financing by international finance institutions – the sofia...
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Financing by International Finance Institutions –
the Sofia case
Metodi AVRAMOVPublic 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
Transport operator Network length in km
Number of lines
Rolling stock
Public transport
services for 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 splitNumber of passengers in 2007 (in ´000) – 470 047.
Trams28%
Trolleybuses 12.7%
Metro5.9%
Buses53.4%
Sofia PT Revenues /2007/
general budgetary resources from the state
11%
general budgetary resources from the
municipality
32%supplementary
commercial revenues
7%
commercial revenues from passenger fares
(ticket sale)
50%
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 companyAmount - 12 894 million JPYInterest Rate (% per annum) - 2.2%Repayment period – 30 yearsGrace 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 MunicipalityBeneficiary: Municipal bus and tram companiesAmount - 29,5 million EURInterest Rate (% per annum) – Eero LIBOR +3,5% (From year 2007 = Euro LIBOR + 1%)Repayment period – 10 yearsGrace 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 busesMercedes Benz O 345 G
61 low floor solo buses BMC 220 SLF
Modernisation of existing Bulgarian trams95 % 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 analysisSTRENGTHS WEAKNESSES
1.EBRD differs from a commercial bank.Better loan conditions (interests, financial securities, etc.) 2. Local legislation There are restrictions according the Bulgarian local legislation for loans taken by the municipality. There should be an open 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.
1.EBRD differs from a commercial bank.2.Profit oriented or political oriented deceisions.3.Who is taking the final decision – EBRD or Sofia Municipal Council?4. Covenants under the loan agreement /one time or each year/
OPPORTUNITIES THREATS
1.Strategy for using the results:- Restoring the production of trams in Sofia. - Building a capacity for refurbishment of trams by Sofia tram factory.- Participation of the Sofia tram factory in international tenders for production of new or refurbishment of old tram vehicles.2. Improvement of institutional framework (local level)3. Gaining experience for development of EU projects.4. Simplified procedures for additional financing.
1. Limitations for co-financing the ticketing system project by Sofia municipality under Bulgarian Public Procurement Act.(exceeding the available budget)
2. Taken of certain obligations under the Loan/Grant agreement (loans, PT institutional framework, etc.).
