Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 57022-EG

PROJECT PAPER

ON A

PROPOSED ADDITIONAL LOAN

IN THE AMOUNT OF

US$330 MILLION

TO THE

ARAB REPUBLIC OF EGYPT

FOR THE

EGYPT NATIONAL RAILWAYS RESTRUCTURING PROJECT

November 12, 2010

Sustainable Development Department Middle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS7 (Exchange Rate Effective November 12, 2010)

Currency Unit = Egyptian Pounds Egyptian Pounds 5.75 = US$1.00

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

AC Air Conditioned Trains IBRD International Bank for Reconstruction and Development

APL Adaptable Program Loan IFI International Financial Institution CBE Central Bank of Egypt IFR Interim Financial Report CFAA Country Financial Accountability

Assessment IFRS International Financing Reporting

Standards CMA Capital Market Authority IRR Internal Rate of Return CPAR Country Procurement Assessment

Review ISA International Standards on Auditing

CPI Consumer Price Index LA Loan Agreement CTC Central Traffic Control MIS Management Information System DA Designated Account MoF Ministry of Finance DPL Development Policy Loan MoI Ministry of Investment EAD Environment Affairs Directorate MoIC Ministry of International Cooperation EAS Egyptian Accounting Standards MoT Ministry of Transport EEAA Egyptian Environment Affairs

Agency NIB National Investment Bank

EIA Environmental Impact Assessment NPV Net Present Value EIRR Economic Internal Rate of Return PFS Project Financial Statements EMP Environmental Management Plan ENR Egyptian National Railways PMU Project Management Unit ENRRP

Egypt National Railways Restructuring Project

PA Project Agreement

ERR Economic Rate of Return PSO Public Service Obligation ESAL Equivalent Standard Axle Load RBPIP Results Based Project Implementation

Plan ESW Economic Sector Work RSRU Railway Safety Regulatory Unit FIDIC ‘Federation Internationale des

Ingenieurs-Conseils’ SBD Standard Bidding Documents

SBU Strategic Business Unit FM Financial Management SC Steering Committee FMR Financial Management Report SIL Specific Investment Loan FMS Financial Management System SLA Subsidiary Loan Agreement FR Financial Reports SOE Statement of Expenditure GDP Gross Domestic Product USAID United States Agency for International

Development GoE Government of Egypt

Vice President: Shamshad Akhtar

Country Director: A. David Craig Sector Director: Laszlo Lovei Sector Manager: Jonathan Walters

Task Team Leader: Michel Bellier

ARAB REPUBLIC OF EGYPT EGYPT NATIONAL RAILWAYS RESTRUCTURING PROJECT

ADDITIONAL FINANCING

PROJECT PAPER

CONTENTS

Project Paper Data Sheet

I. Introduction ............................................................................................................................... 1

II. Background and Rationale for Additional Financing ............................................................... 1

III. Proposed Changes ..................................................................................................................... 3

IV. Appraisal Summary ................................................................................................................... 6

Annex 1: Revised Project Results Framework and monitoring indicators ................................... 13

Annex 2: Operational Risk Assessment Framework (ORAF) ...................................................... 17

Annex 3: Detailed Description of Proposed Project Scale Up ..................................................... 20

Annex 4: Economic Analysis ....................................................................................................... 22

Annex 5: Map ................................................................................................................................ 25

EGYPT, ARAB REPUBLIC OF

EG-EGYPT NATIONAL RAILWAYS RESTRUCTURING ADDITIONAL FINANCING

PROJECT PAPER

MIDDLE EAST AND NORTH AFRICA

MNSSD Basic Information (Original Project)

Project ID: P101103 Project Name: Egypt National Railways Restructuring

Team Leader: Michel Bellier Expected Closing Date: September 30, 2015 Environmental category: Partial Assessment

Lending Instrument: Specific Investment Loan Joint IFC: Joint Level:

Basic Information (Additional Financing)

Date: November 12, 2010 Team Leader: Michel Bellier Country Director: A. David Craig Sector Manager/Director: Jonathan D. Walters

Sectors: Railways (100%) Themes: Infrastructure services for private sector development (67%); Trade facilitation and market access (33%)

Project ID: P117356 Environmental category: Partial Assessment Lending Instrument: Specific Investment Loan Additional Financing Type: Scale Up

Joint IFC: Joint Level:

Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 330.00 Proposed terms: Variable Spread Loan payable in 28.5 years, including 7 years grace period and level repayment.

