The project cost of the Metropolitan transaction is estimated to €6 million.
The total size of all related projects under the Bank’s Public Transport Reform Project is estimated at €94.63 million.
As part of the due diligence process the four proposed transactions under the Public Transport Reform Project are reviewed together to estimate their combined impact.
The project has been categorised B in accordance with EBRD's 2008 Environmental and Social Policy. The proposed integrated investment programme is expected to provide improvements to the quality, safety, accessibility and energy efficiency of the public transport system in Sofia.
The due diligence includes a corporate review of the Municipality owned transport companies (UMC, SETC and Metropolitan), incorporating an assessment of their current environmental and social management systems, past and current performance against EBRD's Performance Requirements (PRs). An environmental and social analysis of the potential environmental and social impacts and benefits of the integrated investment programme is also being undertaken. The due diligence also includes a review of the reports prepared by the JASPERS consultants as part of the project preparation for grant funding under the Operating Programme ‘Regional Development’.
An Environmental and Social Action Plan will be prepared and agreed for the Project to address any environmental and social issues identified during the due diligence to achieve and maintain compliance with the Bank's PRs within a reasonable time-frame. A Stakeholder Engagement Plan, including a grievance mechanism will also be adopted. This PSD will be updated when the results of due diligence are known.
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