Document of The World Bank

Report No: Public Disclosure Authorized

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF

Public Disclosure Authorized SÃO PAULO TRAINS & SIGNALING PROJECT (IBRD LOAN 7506-BR) March 3, 2008

AND ADDITIONAL FINANCING (IBRD LOAN 7820-BR) August 11, 2010

TO THE

STATE OF SÃO PAULO, BRAZIL

Public Disclosure Authorized December 18, 2012

Public Disclosure Authorized

ABBREVIATIONS AND ACRONYMS

CPTM São Paulo Metropolitan Train Company (Companhia Paulista de Trens Metropolitanos) IBRD International Bank for Reconstruction and Development (World Bank) JBIC Japanese Bank for International Cooperation METRO São Paulo Metro Company (Companhia do Metrô de São Paulo) PDO Project Development Objective SPMR São Paulo Metropolitan Region

Regional Vice President: Hasan A. Tuluy Country Director: Deborah L. Wetzel Sector Director: Ede Jorge Ijjasz-Vasquez Sector Manager: Aurelio Menendez Task Team Leader: Georges B. Darido

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Extension of Closing Date

BRAZIL — SÃO PAULO TRAINS AND SIGNALING PROJECT (P106038) AND ADDITIONAL FINANCING (P117122)

Restructuring Paper

1. The closing dates for the São Paulo Trains and Signaling Project with the State of São Paulo (Borrower) are to be extended to April 30, 2015 for the original loan (P106038, IBRD Loan No. 7506-BR) and October 31, 2014 for the additional loan (P117122, IBRD 7820-BR), representing a 22-month extension of each loan. In June 2012, the Borrower formally requested the Brazilian Federal Government and the project co-financiers (IBRD and JBIC) for approval to extend the loan closing date of both loans and update the results framework to reflect the current project timeframe. The Bank was informed by November 2012 of the Brazilian Federal Government’s approval of the closing date extension for the loans. The Bank, Borrower and implementing agencies have agreed with this plan. This will be the first restructuring of the project.

2. Loan 7506-BR in the amount of US$550 million was approved by the Board on May 1, 2008, and became effective on July 28, 2008. The closing date of this original loan is June 30, 2013 and has not been extended previously. The additional loan 7820-BR in the amount of US$112.91 million was approved by the Board on September 21, 2010 and became effective on December 8, 2010. The Borrower specifically requested a loan closing date of December 31, 2012 for this additional loan during negotiations although it preceded the closing date of the original loan.

3. The latest ratings for progress towards achievement of the Project Development Objective (PDO) and Implementation Progress are both Moderately Satisfactory. The project is 77 percent disbursed overall (original loan is 84% disbursed and its additional financing is 44% disbursed). The PDO remains the same, namely to: a) improve the level-of-service provided to the urban rail transport users in the São Paulo Metropolitan Region (SPMR) in a safe and cost-efficient manner by increasing the peak-hour and off-peak carrying capacity of Lines 7, 11 and 12 (formerly known as Lines A, E and F) of CPTM and Lines 1, 2 and 3 of the METRO; and b) continue the strengthening of the transport management and policy framework in the SPMR.

4. Under the Project, considerable progress has been achieved to date from adding 17 new Metro trains and 40 CPTM suburban trains in service and institutional components including the consolidation of the regional transport coordination commission and updating of elements of the integrated metropolitan transport plan. Once fully completed, the Project is expected to achieve significant improvement in the level-of-service by reducing headways and increasing passenger capacity and comfort with both trains and systems.

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5. However, further progress related to level-of-service improvements depend on the successful implementation of new signaling systems on Metro and CPTM and upgraded track infrastructure on CPTM. These contracts, signed in 2008 or 2009, have been significantly delayed due in large part to unforeseen technical issues with implementing complex systems and infrastructure while trains continue to operate on the lines and while ridership on all lines continues to increase. While Metro and CPTM have recently taken measures to accelerated implementation, these critical contracts remain significantly behind the original schedule. The Borrower is regularly updating the Bank on the progress of these contracts and the Bank is providing close implementation support on a quarterly basis to evaluate progress.

6. The PDO is unchanged and remains achievable. The proposed extension enables the satisfactory attainment of the PDO through the completion of the contracts for signaling and track upgrade and implementation of the institutional components, including initial results of an impact evaluation of the Project on low-income users.

