Lviv Public Transport Financing Project

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The EBRD is considering providing financing to LvivElectroTrans Public Transport Company (“LET”), the public transport company of the city of Lviv, and LvivAvtodor, a road construction, maintenance and traffic management municipal enterprise to be created and owned by the City of Lviv, to finance (i) the rehabilitation of the tram tracks, streets and underlying utilities along the two most heavily used tram lines in the City of Lviv; (ii) the prioritization of the tram traffic along the rehabilitated corridors to increase tram commercial speed; (iii) the implementation of traffic management systems along the rehabilitated corridors; (iv) the acquisition of used/refurbished trams; (v) the renewal of tram infrastructure (electrical sub-stations and cabling); (vi) depots modernization, including energy efficiency investments; and (vii) the acquisition of information systems to enable LET to implement its corporate restructuring plan. The project will also support a number of related initiatives, including, the introduction of an electronic ticketing system for LET, a parking strategy for the city, the development of a public transport regulatory reform based on the introduction of a public service contract (“PSC”) between the city and LET, a corporate development programme for LET and the introduction of competitive tendering for standardized bus services in the city. Demonstration effect of successful restructuring The corporate development activities and PSC adoption will introduce a range of activities that focus on the restructuring of LET as operator, will include the thorough process for fare increase reviews. Additionally, the LET loan will include productivity milestones that will match progress on corporate structuring to improve productivity levels. Finally, improvements in corporate governance will occur with the introduction of the more robust management and accounting practices and the functioning of the PSC Supervisory Committee. Framework for markets This area includes the two subcomponents: (i) the adoption of the PSC, which will provide numerous benefits in terms of performance-based service indicators for services delivered, indexation of the net compensation formulas based on the total price per kilometre operated, introduction of a CAPEX payment to ensure LET’s long-term asset base renewal, contribute to improved city regulation and budgetary planning for support payments to LET, and provide a series of penalties and incentives for compliance with clear service indicators; and (ii) route tendering for the private bus sector, which will introduce a process of competitive route tendering which aims to provide incentives to the existing but atomised minibus industry to consolidate into bona fide passenger transport companies under multi-year PSC-backed arrangements with the City to provide a higher level of service to the users. This activity would constitute one of the first examples in the region of transforming the mini-bus industry into a consolidated, economically optimized public transport service operated by the private sector, and could be replicated throughout Ukraine. Performance-based contracting The creation of the LvivAvtodor represents a significant advancement in the development of the urban road sector. In particular, the road agency will introduce modern traffic management, thorough the establishment of long-term private sector participation in the form of a supply-install-maintain contract. The agency will begin with these investments to inculcate an approach to urban roads that goes beyond mere construction and maintenance activities to perform the management of urban streets. LvivElectroTrans Public Transport Company, LvivAvtodor and City of Lviv EBRD is considering providing financing to LET in an amount of up to EUR12 million and up to EUR26 million to LvivAvtodor. Up to EUR 50 million. The project has been reviewed under the 2 Bank’s policies and screened B/1 (under 2003 Environmental Policy) and B under 2008 Environmental and Social Policy. Environmental and social due diligence has been undertaken with the help of independent consultants to ensure compliance with the relevant Performance Requirements and included (i) environmental and social audit of the existing facilities and operations of both Borrowers, (ii) a review of their corporate management policies, procedures and approaches to environmental, heath and safety and labour/social issues, and (iii) an environmental and social analysis of the proposed investment components. The investigations showed that the proposed project components would result in a number of environmental and social benefits, including: The potential adverse environmental and social impacts have been identified and assessed during the due diligence. It has been confirmed that the project will not include any rehabilitation works in the City centre which is a UNESCO World Heritage Site (the “UNESCO Zone”). Environmental issues will be mainly associated with the construction stage and might include increased noise and dust levels, and management and disposal of the construction waste. Health and safety issues are mainly associated with the road safety and traffic restrictions, provision of proper signage and adequate notification of any road closures during replacement of tracks. Labour issues might be associated with the use of temporary construction labour, their working hours and remuneration levels, provision of adequate safety arrangements for the construction personnel, as well as Company’s labour restructuring plans. An Environmental and Social Action Plan (ESAP) has been developed for both LET and LvivAvtodor to avoid, minimise or mitigate any potential adverse environmental and social impacts and liabilities arising from the project, and to guide both Companies to compliance with the national and EU environmental standards. This ESAP will be agreed with both Companies for implementation during the project. A Stakeholder Engagement Plan will be prepared to ensure that communication with the identified stakeholders is handled properly throughout project preparation and implementation, including the type of grievance procedure. A total of EUR 2.6 million of TC assistance is required to prepare, design and implement the Project. It will include: Donors for the design and implementation phase assignments are yet to be identified.