The World Bank Report No: ISR6692

Implementation Status & Results Gateway Project (P043195)

Operation Name: Rijeka Gateway Project (P043195) Project Stage: Implementation Seq.No: 21 Status: ARCHIVED Archive Date: 26-Sep-2012 Country: Croatia Approval FY: 2004

Public Disclosure Authorized Product Line:IBRD/IDA Region: EUROPE AND CENTRAL ASIA Lending Instrument: Specific Investment Loan Implementing Agency(ies): HAC, HC, of Rijeka Authority Key Dates Board Approval Date 08-Jul-2003 Original Closing Date 30-Sep-2009 Planned Mid Term Review Date Last Archived ISR Date 18-Dec-2011 Public Disclosure Copy Effectiveness Date 10-Oct-2003 Revised Closing Date 30-Sep-2012 Actual Mid Term Review Date 28-Sep-2006

Project Development Objectives Project Development Objective (from Project Appraisal Document) Improve the effectiveness of the transport chain through the Rijeka Gateway for both freight and passenger traffic by modernizing the port and road network connections, and privatizing port operations. Has the Project Development Objective been changed since Board Approval of the Project?

Yes No Public Disclosure Authorized Component(s)

Component Name Component Cost A - PORT RESTRUCTURING AND MODERNIZATION 50.20 B - PORT/CITY INTERFACE REDEVELOPMENT 24.60 C - INTERNATIONAL ROAD IMPROVEMENTS 78.70 D - PROJECT PREPARATION FACILITY 1.50

Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Unsatisfactory

Public Disclosure Authorized Overall Implementation Progress (IP) Moderately Satisfactory Moderately Unsatisfactory Overall Risk Rating

Implementation Status Overview This is the last status report for the project. Public Disclosure Copy Notable features over the last 9 months of the project: -- The project activities related to roads and motorways were completed since early 2011, implementation was limited to Authority (PRA) components (components A

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and B). -- The construction of the additional quay wall for the Brajdica Container Terminal is ongoing according to schedule and will be completed in the first half of 2013. The operations of the Brajdica terminal by Adriatic Gate majority shareholder ICTSI have already led to increased productivity and to the development of container activities. The Container Terminal (ZCT) design-build contract and of the associated supervision services were signed in April 2012 instead of end-2011 (review by the new government), and these assignments are now starting, with an end date of construction scheduled for 2016. The contract price is significantly lower than the pre-procurement cost estimate. An amount of 15 million Euros was canceled from the loan to the Port of Rijeka Authority (4715-1 HR) on July 12, 2012 due to overall savings in the procurement of the two container terminals construction compared to the financing plan of the project. -- Regarding the Delta/Port of Baros conversion into an urban area, consultations with interested developers took place early in November 2011 after the advertising campaign and the survey carried out during the summer of 2011, but no activity was carried out since then given the need for consultation with the new government and expected management in the PRA. Re-start of the activities is now scheduled for the second half of 2012 after all parties agreed on a clear process and timetable. -- The status of the environmental activities remains satisfactory. A comprehensive port environment protection plan was prepared in 2011 based on an Eco management and audit system. The system will become operational in several phases. Environmental compliance of the construction activities is also satisfactory.