Financing Plan (US$m) Source Local Foreign Total

Borrower 10.00 0.00 10.00 International Bank for Reconstruction and Development

330.00 0.00 330.00

Total: 340.00 0.00 340.00 Borrower: Government of Egypt Egypt, Arab Republic of Responsible Agency: Egyptian National Railways

Ramses Square PO 11111 Egypt, Arab Republic of Tel: (20-2) 577-1388 Fax: (20-2) 575-0000

Estimated disbursements (Bank FY/US$m) FY 2012 2013 2014 2015 2016 2017 Annual 0.00 40.00 50.00 60.00 100.00 80.00 Cumulative 0.00 40.00 90.00 150.00 250.00 330.00 Project implementation period: Start January 3, 2011 End: December 31, 2016 Expected effectiveness date: July 4, 2011 Expected closing date: March 31, 2017

Does the project require any exceptions from Bank policies? Ref. Section Appraisal of Project Activities Have these been approved by Bank management?

[ ]Yes [X] No [ ]Yes [X] No

Does the project include any critical risks rated “substantial” or “high”? Ref. Section Project Risks and Mitigating Measures [ ]Yes [X] No

Project development objective Ref. Section Bank Response The objective of the proposed scale up activity is the same as the original project, the Egypt National Railways Restructuring Project (ENRRP), which is to assist the Government in improving the reliability, efficiency and safety of the railways' services through signaling and track renewal investments by ENR and the modernization of its management and operating practices in order to enhance the railways' sector responsiveness to economic and social needs and to strengthen the financial viability of the Project Implementing Entity. Project description Ref. Section Bank Response The ENRR Project scale up consists of two sub-components: -Signaling Modernization(US$337 million, of which US$329 million from Bank Financing): will finance the modernization of the signaling system on the line Beni-Suef-Asyut. -Modernization of Management and Operating Practices(US$2 million financed by ENR): will scale up to include additional activities for the modernization of ENR management and operating practices. Which safeguard policies are triggered, if any? Ref. Section Appraisal of Project Activities The project remains classified as Category B according to the World Bank's Operational Policy 4.01 on Environmental Assessment, requiring partial assessment through the preparation of an Environmental and Social Impact Assessment (ESIA) report.

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I. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide an additional loan in the amount of US$330 million to the ongoing Egypt National Railways Restructuring Project (ENRRP). The proposed additional financing will be a scale up to ENRRP and will allow the Egyptian National Railways (ENR) to expand and accelerate the modernization of signaling systems that are critical to the safety of rail services, specifically on the Beni Suef–Assyut section of the rail network, as well as to amplify initiatives for strengthening management and operating practices thereby enhancing the impact of the initial project. II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 2. Government Railways Strategy. The railway sector plays a significant role in the Egyptian economy and is an essential mode of transport for low-income Egyptians. ENR, a public entity reporting to the Ministry of Transport, is a predominantly passenger railway. The Government of Egypt (GoE) launched in 2006 a restructuring program for ENR to address the very poor performance of the sector, notably the very low safety, the deteriorating quality of services and the significant fiscal liability of the sector. There has been significant progress in the implementation of the restructuring program: ENR was re-organized along strategic business lines in early 2008 (Long-distance Passenger Services, Short-distance Passenger Services, Freight Services, and Infrastructure Services), it is modernizing its working methods with the support of a group of experts seconded by the Italian National Railways and is undertaking large investments to modernize the railway network and increase its transport capacity, financed by a 5 billion EGP budget contribution and Donors. GoE is compensating ENR for the reduced tariffs offered as Public Service Obligation (PSO) and for the loss making local railway services. The current Minister of Transport, appointed in January 2010, has confirmed GOE’s commitment to improve ENR’s performance by giving priority to: (i) improving safety and quality assurance, (ii) developing human resources, (iii) increasing freight transport traffic with an intermodal perspective, (iv) enhancing operational reliability, and (v) modernizing assets and introducing new technologies. 3. Project performance. The ongoing ENRRP is supported by a Bank loan of US$270 million approved on March 17, 2009 (Loan 7656-EG) and effective since June 24, 2010. The ENRRP has three components: (i) signaling modernization between Arab El Raml – Alexandria in the delta, (ii) track renewal, and (iii) modernization of management and operating practices. Approval procedures in Egypt, compounded by the resignation of the Minister of Transport and ENR Chairman in October 2009 followed by the appointment of a new Minister three months later, have contributed to delaying the loan approval by Parliament and thereby project effectiveness. 4. The last rating of the ENRRP progress toward achieving project objectives was Satisfactory, and the overall implementation progress was rated Moderately Satisfactory. Actually, ENR has been moving ahead with the project implementation, particularly in relation to the establishment of the project Steering Committee in October 2009, the creation and staffing of a Project Management Unit (PMU) from May 2009, and the ongoing procurement of works

