This transaction is part of the Bank’s Public Transport Reform Project covering essential areas of the Sofia’s urban transport system 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 Sofia Electric Transport Company JSC (SETC) of up to €6 million to consolidate reform efforts.
It is expected that the combined transition impact potential of the four proposed 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.
Sofia Electrical Transport Company JSC, a company wholly owned by Sofia municipality.
SETC operates the ground electrical transport in the city. The company operates 159 km of tram lines and 93 km of trolleybus lines. SETC has signed a PSC with the Urban Mobility Centre (UMC) and the Municipality and delivers more than 17 million vehicle kilometres on an annual basis.
The size of the Bank loan to SETC is up to €6 million.
The project cost of the SETC 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.
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 included a corporate review of Sofia Municipality and the Municipality owned transport companies (Sofia Electrical Transport Company, Public Services Contracts (PSC) and Metropoliten JSC), 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 was also completed.
The due diligence has confirmed that the Company and its operations are generally in compliance with the applicable Bulgarian environmental, health and safety and labour requirements. The project and Environmental and Social Action Plan (ESAP) have been structured to meet Bulgarian and EU environmental, social, health and safety standards.
Due diligence identified that some additional resources and procedures are needed to achieve compliance with EBRD’s Performance Requirements (PR’s). Issues to be addressed include:
- Improvements to contractor management of Environmental, Health and Safety issues
- Improvement to material handling procedures and operational controls
- Improvements to the disposal of hazardous waste materials from site
- Adoption of a grievance mechanism.
An ESAP has been 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 has been disclosed on the web. The Plan includes details of the project, a grievance mechanism and will be used to meet the Bank's public disclosure requirements for B-level projects.
An ESAP has been 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. The Company will provide the Bank with regular reporting on the implementation of the ESAP.
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