Republic of Moldova Ministry of Economy and Infrastructure ...€¦ · Ministry of Economy and...

Ministry of Economy and Infrastructure - Republic of MoldovaRegional Rail Connectivity Workshop 2019

Republic of MoldovaMinistry of Economy and Infrastructure

Regional Rail Connectivity

Vasile CODREANULeading Expert, Railway Unit

Belgrade, Serbia 3-4 October 2019


Moldovan Railway

Republic of Moldova population - 3,55 million. The length of main railway lines - 1157 km.

Railway gauge - 1520 mm. Double railway lines - 77 km.

Railway Network include 84 stations, opened for cargo and passenger transport operations.

Logistic terminal of cargo - International Free Port of Giurgiulesti equipped with mixed 1435/1520 mm gauge.


Development Policy in Railway Transport Sector

• Transport and Logistic Strategy for 2013-2022, establishing priorities and main vector fordevelopment of railway transport sector.

• MD-EU Association Agreement signed in 2014, Chapter 15 – Transport, applicable from01.06.2016

• Project agreement between EBRD and CFM (Moldovan Railway SE) for restructuring theMoldovan Railway, (12 new Locomotives + rehabilitation of 235 km of infrastructure).

• Road-Map for restructuring the national Railway Sector (approved by Government).


Transport and Logistic Strategy

• The Transport and Logistic Strategy is aimed at creating a regulatory framework:- For opening the railway market and- Restructuration of CFM (Moldovan Railway SE)

• The Strategy establish the actions needed for enhancing the investments for: - Rehabilitation of railway infrastructure- Improving the locomotives and wagons pool


MD-EU Association Agreement

Implementation of the Association Agreement between the European Union and Moldova,in the field of railway transport, in accordance with the provisions of Chapter 15“Transport”, provides for the implementation:

• Directive 2012/34/EU on establishing a single European railway area• Directive 2016/798/EU on railway safety• Directive 2008/57/EC on the interoperability of the rail system within the Community• Directive 2007/59/EC on the certification of train drivers operating locomotives and trains

on the railway system in the Community• Regulation (EC) No 1370/2007 on public passenger transport services by rail and by road• Regulation (EC) No 1371/2007 on rail passengers’ rights and obligations• Regulation (EU) No 913/2010 concerning a European rail network for competitive freight

Ministry of Economy and Infrastructure of the Republic of MoldovaRailway Sector 2019

New Railway CodeEU Railway Legislation to transpose, according to the RM-EU AA

2013-20161991 1995 1996 2001 2004 2007 2008 2011 2012

D 91/440/EECon the development of the Community's railways

D 95/18/ECon the licensing of railway undertakings

WHITE PAPER A strategy for revitalizing the Community's railways

D 96/48/ECon the interoperability of the trans-European high-speed rail system

1 RAILWAY PACKAGED 2001/12/ECD 2001/13/EC

D 2001/14/EC

2 RAILWAY PACKAGE

D 2004/49/ECR CE 881/2004

3 RAILWAY PACKAGED 2007/59/ECR EC 332/2007R EC 653/2007

R EC 1370/2007R EC 1371/2007

WHITE PAPER European transport policy - time to decide

D 2008/57/ECon the interoperability of the rail system within the Community

TCE

WHITE PAPER Roadmap to a Single European Transport Area - Towards a competitive and resource efficient transport system

1 PACKAGE (recast)

D 2012/34/EUestablishing a single European railway area

4 RAILWAY PACKAGE


Moldovan Railways Restructuring Project

LOAN AGREEMENT EBRD – RM – CFM €52,5M

NIF Grant Agreementin the amount of €5,0M EMIS Grant Agreement

in the amount of €250.000

EIB – RM – CFM €50M

Acquisition of locomotives/Rehabilitation of railway infrastructure

Technical Assistance

Project AGREEMENT EBRD – CFM

Ministry of Economy and Infrastructure of the Republic of MoldovaRailway Sector 2017

Procurement PLAN of the Restructuration Project

# Description EstimatedContract Value

Financing by EBRD

Financing by othersContract type

Financier AmountLoan – funded component's:Tranche 1

1 New Locomotives (around 10) and depot facilities 45.00 20.00 EIB/EC NIF 25.00 Goods2 EMIS 0.50 0.25 SSF 0.25 Goods3 Feasibility Study 0.25 0.25 n/a 0.00 Consultancy4 Retrenchment 4.50 4.50 n/a 0.005 Rehabilitation of DMUs (completed) 10.00 0.00 CFM 10.00 Goods

Tranche 21 Rail infrastructure rehabilitation (track rehab) 52.50 26.25 BB 26.25 Works2 Design and Supervision 2.50 1.25 BB 1.25 Consultancy

TA – Funded components1 Tender preparation and implementation (PIU assistance) 0.25 0 TC 0.25 Consultancy2 Restructuring support 0.65 0 TC 0.65 Consultancy3 Energy Efficiency 0.22 0 TC 0.22 Consultancy4 EHS mgt support and capacity building 0.07 0 TC 0.07 Consultancy5 Retrenchment planning 0.07 0 TC 0.07 Consultancy6 Corporate governance support 0.25 0 TC 0.25 Consultancy

TOTAL 116.76 52.5 64.25


Progress on reform

• On-going TA on CFM restructuring

• On-going TA on procurement

• Roadmap for CFM restructuring (Action Plan for implementation approved by the

Government)

• Feasibility study’ for railway infrastructure (already finished)

• On-going Tender on design and rehabilitation works

• Contract on providing 12 new cargo Locomotives signed in Nov. 2018

• Draft of new Railway Code that will transpose EU Directives already presented to the

Parliament for adoption.