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and consultants. Disbursements are expected to start on December 2010 once the first works contract regarding track renewal is signed. 5. Rationale for the Additional Financing. The ENRRP scale up will at first enhance the Bank support to ENR efforts to improve railway safety which remains a major challenge. Poor signaling and infrastructure systems and outdated operational practices which heavily rely on human judgment and interference continue to hinder the safety of railways operations. Human error remains the most common cause of accidents, meaning that both modern and safe equipment and systems have to be implemented to reduce the chance of human interference. An example is the deadly railway accident in October 2009 which resulted in 18 fatalities. 6. Improving safety is therefore a key priority for the Government. During the ENRRP preparation, MoT and ENR had identified a series of priority corridors where signaling systems needed to be modernized, based on a multi-criteria assessment of the railway network (2007) which gave special attention to safety conditions and congestion levels. Following the assessment, the modernization of signaling on the Cairo – Alexandria line, financed by the ENRRP, was identified as the highest priority, followed by the modernization of signaling on the Beni Suef-Asyut line, to be supported by the proposed additional loan, as this line is part of the busiest corridor of the ENR network. 7. With the Bank assistance during the preparation of ENRRP, ENR had carried out studies to assess the technical and safeguards aspects of Beni Suef – Asyut line. Nevertheless, GoE did not follow through with a request for a Bank financing at that time in order to speed up the approval of the operation and intended to seek other financing options. However, these efforts were largely unsuccessful, hence the GoE’s new request for Bank additional assistance in December 2009 for the modernization of the Beni Suef–Asyut signaling system. Meanwhile, during the preparation of the scale up activities, ENR also expressed its wish to expand the scope of the ENRRP component regarding the strengthening of management and operating practices. 8. The Bank’s involvement in the railways sector and its support to the ongoing reforms has been very much appreciated by the counterparts. The increase of Bank assistance to critical investments and the overall strengthening of ENR performance will reinforce the existing dialogue on strategic ENR objectives, safety improvements, the development of the commercially critical freight business, and on complex technical matters and modern management practices. 9. Consistency with the Country Assistance Strategy (CAS). The ENRRP scale up is fully consistent with the CAS priorities. The CAS Progress Report for Egypt identifies enhancing the provision of public services as a key objective to be supported by Bank operations, and identifies a railway sector project as one of the inputs contributing to CAS outcome 2.2 – expanded supply and improved efficiency of infrastructure services. The proposed additional financing would seek to support this strategic objective by improving the performance of the railway sector. 10. Alternatives considered. The main alternative to an additional financing would be to prepare a second project. However, an additional financing is a preferred option because the proposed new investments and the management strengthening initiatives will directly contribute

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to achieving ENRRP’s development objectives. Furthermore, the ENRRP implementing arrangements, including those related to procurement and financial management, are fully applicable to the additional investment. Moreover, outcome indicators will remain the same to the exception of the addition of an outcome indicator specific to the new investment, and some refinement of the initial data and the original target indicators. Finally, given that the proposed scale up activity had undergone substantial preparation as explained above, an additional financing could be swiftly delivered to the Board, whereas the preparation of a separate project would require more time, thereby delaying the installation of the new signaling system. Speed is the key to the success of this operation as there are economies of scale and cost efficiencies if the ENRRP investment and the new signaling program are implemented in sequence.

III. PROPOSED CHANGES 11. The proposed scale up fully supports the ENRRP’s development objectives which are to assist the Government in improving the reliability, efficiency and safety of railways’ services through signaling and track renewal investments by ENR and the modernization of its management and operating practices in order to enhance the railways’ sector responsiveness to economic and social needs and strengthen the financial viability of the Project Implementing Entity. These objectives remain therefore the same. 12. The proposed additional financing will scale up components 1 and 3 of ENRRP by introducing sub-component 1.2 for the modernization of signaling between Beni Suef and Asyut, and by including additional activities to sub-component 3.3 for the support of the modernization of ENR’s managerial and operational practices. The new activities are detailed below: 13. Sub-Component 1.2 (US$337 million, of which US$329 million from the Bank loan and US$8 million from ENR’s budget) will finance the modernization of the signaling system on the Beni Suef–Asyut line and will comprise the following:

a) Supply and installation of signaling equipment, including a few works, for US$329 million, including contingencies, by a single contractor to be selected under the Bank International Competitive Bidding (ICB) procedures. This will be financed by the Bank loan.

b) Supervision contract estimated at US$8 million, to be undertaken by an engineering firm with a strong expertise in modern automatic signaling systems, selected competitively, and based on terms and conditions satisfactory to the Bank. The contract will be financed by ENR’s own budget.