Public Disclosure Copy Results Achieved under the Project: -- The Project started in 2003 with activities linked to (i) connecting the Port of Rijeka and its terminals to the international road network while improving circulation in the city (road components); (ii) Port improvements comprising increase in private sector participation and efficiency improvements, construction of a new container terminal (Zagreb terminal), the construction of a passenger terminal and its link to the city network, and (iii) the improvement of the Port-CityInterface by allowing the redevelopment of the Delta-Porto Baros area into an urban area. -- In terms of road component, the activities were fully achieved: The Croatian Roads (HC) loan is closed and fully disbursed and allowed the construction of a bypass to the city of Rijeka for all transit traffic between Istria, , and the rest of Croatia, as well as a direct link through a tunnel between the Port area and the Zagreb Motorway, reducing congestion and pollution in the city center. The road D404, which was the last HC component funded by the project was open to traffic on May 30, 2011 The activities under Croatian Motorways (HAC) were completed in November 2010, and allowed for the reinforcement of the main bridge to the Island of , which hosts the Petroleum activities of the Port. On average, Road activities spanned over 3 years more than initially envisaged. -- Port activities were substantially affected by the need to cancel in 2005 the contract for construction of the Zagreb terminal, which had to be terminated when initial works determined that the geotechnical conditions did not correspond to design hypothesis, making the terminal as designed impossible to build. As a result, the PRA had to re-study the whole terminal and find a temporary solution to increase container capacity (extension of the Brajdica terminal). This led to the approval of an additional financing in 2007 and then, after costs were revised at design stage, to the approval in 2009 of a second Rijeka Gateway Project to complement the financing plan of the two terminals (Zagreb and Brajdica) and enhance the environmental component of the project. The finalization of studies for Brajdica delayed its start to early 2010, and a very long technical process to confirm the viability of the Zagreb terminal, followed by a procurement process for a design-and-build contract that took more than two years, have delayed the start of this contract to 2012. As a result, several key activities are to continue after the project closing date of September 30, 2012 with the financial support of the Rijeka Gateway II Project: finalization of the construction of the Brajdica Terminal (2013), construction of the Zagreb Terminal (2016). -- The activities related to the improvement of port efficiency included a successful severance plan for the dd, implemented during the mid 2000s, and several supports to improve the port authority management. In spite of the postponement of the construction of the Zagreb Container terminal, the project successfully supported the change in contractual relationships between the port authority and the public operator Luka Rijeka dd, with the set up of concessions for various activities, and concession of the Brajdica container terminal to a subsidiary of Luka Rijeka (Adriatic Gate). This subsidiary was successfully privatized after a competitive process in 2011, making it one of the only privatization done in the sector. The Luka Rijeka dd is contemplating similar operations for some of its other concessions (grain, bulk), while the Zagreb terminal will be concessioned to a private operator under the Second Rijeka Gateway Project. -- Implementation of the Port-City component mostly comprised the full preparation of all the needed administrative steps to carry out the redevelopment ofthe area, which last over the full life of the project, as well as the linkage of the passenger terminal to the city (cofinanced by the project and the city of Rijeka). The actual implementation of the redevelopment of the Delta-Porto Baros will happen under the Second Rijeka Gateway Project, as will the last activities to support environmental improvement in the Port.

In terms of achievement of the project’s objectives: -- The road component has allowed to increase the connection between the Port and its hinterland and reduced transit time in the city by more than half.

Public Disclosure Copy -- Traffic growth has followed the project objectives in terms of freights, while objectives for passenger traffic were not met as demand has not followed (Rijeka does not manage to attract cruise ships because of a less attractive location and hinterland compared to many other Croatian , and traditional ferry services suffer from competition and from bridge constructions).

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-- Privatization of the management of the Brajdica container terminal is a main achievement, while the Port productivity has dramatically improved (decrease in staffing over 10 years compared to an average of 7% traffic growth). -- The physical implementation of the main Port activities as initially designed (container terminals and urban redevelopment) will happen only once the Second Rijeka Gateway Project is completed. But as early as June 2013 the Port capacity for container traffic will more than double, exceeding 300,000 TEU against 150,000 today. -- Beyond the construction of the two terminals, the has committed to fund road D403, which will link the Rijeka bypass to the Zagreb Container Terminal by 2016 and enable the full use of the terminal's capacity.