Roadmap for CFM restructuring

ROADMAP FOR RESTRUCTURING OF CFM / RAILWAY SECTOR

Main Directions for the Railway Sector

Railways Restructuring Options

Comparison of possible structures for the new organization of CFM

MAIN DIRECTION FOR THE RAILWAY SECTOR AND OPTIONS ANALYSIS

STRATEGIC OBJECTIVES AND RESTRUCTURING PLAN



The RESTRUCTURING PLAN for the whole railway sector covers the following major topics:

• Organizational and financial separation of CFM into passenger, cargo and infrastructure activities

• Transposition of the EU Acquis Communautaire

• Creation of the railway bodies acting as National Safety Authority (NSA) and Regulatory body (RB) and Accident Investigation Authority

• Opening of the Moldovan railway market for private market players

• Coming of new rail operators (public or private, local or foreigners)

• Increasing the competition between CFM and new operators



The Key Assumptions for restructuring are:

• Separation of rail operations and infrastructure management

• Full financially independent and cost covering rail operation

• Infrastructure management (IM) as a public function (equal to the road sector) financed by the state budget according to the EU Directive 2012/34/EU

• Sustainable level of quality and rail infrastructure to ensure proper rail operations in an open access rail market

• Business & market driven subsidiaries to ensure attractiveness for PPP

• Responsibility/ accountability/ profitability of all management levels



The Key Strategic Objectives for CFM restructuring process and the related key strategic options for decision making are summarized below.

Key Strategic Objectives Key strategic questions for decision makingProfitability • Is the service or product profitable to our business?Restructuring of organization towards customer orientation

• Am I customer-oriented (internal clients - between subsidiaries -external clients)?

Key personnel development • What skills and type of personnel are necessary now and in the future?• How can we support our staff to become more effective to achieve our

business goals?Rehabilitation of key infrastructure

• What infrastructure do we need to achieve our business goals? (CFM operations as purchaser and the Infrastructure Manager as provider)

Increase in reliability of locomotive, wagon material

• What do we need to serve our customer efficiently and qualitatively?



Options:

Keep the status quo (do nothing) → time frame 2-3 years- Step 1: Stop passenger transport- Step 2: Zero investments, Budget blocked by personnel cost and low productivity- Step 3: Closing of lines and stop of certain transport (lack of wagons)- Step 4: Bankruptcy

Subsidies the current system → time frame 5 years- Step 1: Stop passenger transport- Step 2: Minor investments, Budget blocked by personnel cost and low productivity- Step 3: Closing of lines and stop of certain transport- Step 4: Bankruptcy → loss of tax payers money

Major restructuring → time frame 3-5 years- According to the Concept/Roadmap



Roadmap for restructuring of CFM

Step 3Commercialization

• Transformation from public enterprise CFM to Joint stock company (JSC) CFM

• Separation of rail infrastructure & rail operation• Creation of segment-oriented business units

• Transformation of segment-oriented business units into autonomous JSC within a CFM Holding JSC/independent

• Introduction of new management methods (MbO, etc.)

Step 2Operationalization

Step 1Corporatization

Advice to rail sector

restructuring



Options: Management Principles – How to commercialize CFM?

• Market orientation of the organization structure

• Customer orientation (key accounts)

• Revenue orientation (…those who get the revenue have the saying)

• Purchaser & provider principle inside the organization

• Service and product-oriented cost accounting & controlling

• Responsibility & accountability (→ KPMG Governance structure project)

• Transparency of decision making flows & finances

• HR development & training


Baseline

Moldovan railway network rehabilitated.Basarabeasca-Berezino sector rebuilt

EU railway acquis implementedMoldovan railway network open to new railway undertakings;Moldovan railway restructured.

Intermodal logistic center in Chisinau implemented

Better, secure and safe rail connection with EU and neighbouring countries

More competition between railway undertakings;Enhanced service from CFM

Enhanced logistics for exporters and importers

Opportunities for businesses and peopleTransit freight flows attracted

Lower fares for freight and passengers.Improved quality and service reliability.

Improved export competitivityReduced market prices for goods and commodities

Outputs Outcomes Benefits

Poor infrastructure

Low competition, poor service

Low mobility

Railway Connectivity


Railway Passenger Connections

Better mobility vs Sustainable transportation

Chisinau – Iasi (new modernized DMU)

Chisinau – Odesa (new modernized DMU)

Chisinau – Moscow via Kiev

Chisinau – S. Petersburgh via Kiev

Chisinau – Bucharest via Iasi


Railway Passenger Connections

Transport connections between regions:

• Chisinau capital of Moldova – 690 thousands +

136 thousands countryside people (2018)

• Odesa port city on the Black Sea, population –

993 thousand people (2017)

• Iasi the 2’nd most populous city in Romania:

789.9 thousands people (2016)


Railway Connections

Chisinau (Moldova) - Iasi (Romania) Railway connection

In September 2019 was signed an intentionletter between Governments of Moldovaand France on financing the upgrade projectof Railway connection Chisinau - Ungheni(RO border) with a length of 150 km part of IXPan-European Corridor. The aim of the futureproject is the reconstruction of actual 1520mm line in a mixed one 1435/1520 mmgauge, increasing the speed of trains andimproving a better connection between tworegions.


ANY QUESTIONS?

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