14. The modernization of the signaling system on the Beni Suef–Asyut line consists of the installation of a new signaling system on the rail line between those cities and a computerized Central Traffic Control system (CTC) for that section. Works will take place on the existing right of way and the system comprises an automatic block signaling system (on open line), electronic interlocking systems (in stations), and a level-crossing protection system. The computerized CTC will offer sophisticated information to railway staff, including: (i) command and monitoring of train circulation, (ii) a presentation-of-train graph, (iii) event recording, and (iv) dispatcher communications.

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15. Sub-Component 3.3 (US$2 million and financed by ENR) will be scaled up to include additional activities for the modernization of ENR management and operating practices:

a) Support to the modernization of railway maintenance practices, particularly the review

and evaluation of existing maintenance procedures at ENR. The emphasis of the activities is to strengthen the suitability of maintenance spending in the current environment of important investments in track renewal, modernization of signaling systems, and acquisition of new locomotives and wagons.

b) Support to the improvement of operational rules at ENR, allowing the possibility of using the full functionality provided by the new modern signaling equipment to be installed (control of one entire line from only one CTC, telephone system linking all operators and dispatchers and allowing them not to use the radio for communication between signaling boxes, signaling towers and dispatching centre, contra-flow facilities with crossover between upstream and downstream main tracks, automation of level-crossing, etc.).

c) Improvement of project management capacities at ENR. ENR will carry out during the next 10-15 years a large investment program requiring strong implementation capacities of large projects. The activities will be aimed at creating the institutional structures and the skills at ENR for achieving the expected results in planning, evaluating and implementing complex railway projects.

d) Improvement of financial planning and the financial management system at ENR. ENR should acquire adequate financial planning tools and methods to assess and prioritize its investment needs and the time for their implementation based on proper project economic and financial appraisal techniques. Proper financing planning techniques will also allow ENR to identify the various potential sources of financing for its investments (Government, ENR, partnerships with private sector or other public companies) to secure the necessary funds while ensuring ENR’s financial sustainability. In addition, and in the context of the implementation of the SAP system at ENR, a new financial management system, based on commercial operation of activities in each business unit should be envisaged.

16. The Table below summarizes the proposed changes and additions to the financing of the project by the Bank.

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Table 1: Cost Summary (in US$ million)

Activities Original Project ENRRP Additional Financing ENRRPAF

Bank

financing Gvt

financing Total

financing Bank

financing Gvt

financing Total

financing Component 1: Signaling Modernization 197.0 5.0 202.0 310.0 8.0 318.0

Sub -Component 1.1: Signaling Modernization of Cairo - Alexandria 197.0 5.0 202.0 0.0 0.0 0.0

Modernize signaling systems on the Arab El Raml - Alexandria route including CTC

197.0 0.0 197.0 0.0 0.0 0.0

Supervision of works 0.0 5.0 5.0 0.0 0.0 0.0

Sub -Component 1.2: Signaling Modernization of Beni Suef - Asyut 0.0 0.0 0.0 310.0 8.0 318.0

Modernize signaling systems on the Beni Suef - Asyut route including CTC 0.0 0.0 0.0 310.0 0.0 310.0

Supervision of works 0.0 0.0 0.0 0.0 8.0 8.0

Component 2: Renewal of 200 km of track 60.0 20.0 80.0 0.0 0.0 0.0

Renewal works of 200 km of Track 60.0 0.0 60.0 0.0 0.0 0.0 Acquisition of 400 km of Rail 15.0 0.0 15.0 0.0 0.0 0.0 Supervision of works 5.0 0.0 5.0 0.0 0.0 0.0 Component 3: Modernization of Management and Operating Practices

0.0 10.0 10.0 0.0 2.0 2.0

Sub -Component 3.1: Support to the Railway and Transport Academy

0.0 4.0 4.0 0.0 0.0 0.0

Sub -Component 3.2: Support the Reengagement of ENR With International Railways Bodies

