The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) Sustainable Croatian Railways in Europe (P147499) EUROPE AND CENTRAL ASIA | Croatia | Transport Global Practice | IBRD/IDA | Investment Project Financing | FY 2015 | Seq No: 6 | ARCHIVED on 11-Apr-2019 | ISR36052 | Implementing Agencies: Republic of Croatia, HZ Infrastructure, Ministry of Sea, Transport and Infrastructure, HZ Cargo, HZ Passenger Transport Key Dates Key Project Dates Bank Approval Date: 30-Apr-2015 Effectiveness Date: 04-Aug-2015 Planned Mid Term Review Date: 31-Dec-2018 Actual Mid-Term Review Date: 12-Feb-2019 Original Closing Date: 31-May-2020 Revised Closing Date: 31-May-2020 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The Project Development Objective (PDO) is to improve the operational efficiency and the financial sustainability of the public railway sector in Croatia. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Project Coordination and Sector Policy Support:(Cost $5.70 M) Support to HZ Passenger Transport Restructuring:(Cost $65.00 M) Support to HZ Cargo Restructuring:(Cost $53.40 M) Support to HZ Infrastructure Restructuring and Enabling Investment to Increase the System Efficiency:(Cost $93.10 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Moderately Satisfactory Moderately Unsatisfactory Overall Implementation Progress (IP) Moderately Unsatisfactory Moderately Unsatisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions Project implementation Status. Progress in implementation has been uneven. Since the restructuring of June 2018 the following activities advanced, albeit some at a slower pace than expected: (i) purchase of four DMU train sets – on track to be delivered by the closing date, (ii) bidding documents for rehabilitation of the Savski Marof – Zagreb line have been prepared , (iii) contract for HZC financial advisory and for the railway system’s asset management have been signed; (iv) the Public Service Obligation Contract (PSO) study has been completed and the contract signed, which complies with EU rules;and (v) the tender for support to the HZPP management for restructuring has been launched. 4/11/2019 Page 1 of 7 The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) Progress in reaching of the PDO. The restructuring plans of the companies have not progressed as envisaged. Few of the actions expected to be completed as a result of restructuring of HZI or HZP have taken place to date. With 17 months to closing it is unlikely that all the project activities could be completed in a satisfactory manner to achieve the objectives, especially in relation to companies’ productivity and investment planning, without a time extension and some continued supervision by MSTI.  The management of HZI is implementing several short-term restructuring measures including reorganization of works in train stations, signalization on Lika railway section and asset management strategy. One of the most important short-term cost cutting measures is the decision on how to restructure its main subsidiary Pruzne Gradjevine, which is still pending. The related decision will be reflected in the sector policy letter. HZI should also be able to start some of the long-agreed restructuring options (e.g. administrative services and warehouses for example) which would allow to start retrenchment program in the following years.  • Implementation of HZPP’s operational restructuring partially depends on upcoming project activities. Signing of the new PSO contract was done on December 21, 2018. The new PSO contract framework provides HZPP and MSTI the tools to monitor subsidies allocation. It should now be used and modified to maximize passenger traffic for the least amount of subsidy, and MOF and MSTI should agree with HZPP on the final level of service corresponding to the PSO amount: the level of service required was increased but cannot be covered by the approved yearly subsidy in the 2019 budget. This means that HZPP should decrease its services or risk a deficit. The PSO should be modified and the activity (under procurement) supporting HZP management for the company restructuring should help in that.  HZ Cargo’s market shares continue to decrease in the most profitable market segments. Therefore, finding a strategic partner is currently a priority for HZC. Advisory services to support this have been signed and should start in early April 2019. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Substantial Substantial Substantial Macroeconomic Substantial Substantial Substantial Sector Strategies and Policies Moderate Moderate Moderate Technical Design of Project or Program Moderate Moderate Moderate Institutional Capacity for Implementation and Sustainability Substantial Substantial Substantial Fiduciary Moderate Moderate Substantial Environment and Social Substantial Moderate Moderate Stakeholders Substantial Substantial Substantial Other Moderate Moderate Moderate Overall Substantial Substantial Substantial Results PDO Indicators by Objectives / Outcomes To improve the operational efficiency and the financial sustainability of the public rail sector IN00671033 ►Prioritized railway sector development and infrastructure maintenance program developed (Yes/No, Custom) 4/11/2019 Page 2 of 7 The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) Baseline Actual (Previous) Actual (Current) End Target Value No -- No Yes Date 31-Dec-2014 -- 25-Mar-2019 31-Dec-2019 Indicator to be modified by restructuring to reflect legal documents defined by new law passed in 2019 Comments: IN00671034 ►HZP operating expenses per train-km (in HRK) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 45.90 -- 42.30 41.40 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 IN00671035 ►HZC viability ratio (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.78 -- 1.00 1.09 Date 31-Dec-2014 -- 15-Mar-2019 30-Sep-2019 IN00671056 ►HZI million train-km per track-km (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 9,965.00 8,641.00 8,139.00 9,063.00 Date 01-Jan-2014 01-Jun-2018 31-Dec-2018 29-May-2020 IN00671057 ►Number of annual train-km operated per HZI employee (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 4,032.00 -- 3,369.00 3,834.