Joint Stock Company "Freight One"

complete

The proposed project is a senior loan to OAO “First Freight Company” (PGK) to finance the renewal of rail freight wagons. This project will improve the performance of the fleet and hence increase the quality of service offered to the market. The rail sector in Russia is currently in the midst of a structural reform programme. The primary objectives are to improve efficiency and reliability of rail services in Russia, and raise capital to finance upgrading of rail infrastructure. These objectives are pursued through a complex set of reforms, including the commercialisation of the incumbent operator RZD and development of private sector operations. The project is expected to support the unbundling and commercialisation of RZD through the effective creation of a large freight subsidiary (PGK) and associated improvements in the independence of PGK operations and commercialisation. A longer term objective is potential partial privatisation. The commercialisation of PGK will be achieved through enhancing corporate governance to ensure operational independence. PGK is a wholly owned subsidiary of JSC Russian Railways (RZD). PGK was established as an independent rail freight operator in 2007, as part of the rail sector reform programme in Russia. PGK is a rail freight operator with 177,000 freight wagons, transporting a broad range of commodities, including crude and refined petroleum products, cement, metals, coal and grain. RUB 11.5 billion to be structured as an A/B Loan. Up to RUB 11,500 million. Screened C/1. The railway freight wagons to be purchased with the Bank’s finance will comply with applicable national and international environmental and safety standards. Legal covenants will ensure that the Company formalise its environmental, health and safety procedures; particularly those relating to managing contractors and sub-contractors; and implement an agreed Environmental Action Plan. It will be also covenanted that the Company conduct its business with due regard to the environment and public and occupational health and safety following best international practice and in compliance with Russian environmental laws and regulations. Annual environmental, health and safety reports will be submitted to the Bank. None.