0.0 0.0 0.0 0.0 0.0 0.0

Sub -Component 3.3: Support to Modernize Managerial and Operating Practices

0.0 4.0 4.0 0.0 2.0 2.0

Sub –Component 3.4: Business Development Activities

0.0 2.0 2.0 0.0 0.0 0.0

Contingencies and Front-End Fee 13.0 0.0 13.0 20.0 0.0 20.0 Physical Contingencies 6.825 0.0 6.825 10.0 0.0 10.0 Price Contingencies 5.500 0.0 5.500 9.225 0.0 9.225 Front-End Fee 0.675 0.0 0.675 0.775 0.0 0.775

Total Cost (incl. contingencies) 270.0 35.0 305.0 330.0 10.0 340.0 17. ENRRP’s institutional and implementation arrangements and ENRRP’s safeguard and fiduciary procedures, all further described in section E below, will generally apply for the proposed scale up activities. Nevertheless, the overall project implementation schedule will be

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changed to allow sufficient time for the implementation of the proposed activities. Accordingly, the mid-term review is rescheduled on September 30, 2013 and the project closing date delayed to March 31, 2017. 18. Regarding the monitoring indicators, ENR confirmed that in light of the ongoing transformation plan, it is periodically collecting the necessary data to monitor ENRP’s outcome. Nevertheless, ENR requested that the methodology and measurement method for collecting two indicators for ENRRP, mainly punctuality and locomotive availability, be further harmonized with ENR developed methods. These revisions will facilitate the estimation of the indicators using existing ENR methods and procedures, while not affecting the overall quality and relevance of the indicators. Following the extension of the project’s closing date, target values were also revised accordingly. Monitoring indicators, including revised definitions, baseline figures, and target values are provided in Annex 1. Two new indicators, summarized below, were added to specifically measure the impact of the additional financing.

Table 2: Additional Financing New Indicators New Indicator Baseline

FY08/FY09 Target

FY17/FY18 Long distance passenger traffic on Beni Suef–Asyut (Total annual passenger-km (million))

o AC trains o Non AC long distance trains

2201 3204

3204 4944

Punctuality of AC trains on the line Beni Suef–Asyut (Measured as the total number of AC train arriving 15 minutes late to final destination during one year divided by the total number of AC trains operated in the same time period).

0.42 0.09

IV. APPRAISAL SUMMARY 19. Institutional and Implementation Arrangements. All arrangements agreed upon with ENRRP remain unchanged for the Additional Financing. ENR is the implementing agency, under the oversight of the established Steering Committee comprising representatives of the Ministries of Transport, Finance, and International Cooperation. The current Project Management Unit (PMU), to be maintained throughout the duration of the Project with organization, functions, staff and terms of reference satisfactory to the Bank, will continue coordinating and implementing ENRRP and the scale up activities, including liaising with the Bank. The job descriptions for the main positions at the PMU (specialists in procurement, financial management, environment, and monitoring and evaluation) have been revised to take into account the additional investment. ENR has also revised the terms of reference for the consulting firm, currently being selected, which will provide assistance to the PMU and deliver on-the-job training to staff during the first two years of project implementation. ENR will finance all PMU costs from its own budget.

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20. Economic Analysis. The economic analysis of the proposed additional investments was undertaken as part of the Project appraisal; the investments were found to be economically viable. The analysis generally followed the same methodology and assumptions adopted for the economic analysis of the Cairo Alexandria Signaling under the ENRRP which is greatly detailed and documented in Annex 9 of the ENRR Project Appraisal Document. The results of the analysis are presented in Annex 4. Summaries of the methodology and results are provided below. 21. The economic internal rate of return of the additional financing was estimated by the use of a stylized model that considered the actual and forecast freight and passenger traffic on the Beni Suef–Asyut line, and the impact of the proposed investments on available line capacity in a defined “do-minimum” scenario and a defined “do-something” scenario. 22. The economic analysis considers the following main benefits: (i) time savings to existing and forecasted rail freight and passenger traffic; (ii) directly generated rail traffic which would not have traveled before but travels as a result of the reduction in journey time; (iii) generalized cost savings (including operating cost and time value) for diverted traffic from road to rail resulting from the saturation of the line capacity in the “do-minimum” scenario; (iv) savings in highway maintenance costs through the diversion of freight and bus traffic from road to rail; and (v) generalized cost savings particularly in term of safety improvements. 23. The economic analysis indicates that signaling investments on Beni Suef–Asyut are economically viable, returning a positive NPV of US$323 million. The estimated Benefit/Cost ratio is 2.22 and the Economic Internal Rate of Return (EIRR) is 21.8 percent higher than the 12 percent threshold, therefore confirming the viability of this investment. The economic analysis revealed that most economic benefits are derived from improvements in safety, representing about 57 percent of total discounted benefits. Time savings for existing traffic represent 28 percent of total discounted benefits, whereas savings in maintenance costs of the signaling system are about 7 percent. 24. A sensitivity analysis has been carried out and reveals that the proposed investments are relatively robust to defined variations in key parameters, including: (i) capital costs of the project; (ii) forecasted freight and passenger growth rates; and (iii) delayed construction period. Significant variation in all of these parameters still results in a positive NPV and an EIRR higher than the 12 percent threshold. 25. Technical Aspects. The Beni Suef – Asyut section is part of the Alexandria-Asyut corridor which has the highest rail traffic density in Egypt. The modern signaling system, including electronic interlocking systems in the main stations, and the CTC will increase the safety of traffic and create conditions for better utilization of the line. The section was selected based on the results of several rounds of assessment of the network condition and congestion. The technical option was chosen after a detailed comparison by design consultants of a range of alternative standards used in the world. The preparation of the bidding documents is in advanced phase of elaboration, ENR being assisted by a railways consulting firm with large experience in railway signaling. The design will draw upon lessons from the preparation of similar documents