Locations Country First Administrative Division Location Planned Actual Croatia Not Entered Rijeka

Croatia Not Entered Orehovica Public Disclosure Copy

Croatia Not Entered Draga

Croatia Not Entered Sveti Kuzam

Croatia Not Entered Port of Rijeka

Croatia Not Entered

Results

Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Total Rijeka port traffic (non liquid) increases Text Value 3.6 million tons 4.5 million tons 4.3million tons by an average 7% a year from 2004 to 2009 Date 31-Dec-2003 31-Dec-2011 30-Sep-2012 Comments Decrease from 2010 as traffic final value for 2012 will not be suffered from economic crisis known by closing date. end in second half of 2011. value value for 2011 above end of still above end project target project target Number of passengers from ferries and cruise Text Value 181,362 171,396 243,000 vessels increases on average 5% per annum Date 31-Dec-2003 31-Dec-2011 30-Sep-2012 Comments below target because of lack of additional attractions developed around the city compared to neighboring ports and limited ferry traffic due to road competition Public Disclosure Copy Intermediate Results Indicators

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Indicator Name Core Unit of Measure Baseline Current End Target The ratio of total operating expenses (incl. Text Value 240% 171% 130% asset depreciation) to total operating revenues Date 31-Dec-2002 31-Dec-2011 30-Sep-2012 (excl. Government subsidies) declines from 240% in 2002 to 150% in 2009. Comments value above target, because of the deterioration of traffic. Private sector involvement in port operations Text Value 0% 35% 85% Date 31-Dec-2002 30-Dec-2011 30-Sep-2012 Comments Value increased due to the Value not likely to be met, privatization of the Brajdica target was not realistic Terminal operations

Public Disclosure Copy D404 constructed Text Value 0% 100% 100% Date 31-Dec-2002 31-May-2012 15-Aug-2007 Comments D8 sections constructed Text Value 0% 100% 100% Date 31-Dec-2002 13-Sep-2007 15-Aug-2007 Comments unchanged Implementation of severance program (number Text Value 1339 479 939 of employees Date 31-Dec-2003 31-Dec-2007 31-Dec-2007 Comments unchanged Construction of Port infrastructure ( Pier, Text Value 0% 85% 100% Passenger terminal, breakwater strengthening, Date 31-Dec-2003 30-Jun-2012 30-Sep-2012 Zagreb terminal, demolition) Comments The Zagreb Container Unlikely to reach 100% as Terminal (ZTC) construction ZCT will be carried out contract is signed. Brajdica essentially under the RG II terminal progressing project. satisfactorily. ISO certification for Croatian Motorways Yes/No Value No Yes Yes Date 30-Jan-2004 31-Jul-2009 31-Dec-2010 Comments Unchanged. HAC received ISO 9001, 14001,18001 and total quality management independent certification Roads constructed, non-rural Kilometers Value 0.00 10.50 10.50 Date 31-Dec-2003 30-Jun-2012 31-Dec-2010 Comments Public Disclosure Copy

Data on Financial Performance (as of 21-Aug-2012)

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Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P043195 IBRD-47140 Closed 08-Jul-2003 12-Jul-2003 10-Oct-2003 30-Sep-2009 31-Dec-2010 P043195 IBRD-47150 Closed 08-Jul-2003 12-Jul-2003 10-Oct-2003 30-Sep-2009 31-Aug-2011 P043195 IBRD-47151 Effective 30-May-2007 11-Jun-2007 21-Nov-2007 31-Dec-2010 30-Sep-2012 P043195 IBRD-47160 Closed 08-Jul-2003 12-Jul-2003 10-Oct-2003 30-Sep-2009 30-Sep-2009

Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P043195 IBRD-47140 Closed USD 17.30 6.82 10.48 10.99 0.00 161.00

Public Disclosure Copy P043195 IBRD-47150 Closed USD 55.10 55.10 0.00 55.10 0.00 100.00 P043195 IBRD-47151 Effective USD 48.00 29.72 18.28 9.46 16.32 32.00 P043195 IBRD-47160 Closed USD 84.10 84.10 0.00 96.82 0.00 115.00

Disbursement Graph

Key Decisions Regarding Implementation N/A Public Disclosure Copy Restructuring History Level two Approved on 24-Feb-2010, Level two Approved on 12-Jul-2010, Level two Approved on 28-Oct-2010, Level two Approved on 09-Dec-2010

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Related Projects P105238-CROATIA RIJEKA GATEWAY - ADDITIONAL FINANCING Public Disclosure Copy Public Disclosure Copy

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