Ulaanbaatar City Bus Fund

Location:

Mongolia

Project number:

43510

Business sector:

Municipal and environmental infrastructure

Notice type:

Public

Environmental category:

B

Status:

Passed Concept Review, Pending Final Review

PSD disclosed:

28 Jan 2019

Translated version of this PSD: Mongolian

Project Description

The provision of a sovereign loan of up to US$ 30 million (€26.3 million) to Mongolia on-lend to the Municipality of Ulaanbaatar (the "City" or "Ulaanbaatar"), the capital of Mongolia, to finance the acquisition of buses to be used in the City. In addition the loan will finance the acquisition of maintenance equipment and works on a key route to prioritise the bus lane. The loan will be divided into two tranches: committed Tranche I in the amount of up to US$ 16 million and uncommitted Tranche II in the amount of up to US$ 14 million. The Bank is seeking co-financing via a capital grant of up to US$ 10 million (€ 8.8 million) from an international donor.

Project Objectives

Successful implementation of the Project will help alleviating the City's most pressing issues in the public transport sector such as obsolete vehicles, lack of reliable service, inefficient traffic management, and the reduction of Particulate Matter 2.5 emissions.

Transition Impact

The project contributes to the Well-governed quality through the introduction of a Public Service Contract (the "PSC") in line with best international practice (the EU). It will replace the current scheme under which transport copanies operate under unsustainable short-term contracts, where cost recovery cannot be achieved. The project will also support the Green quality through the replacement of the obsolete bus fleet with new buses that will operate on cleaner fuel. GET components related to lower carbon emissions (separate priority bus lane and the acquisition of maintenance equipment to maintain the buses) to be determined based on feasibility study results.

Client Information

MONGOLIA SOVEREIGN

MONGOLIA AND MUNICIPALITY OF ULAANBAATAR

EBRD Finance Summary

USD 30,000,000.00

Total Project Cost

USD 40,000,000.00

Environmental and Social Summary

The Project has been categorised B in accordance with the 2014 EBRD Environmental and Social Policy ("ESP"). The introduction of new buses, as well as auxiliary investments into bus lanes and bus depot equipment are anticipated to increase the availability and effectiveness of Ulaanbaatar’s public transport system as well as contributing to the improvement of the network’s overall accessibility and mobility for the Capital. Specifically, the investment will (i) procure 100 buses, spare parts, maintenance equipment and will construct a new garage at Depot #2 for these new buses to be operated by the CTC and (ii) will provide additional 87 buses for selected municipal bus operator(s) by the City. All new buses will operate using compressed natural gas (“CNG”) fuel.

For this project, an independent consultant was retained to supplement the Bank's environmental and social due diligence, which focused on the Client's current operations, planned investments under Tranche I and II, and the Client's overall Environment, Health & Safety and Social (EHSS) management systems. Whilst, the Bank’s assessment did not identify any material EHSS risks or impacts; improvements are required to formalise the Client’s management systems and align the project with the Bank’s Performance Requirements.  To address these issues, an Environmental and Social Action Plan (ESAP) has been developed (to be agreed prior to signing), which includes, but is not limited to (i) the need to develop a formal Environmental and Social Management System (ESMS), (ii) improvements to the Client’s Human Resources Policy, (iii) implementation of a formal workers grievance procedure and, (iv) improvements to contractor management and inspections of bus operators. Technical Cooperation funds will be sought to assist the Client in fulfilling these ESAP commitments. A Non-Technical Summary has been prepared by the consultant which outlines the project’s overall environmental and socioeconomic benefits, as well as the Client’s approach to managing EHSS risks and impacts:

Non-Technical Summary (NTS)

Technical Cooperation

The Project is expected to benefit from the following Technical Co-operation assignments:

Pre Loan Signing

TC 1: Pre-Feasibility, (i) a technical review of proposed bus operations to establish the target route structure, demand, revenue and operational cost projections; (ii) traffic assessment; (iii) preparation of technical and functional specifications for the new fleet; (iv) preparation of the financial model based on financial and economic review of the proposed investments, including cost estimates and assumptions; (v) environmental and social due diligence. The assignment's cost was €100,000, financed by the EBRD Shareholder Special Fund ("SSF").

TC 2: Technical and financial due diligence taking into account the existing pre-Feasibility study, including: (i) a technical review of proposed bus operations to establish the target route structure, demand, revenue and operational cost projections; (ii) traffic survey; (iii) preparation of technical and functional specifications of the new fleet; (iv) financial and economic review of the proposed investments, including cost estimates and assumptions for the bank's model; (v) environmental and social due diligence. The estimated cost of the assignment was €150,000, financed by the SSF.

Post Loan Signing

TC 3: Project Implementation and Procurement Support including (i) procurement of the fleet including assistance with technical acceptance of buses, spare parts, documentation and training; (ii) procurement of workshop equipment; and (iii) assistance with the implementation of the ESAP. The estimated cost of the assignment is €350,000, proposed to be financed by the SSF.

TC 4: Support for Bus Sector Reform for the Implementing agency, including: (i) support for finalisation and tendering of PSC and lease agreements; (ii) assistance with implementation of Bus Leasing Contracts and PSCs during first 18 months, and assistance in developing template report by the bus operators under the PSC; (iii) enhancement of the financial management and accounting system of the Implementing Agency, developing standardised reporting under the Loan Agreement and the PSC; (iv) routes optimisation; and (v) parking strategy preparation. The estimated cost of this assignment is €600,000, proposed to be financed by the SSF.

Company Contact Information

Myagmarjav Sukhbaatar
migacarbon@gmail.com
+(976) 11327662

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