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for the modernization of signaling system on section Arab El Raml-Alexandria. The same consultant has also prepared bidding documents according to the provisions of the World Bank Standard Bidding Document (SBD) “Procurement of Plant Design, Supply, and Installation” and will provide assistance to ENR during the pre-qualification of bidders, evaluation of bids, and contract award. Based on the high interest from firms specialized in rail signaling systems for the Arab El Raml–Alexandria modernization program, it is expected that very strong international consortia will bid. During the execution of works, a consultant with strong expertise in modern signaling systems will supervise the quality of works as the Project Manager according to World Bank rules. ENR will need to modernize the Automatic Train Protection (ATP) system (locomotives and track equipment) at a later stage, under financing arrangements yet to be determined. 26. Procurement. Procurement for the proposed additional investment will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 2006 and May 2010. ENR will be in charge of carrying out procurement activities, in accordance with the different procurement methods: the need for pre-qualification, estimated costs, prior review requirements, and time frame have been agreed between the Borrower and the Bank. Procurement for installing and modernizing the signaling system will be done using the Bank Standard Bidding Documents for Procurement of Plant Design, Supply, and Installation through International Competitive Bidding. Since prequalification is required for this contract, the Bank Standard Prequalification Documents will be used. The revised ENRRP Procurement Plan to take into account the Beni Suef – Asyut investment will be updated, at least, annually or as required to reflect the actual project implementation needs. 27. ENR experience with World Bank procurement has been reinforced during the preparation of ENRRP. Requirements and procedures for the Beni Suef – Asyut investment were discussed with ENR during appraisal, and are similar to those being undertaken for component 1 of ENRRP (Signaling Modernization of Arab El Raml – Alexandria section). Bidding documents are being finalized. The PMU’s procurement specialist is expected to provide support in procurement related matters. The Bank will continue to strengthen ENR procurement capacity through supervision missions and the organization of additional workshops to the one previously organized in February 24th, 2010. 28. Financial Management (FM). The existing FM as well as disbursement procedures used for the ENRRP will be followed for the additional loan. PMU’s financial management specialist is responsible for all financial management matters, including reporting to the Bank. He will be able to draw on the resources of the consulting firm which will support the PMU during the first two years. 29. The ENRRP project design, from an FM perspective, addressed potential risks identified during project preparation, particularly the fact that ENR had no recent experience in managing Bank projects. Nevertheless, since the project is not yet disbursing, the FM arrangements are yet to be tested. The project’s financial accounting and reporting system are currently being developed and expected to be finalized by end October 2010. Project transactions will be recorded on the system which will also produce the IFR reports. An external auditor, acceptable

