The proposed project will provide further assistance in operational modernisation of Ukraine Railways (“Ukrzaliznytsia“ or “UZ”), and enhance institutional strengthening of UZ through assistance with developing a new corporate structure. The Project objectives are to: (i) replace old-style night sleeper services on medium distance inter-city routes with fast day passenger services which will provide much better service to customers and a higher return to UZ; (ii) eliminate a critical bottleneck on the pan-European corridor V with the construction of the Beskyd Tunnel; (iii) continue with the track rehabilitation programme that commenced with the proceeds of the first loan.
Transition impact would stem from: (i) UZ conversion into a joint-stock company; (ii) new legislation and introduction of amendments to existing legislation to allow UZ’s corporatisation process; (iii) implementation of UZ’s Railway Reform Policy; (iv) introduction of efficient procurement methods for equipment and rolling stock purchase.
Ukrzaliznytsia (or “UZ”) which is 100% owned by the State. UZ's Director General is also the Minister of Transport.
The Bank would extend a loan of US$ 120 million to UZ to finance (i) the purchase of passenger carriages; (ii) the purchase of track machinery; (iii) the construction of the Beskyd tunnel and (iv) consultancy services.
Total project cost is US$ 289 million including local contributions and estimated taxes and duties to be paid by the borrower (EUR 289 million).
Classified IEE, requiring an Initial Environmental Examination (IEE). Each of the three sub-projects will need to undergo an individual environmental due diligence. Two of these: the purchase of new passenger carriages and modern track machinery; have been classified B/0 requiring an environmental analysis. Due to the limited information currently available on the third sub-project, the construction of a new double track Beskyd tunnel an IEE will be carried out to determine the Bank's environmental due diligence requirements. In case IEE identifies sensitive environmental issues, this sub-project may be classified "A", requiring a full environmental impact assessment and public consultation as per Ukrainian law and the Bank's policies and procedures. A summary environmental analysis of each of the sub-projects will be annexed to this document as soon as the environmental investigations have been completed.
Technical Co-operation funding will include:
Beskyd Tunnel Feasibility Study – engineering assessment of the proposed investment and preparation of ToR for geological survey, financed by Austrian bilateral funds – EUR 60,000 (in completion);
Project preparation - geological survey to serve as basis for later tunnel design and construction of the Beskyd tunnel, expected to be financed by bilateral grant funds – estimated EUR 200,000;
Institutional strengthening and implementation – drafting new legislation to allow corporatisation and implementation of Railway Reform Policy, environmental measures, expected to be financed by EU-TACIS – estimated EUR 800,000.
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