Financing by International Finance Institutions – the Sofia case Metodi AVRAMOV Public Transport Company - Sofia Leipzig, 18 April 2008 SOFIA Area – 1 194 sq.км. Population – 1 400 000 inhabitants Number of public transport lines – 120 Length of the public transport network – 1 441 km Number of public transport vehicles – 834 Public transport services (2007) – 63 mil vehicle km Number of passengers in 2007 – 470 mil. Sofia PT scheme SOFIA PUBLIC TRANSPORT IN FIGURES Public transport Network Number Rolling services for Transport operator length in km of lines stock 2007 (in ´000 vehicle km) 1. Bus transport 977,85 77 424 34 249 2. Electrical transport 253,77 26 278 17 756 tram 153,37 16 177 11 069 trolley-bus 100,40 10 101 6 687 3. Metro 9,90 1 6 869 4. Private bus operators 200,15 16 126 10 233 TOTAL 1 441,67 120 834 63 107 Modal split Number of passengers in 2007 (in ´000) – 470 047. Metro Trolleybuses Buses 5.9% 12.7% 53.4% Trams 28% Sofia PT Revenues /2007/ general budgetary resources from the state 11% general budgetary commercial revenues resources from the from passenger fares municipality supplementary (ticket sale) 32% commercial revenues 50% 7% Major PT projects in Sofia financed by Finance Institutions /2002 – 2008/ • Sofia Metro Extension Project – financed by Japan Bank for International Cooperation (JBIC) • Sofia Public Transport Project - financed by European Bank for Reconstruction and Development (EBRD) 1. Sofia Metro Extension Project. In 2002 was signed a loan agreement between Sofia municipality and JBIC. The Project aims to construct a 2.1km segment from the 7th to 9th station of the metro line No.1 Line (total length: 19.2km, of which 9.9 km is already in service). The segment runs through the central part of the city, which requires construction work using the shield tunneling method. The proceeds of the loan are using for procurement of equipment and services for construction work (including ancillary facilities such as the tunnel, rails, station buildings and traffic signals) as well as engineering and management consulting services. Parameters of the Loan: Borrower: Sofia Municipality Beneficiary: Sofia metro company Amount - 12 894 million JPY Interest Rate (% per annum) - 2.2% Repayment period – 30 years Grace period – 10 years 2. Sofia Public Transport Project. In April 2002, the City of Sofia signed a loan agreement with the European Bank for Reconstruction and Development (EBRD) to finance the Sofia Public Transport Project. The proceeds of the loan are for: - Rolling stock renewal (buses); - Refurbishment of trams. Parameters of the Loan: Borrower: Sofia Municipality Beneficiary: Municipal bus and tram companies Amount - 29,5 million EUR Interest Rate (% per annum) – Eero LIBOR +3,5% (From year 2007 = Euro LIBOR + 1%) Repayment period – 10 years Grace period – 3 years In addition to the Project, Sofia municipality received a 2.45 million EUR grant from the Netherlands for a new ticketing system. The grant is administrated by EBRD. Project realisation - 4 international tenders under the EBRD Procurement policies and rules: • In 2003 – purchase of 50 new articulated buses - Euro 3. The vehicles are in operation. • In 2005 – purchase of 61 new low floor solo buses - Euro 3. The vehicles are in operation. • In 2006 – 2 stage tender for supply and installation of a public transport ticketing system (trams and trolley-buses). The system will be in operation in July 2008. • In 2006 – 2 stage tender for refurbishment of 18 trams - AC motors. First refurbished tram was accepted for operation on 03 April 2008. 50 articulated buses Mercedes Benz O 345 G 61 low floor solo buses BMC 220 SLF Modernisation of existing Bulgarian trams 95 % new components; 4 AC motors; middle low floor section (16 %) Sofia PT ticketing system - Central system - 466 trams and trolleybuses - 1830 card validators - 466 onboard control units - 21 ticket offices Credit rating Credit ratings strongly influence the cost of financing. • Sofia municipality generates a quarter of Bulgaria's gross domestic product and attracts almost 60 per cent of foreign direct investments in Bulgaria. The unemployment rate in Sofia is at 2.4 % , more than three times lower compared to the average for the country (9%). • In March 2008 Standard & Poor's credit rating agency upgraded the credit rating of Sofia municipality from stable to positive. The agency affirmed the city's rating at BB+. • Due to the credit rating upgrade, the Sofia Municipality will decrease interest payments on loans. Financing by International Finance Institution (EBRD) – the Sofia case SWOT analysis STRENGTHS WEAKNESSES 1.EBRD differs from a commercial bank. 1.EBRD differs from a commercial bank. Better loan conditions (interests, financial securities, etc.) 2.Profit oriented or political oriented deceisions. 2. Local legislation 3.Who is taking the final decision – EBRD or Sofia Municipal There are restrictions according the Bulgarian local legislation Council? for loans taken by the municipality. There should be an open 4. Covenants under the loan agreement /one time or each year/ tender for selection of a financing Bank. However, this restriction does not apply for IFI. 3. The municipality signed new Public Service Contracts with the transport operators as an obligation according to the Loan agreement. (penalties / bonuses) 4. Almost no financial risk for the both parties. 5. Transparent procedure under EBRD’s Procurement Policies and Rules. OPPORTUNITIES THREATS 1.Strategy for using the results: 1. Limitations for co-financing the ticketing system - Restoring the production of trams in Sofia. project by Sofia municipality under Bulgarian Public - Building a capacity for refurbishment of trams by Sofia tram Procurement Act. factory. (exceeding the available budget) - Participation of the Sofia tram factory in international tenders 2. Taken of certain obligations under the Loan/Grant for production of new or refurbishment of old tram vehicles. agreement (loans, PT institutional framework, etc.). 2. Improvement of institutional framework (local level) 3. Gaining experience for development of EU projects. 4. Simplified procedures for additional financing. THANK YOU! [email protected] Public Transport Company - Sofia.