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to the Bank, will be hired by ENR to audit the projects annual financial statements which will be submitted to the Bank. In accordance with the Bank revised Policy on Access to Information, following the formal receipt by the Bank of the project and ENR’s audited financial statements, the borrower shall ensure that they are made publicly available in a timely fashion and in a manner acceptable to the Bank. 30. Since the proposed additional financing is similar, at least in terms of fiduciary aspects, to ENRRP component 1, the agreed FM arrangements and risk mitigating measures incorporated in the FM design are assessed to be adequate to have the project and the additional financing operating in a moderate FM risk environment. 31. Disbursement. Disbursement procedures used for ENRRP will also be used for the additional financing. The project’s loan disbursement, including the disbursement of the additional loan, will take place using the direct disbursements and special commitments methods. The Bank loan proceeds with be on-lent by GoE to ENR under an amendment to the Subsidiary Loan Agreement (SLA). Payments to contractors and suppliers will be made directly by the Bank with respect to works and goods, while ENR will finance supervision costs. 32. Environmental Safeguards. The project remains classified as category B according to the World Bank’s Operational Policy 4.01 on Environmental Assessment, requiring partial assessment of the new investment through the preparation of an Environmental and Social Impact Assessment (ESIA) report. An environment consulting firm hired by ENR according to terms of reference cleared by the Bank prepared an ESIA specific to the Beni Suef-Asyut section. The ESIA includes an environmental management plan (EMP), detailing the institutional settings, the mitigation measures, and the monitoring plan for the potential impacts resulting from the project during the construction and operation phases. 33. Stakeholder consultations were carried out during the preparation of ENRRP’s ESIA through: (a) interviews and data collection in public scoping for train users, users of level crossings, and residents in areas adjacent to construction sites (totaling 1,166 individuals representing the different groups); and (b) two public consultation meetings in Minya and Cairo, which were well advertised in a major daily newspaper, and were attended by a total of 184 participants. Information on the project as well as a summary of the findings of the ESIA, were posted on the consulting firm’s website for public review, prior to the consultation meetings. The meetings attracted a pool of stakeholders representing different sectors of society, including various social and economic class, gender, and affiliation. 34. The ESIA report for the proposed scale up was disclosed by ENR in English and Arabic on their website on May 4th 2010 and was approved by the Egyptian Environmental Affairs Agency (EEAA) on May 17th 2010. The ESIA documents were disclosed by the Bank infoshop on June 30, 2010. 35. As agreed during the preparation of ENRRP, ENR will create an Environmental Affairs Directorate (EAD) and will select a specialized environmental consultant to assist the PMU on project environmental matters and for the implementation of the EMP. ENR has made significant

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progress to implementing these requirements and has agreed to establish the EAD by March 31, 2011 with organization, functions, staff and terms of reference satisfactory to the Bank. 36. Social Safeguards. The modernization of Beni Suef–Asyut signaling system does not entail any land acquisition or resettlement as all works will be carried out on existing rights-of-ways. There are likely to be some socio-economic impacts during the implementation of the project related to construction, for example, some delays in train travel along affected corridors, but overall the proposed scale up activities are expected to strengthen the ENRRP’s positive impacts resulting from project investments in signaling through improved rail services and safety on core routes.

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Annex 1: Results Framework and Monitoring EGYPT: Egypt National Railways Restructuring Project

Results Framework

Revisions to the Results Framework Comments/ Rationale for Change

PDO Current (PAD) Proposed

Assist the Government in improving:

a) the reliability;

b) the efficiency; and

c) the safety of railways services.

No Change

(a) Rate of utilization of ENR assets; long distance passenger traffic on Cairo Alexandria (b) PSOs paid; freight traffic (c) Number of fatalities due to rail accidents.

PDO indicators Current (PAD) Proposed change (a) Rate of utilization of ENR assets;

Indicator Revised to: (a) Rate of utilization of ENR assets (new definitions

); (b) long distance passenger traffic on Cairo Alexandria line;

Indicator revised to : Long distance passenger traffic on Cairo Alexandria and Beni Suef – Asyut lines

Include Beni Suef – Asyut Line to reflect impacts of proposed investments under additional financing. .

(c) PSOs paid;

No Change Total annual amount of PSO paid by the government to ENR (expressed in EGP million).

(d) freight traffic; No change Total annual net-ton-km of freight traffic (million)

(e) Number of fatalities due to rail accidents.

No Change Average number of fatalities due to railway accidents on the ENR network

Intermediate Results indicators Current (PAD) Proposed change Punctuality on Cairo-Alexandria Line.

Indicator revised to: Punctuality on Cairo-Alexandria and Beni Suef–Asyut lines.

Include Beni Suef–Asyut Line to reflect impacts of proposed investments under additional financing.

Maintenance costs on renewed tracks.

Indicator revised to: Maintenance costs on sections were tracks are renewed (

To harmonize the collection of necessary information with ENR revised practices. Change in method

12

Revisions to the Results Framework Comments/ Rationale for Change

of calculation and target value) Training time of management.