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 Overall Comments PDO The indicator related to planning and programming of investment consisted in having a Prioritized railway sector development and infrastructure maintenance program developed. Since the project start both HZI and the MSTI have developed programs that partially covered these areas, but which delivery has been hampered by delays in the overall sector strategy. As part of the Sector Policy Letter discussions, there is a proposal to replace it by the introduction and signing of the multi annual infrastructure contract, which is an EU requirement not yet met by Croatia. This would provide a medium-term visibility to investment carried out by HZI. A draft has been developed for such plan which needs to be reviewed and implemented. • The main indicator for HZC related to its viability ratio: given that the situation of HZC can only be solved with injection of capital by external partners, we propose to 4/11/2019 Page 3 of 7 The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) replace the condition related to the viability ratio by a condition on the completion of a strategic partnership for HZ Cargo (transaction finalized). • The two other indicators relate to productivity in HZI and may need minor adjustment of targ ets. Intermediate Results Indicators by Components Project Coordination and Sector Policy Support IN00671058 ►Percentage of affected workers who participated in the social mitigation programs reporting satisfaction with the programs including gender disaggregated data (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 0.00 65.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 IN00671062 ►Percentage of assets with resolved legal titles (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 0.00 30.00 Date 31-Dec-2014 -- 15-Mar-2019 31-Dec-2019 Support to HZ Passenger Transport Restructuring IN00671059 ►Number of HZP staff retrenched (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 902.00 731.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 IN00671063 ►Number of HZP rolling stock rehabilitated (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 101.00 153.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 IN00671067 DMUs and diesel locomotives (Number, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 5.00 -- 5.00 14.00 Date 31-Dec-2014 -- 15-Mar-2019 31-Dec-2019 IN00671069 EMUs and electric locomotives rehabilitated (Number, Custom Breakdown) 4/11/2019 Page 4 of 7 The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) Baseline Actual (Previous) Actual (Current) End Target Value 3.00 -- 4.00 4.00 Date 31-Dec-2014 -- 15-Mar-2019 31-Dec-2019 IN00671071 ►HZP commercial revenues per employee (in HRK) (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.26 -- 0.20 0.21 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 IN00671072 ►HZP four new DMU trains (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 4.00 Date 01-Jan-2014 05-Jun-2018 05-Jun-2018 29-May-2020 Support to HZ Cargo Restructuring IN00671060 ►Number of HZC staff retrenched (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 326.00 910.00 Date 31-Dec-2014 -- 31-Dec-2018 31-Dec-2019 IN00671064 ►Number of HZC rolling stock rehabilitated (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 1,210.00 2,166.00 Date 31-Dec-2014 -- 31-Dec-2018 30-Sep-2019 IN00671068 Wagons (Number, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 0.00 0.00 Date 31-Dec-2014 -- 15-Mar-2019 31-Dec-2019 IN00671070 Locomotives (Number, Custom Breakdown) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 -- 3.00 16.00 Date 27-Feb-2015 -- 15-Mar-2019 31-Dec-2019 4/11/2019 Page 5 of 7 The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) Support to HZ Infrastructure Restructuring IN00671061 ►Number of HZI staff retrenched (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 1,070.00 494.00 1,098.00 Date 31-Dec-2015 30-Jun-2018 31-Dec-2018 31-Dec-2021 IN00671065 ►Number of kms of line sections rehabilitated or improved (Kilometers, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 239.20 183.96 306.25 Date 31-Dec-2014 30-Jun-2018 31-Dec-2018 31-Dec-2019 IN00671066 ►Fatalities per 10 million train-km (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 10.00 8.00 8.00 7.00 Date 31-Dec-2014 29-Dec-2017 31-Dec-2018 31-Dec-2019 Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P147499 IBRD-85000 Effective USD 88.65 88.65 0.00 32.19 56.20 36% P147499 IBRD-85010 Effective USD 48.20 48.20 0.00 27.39 21.46 56% P147499 IBRD-85020 Effective USD 46.50 46.50 0.00 34.78 11.75 75% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P147499 IBRD-85000 Effective 30-Apr-2015 06-May-2015 04-Aug-2015 31-May-2020 31-May-2020 P147499 IBRD-85010 Effective 30-Apr-2015 06-May-2015 04-Aug-2015 31-May-2020 31-May-2020 P147499 IBRD-85020 Effective 30-Apr-2015 06-May-2015 04-Aug-2015 31-May-2020 31-May-2020 Cumulative Disbursements 4/11/2019 Page 6 of 7 The World Bank Implementation Status & Results Report Sustainable Croatian Railways in Europe (P147499) Restructuring History Level 2 Approved on 27-Jun-2018 Related Project(s) There are no related projects. 4/11/2019 Page 7 of 7