7. As the signaling and track upgrade components of the Project are significantly delayed, the target indicator values for level-of-service (number of trains and average trip duration) originally expected in 2012 and 2013 will only be achieved in 2014 and 2015 considering the most recent schedule presented by the Borrower. The tables in the Annex of this paper reflect the new target dates for the indicators which otherwise remain unchanged.

8. Throughout project implementation, the implementing agencies (METRO and CPTM) and the Borrower represented by the Metropolitan Transport Secretariat have given appropriate attention to fiduciary (financial management and procurement) and safeguards (social and environmental) requirements as per Bank policies and guidelines. There are no outstanding audits. In addition, neither the loan in particular, nor the country in general is subject to an ongoing suspension of loan disbursements.

4 Annex: Results Framework with Revised Target Dates for Indicators - São Paulo Trains & Signaling Project

METRO - PERFORMANCE INDICATORS Target Values Data collection and Report Preparation 2008 2009 2010 2011 2012 2013 2014 2015 KPI Frequence of Data Collection Resposible for Reference 2007 Expected Achieved Expected Achieved Expected Achieved Expected Achieved Expected Achieved¹ Expected Expected Expected Reports Instruments data collection

Number of trains / during peak-hour and 33 / 24 34 / 24 33 / 26 35 / 24 33 / 28 36 / 24 33/28 36/24 33/28 33/28 33/28 33/28 33/28 41/34 Semester METRÔ non peak-hour Line 1 Number of trains / during peak-hour and 24 / 16 25 / 16 25 / 16 26 / 16 25 / 16 27 / 16 26/18 27/16 27/22 27/22 27/22 29/23 29/23 40/25 Semester METRÔ non peak-hour Line 2 Number of trains / during peak-hour and 35 / 2I 36 / 25 36 / 27 37 / 25 36 / 30 38 / 25 36/30 38/25 36/30 36/31 36/31 36/31 36/31 44/33 Semester METRÔ non peak-hour Line 3 Trip duration + reduction of the wait time 29 14 Semester Rel. Operacionais METRÔ in the Metro (minutes) Passenger per square meter in the 8 6 Semester Rel. Operacionais METRÔ Metro - Line 3 Additional demand (Lines 1+2+3) per 0 253.071² 364.047² 586.801² 642.103² 625,723 672.948³ 666,953 1.168.873(4) 1,425,563 Annual Rel. Operacionais METRÔ day Number of users per day with monthly family earnings inferior to four minimum 908,50 - - 1.339,69 - 1,369.66 1.231,09 1.553,01 1.647,7 Every 2 years METRÔ salaries - Lines 1, 2 and 3 - mil (reference 2006) Operation Index - Metro 1,00 1,00 0.75 <1,00 0,76 <1,00 0,80 <1,00 0,79 <1,00 <1,00 Annual METRÔ Intermediate Results Indicator % of conclusion of Metro trains 0.00% 0.00% 10.00% 39.51% 85.80% 60.49% 0.00% 0.00% 0.00% 0.00% Annual METRÔ % of conclusion of Metro Systems 0.00% 0.00% 54.80% 30.82% 45.20% 8.23% 25.95% 21.95% 8.00% 1.50% 17.00% 14.00% Annual METRÔ

¹ Achieved between jan and June 2012 (corresponds to the frequence of trains during peak-hour/vale) ² Corresponds to the difference between the average number of passengers transported in business days of Lines 1+2+3 in the year in comparison to 2007 ³Corresponds to the difference between the average number of passengers transported in business days of Lines 1+2+3 in the period between jan and June 2012 in comparison to 2007

4 Additional demand for 2014, considering comercial operation of the following lines: Line 17 - gold - between Congonhas and Morumbí station of CPTM; Line 2 - Silver Monorail - Vila Prudente to São Matheus; Line 4 - Yellow - Phase 2 and phase 3. For 2015

CPTM - PERFORMANCE INDICATORS

Data Collection and Preparation Target Values of Reports

Project Performance Indicators 2008 2009 2010 2011 2012 2013 2014 2015 Expected Achieved Expected Achieved Frequence Data Collection Responsible for Reference 2007 Expected Achieved Expected Achieved Expected Achieved Expected Achieved Expected Achieved Expected Achieved first first second second Expected of Reports Instrument data Collection semester semester semester semester Number of trains / during peak-hour and non peak-hour - 7.5 / 4 7.5 / 4 7,5 / 5 7.5 / 4 8,6 / 5 7.5 / 4 7.5 / 5 7.5 / 4 7.5 / 5 7.5 / 4 7.5 / 4 7.5 / 4 10 / 8 15 / 8 Semester CPTM CPTM Line 7 (A) (*) Number of trains / during peak-hour and non peak-hour - 7.5 / 4 7.5 / 4 10 / 5 7.5 / 4 10 / 6 7.5 / 4 10 / 4 7.5 / 4 10 / 6 7.5 / 4 7.5 / 4 7.5 / 4 10 / 8 15 / 8 Semester CPTM CPTM Line 12 (F)(**) Número de trens / dentro e fora do horário de pico - CPTM 8.5 / 5 8.5 / 6 12 / 6 8.5 / 6 12 / 7.5 8.5 / 6 12 / 7.5 8.5 / 6 10 / 7 10 / 7 10 / 7 15 / 8 Semester CPTM Linha 11 (E)(***) Trip duration time + reduction of wait time in CPTM 80 77 74 77 76 68 68 57 Semester Operational CPTM (minutes) Line 7 (A) Luz-Fco Morato Reports Trip duration time + reduction of wait time in CPTM 83 80 77 77 58 58 51 Semester CPTM (minutes) Line 11 (E) Passeger per square meter - Lines 7 (A) e 12 (F) 8 8,7 / 6,4 8,7 / 6,9 7,2 / 5,5 8,3/7,4 7 7 6 Semester CPTM Passeger per square meter - Line 11 (E) 8.3 7.9 7 6.5 7 7 6 Semester CPTM Additonal demand (Lines A + F) per day 0 106 154 176 203 219.341 219.341 219.341 Annual CPTM Additional demand Line 11 (E) per day 180 211 262 242.634 242.634 273.828 Annual CPTM Number of users per day with monthly family earnings Every two inferior to four minimum salaries - CPTM Lines 7 (A) and 12 237 256 294 333 348 357 357 357 CPTM years (F) (reference 2006) Trains Inspection Number of users per day with monthly family earnings Every two inferior to four minimum salaries - CPTM Line 11 (E) 313 475 503 549 531 531 559 CPTM years (reference 2008)

Operation Index - CPTM (with gratuity and without subsidy Audite Financial 1 1 1 1 1 1 1 1 1 1 1 1 1 <1,00 Annual CPTM to reequilibrate the account) Statements

Maintenace and strenghtening of PITU 0% 10% 10% 20% 20% 30% 30% 45% 45% 60% 75% 80% 90% 100% Annual Evolution Report STM Itermediate Results Indicators % of conclusion of CPTM trains 0% 0% 26.06% 26.06% 56.24% 56.24% 17.70% 17.70% Annual CPTM % of conclusion of CPTM trains - Line 11 (E) (Additional 0.00% 0.00% 0.00% 0.00% 80.00% 20.00% 20% 80% Annual CPTM Financing) % of conclusion of CPTM systems 0.20% 0.20% 17.79% 17.79% 21.99% 21.99% 10.94% 10.94% 8.00% 12.00% 6.00% 8.00% 15.08% Annual CPTM % of conclusion of the Permanent Way and Rede Aérea 0% 0% 0.01% 0.01% 6.11% 6.11% 32.32% 32.32% 27.06% 27.60% 6.90% 0.00% 0% Annual Operational CPTM (Lot 1) of CPTM Report % of conclusion of the Permanent Way and Rede Aérea 0% 0% 0% 0% 8.40% 8.40% 12.70% 12.70% 23.50% 25.20% 12.60% 12.60% 5.00% Annual CPTM (Lot 2) of CPTM % of conclusion of the Permanent Way and Rede Aérea 0% 0% 0% 0% 28.00% 28.00% 17.50% 17.50% 21.00% 22.00% 11.50% 0.00% 0% Annual CPTM (Lot 3) of CPTM % of conclusion of STM studies 0% 0% 0% 0% 0% 0% 10% 3% 70% 0% 10% 10% 0% Annual STM (*) Stretch between Luz - Francisco Morato (**) Stretch between Brás - Calmon Viana (***) Stretch between Luz - Guaianazes

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