No Change Average management training time

13

AN

NE

X 1

: RE

VIS

ED

PR

OJE

CT

RE

SUL

TS

FRA

ME

WO

RK

AN

D M

ON

ITO

RIN

G IN

DIC

AT

OR

S

Proj

ect D

evel

opm

ent O

bjec

tive

(PD

O):

No

chan

ge to

the

initi

al P

DO

whi

ch is

to a

ssis

t the

Gov

ernm

ent i

n im

prov

ing

the

relia

bilit

y, e

ffic

ienc

y an

d sa

fety

of t

he ra

ilway

s’ se

rvic

es

thro

ugh

sign

alin

g an

d tra

ck re

new

al in

vest

men

ts b

y EN

R a

nd th

e m

oder

niza

tion

of it

s man

agem

ent a

nd o

pera

ting

prac

tices

in o

rder

to e

nhan

ce th

e ra

ilway

s’ se

ctor

resp

onsi

vene

ss to

ec

onom

ic a

nd so

cial

nee

ds a

nd st

reng

then

the

finan

cial

via

bilit

y of

the

Proj

ect I

mpl

emen

ting

Entit

y.

PDO

Lev

el R

esul

ts In

dica

tors

Core

UO

M

Bas

elin

e O

rigi

nal

Proj

ect

Star

t FY

07/F

Y08

Prog

ress

T

o D

ate

FY08

/09

Tar

get V

alue

s

Freq

uenc

y D

ata

Sour

ce/

Met

hodo

logy

Res

pons

ibili

ty

for

Dat

a C

olle

ctio

n

Com

men

t

FY11

/ 12

FY

13/

15

FY15

/ 16

FY

17/

18

1. (i

.a) L

ocom

otiv

e pr

oduc

tivity

o

Lo

ng D

ista

nce

Pass

enge

r o

Sh

ort D

ista

nce

Pass

enge

r o

Fr

eigh

t o

Al

l act

iviti

es

Ava

ilabi

lity

ratio

of t

he

usef

ul fl

eet [

%],

defin

ed

as th

e nu

mbe

r of d

aily

av

aila

ble

loco

mot

ives

di

vide

d by

the

tota

l nu

mbe

r of a

ssig

ned

loco

mot

ives

for e

ach

SBU

, ave

rage

d on

a

year

ly b

asis

.

49

.5

74.5

15

.3

49

.5

48

74

26 52

66

77

67 70

73

79

71 75

76

80

75 77

80

80

77 79

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

1. (i

.b)L

ocom

otiv

e pr

oduc

tivity

K

ilom

etra

ge p

er a

vaila

ble

loco

mot

ive:

o

Lo

ng D

ista

nce

Pass

enge

r o

Sh

ort D

ista

nce

Pass

enge

r o

Fr

eigh

t

o

All

activ

ities

Tota

l num

ber o

f km

(0

00s)

run

by a

ll lo

com

otiv

es d

urin

g a

year

div

ided

by

the

aver

age

num

ber o

f ye

arly

ava

ilabl

e lo

com

otiv

es

14

3 68

75

98

13

2 67

28

89

153 80

54

98

15

6 83

62

10

4

16

6 90

72

11

0

17

6 97

85

11

8

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

1. (i

i) Lo

ng d

istan

ce P

asse

nger

tr

affic

on

Cai

ro –

Ale

xand

ria

o

A

C tr

ains

o

no

n-A

C lo

ng d

ista

nce

train

s

To

tal a

nnua

l pas

seng

er-

km (m

illio

n)

85

5 13

23

10

80

1118

1684

22

10

17

55

2304

18

30

2402

19

07

2503

1684

22

10

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

1. (i

ii) L

ong

dist

ance

Pas

seng

er

traf

fic o

n Be

ni S

uef

- Asy

ut

o

AC

trai

ns

o

non-

AC

long

dis

tanc

e tra

ins

To

tal a

nnua

l pas

seng

er-

km (m

illio

n)

22

45

4239

22

01

3204

2828

43

64

2948

45

50

3073

47

42

3204

49

44

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Ta

rget

va

lues

are

ye

arly

and

no

t cu

mul

ativ

e

14

2. P

aym

ent o

f PSO

s: PS

O

com

pens

atio

n fo

r EN

R

Tota

l ann

ual a

mou

nt o

f PS

O p

aid

by th

e go

vern

men

t to

ENR

[e

xpre

ssed

in E

GP

mill

ion]

.

35

7

61

5

80

0

80

0

80

0

80

0 O

nce

ever

y tw

o ye

ars

ENR

ann

ual

acco

unts

EN

R

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

3. (i

) Soc

ial a

nd E

cono

mic

N

eeds

: Ave

rage

num

ber o

f fa

talit

ies d

ue to

railw

ay

acci

dent

s on

the

ENR

net

wor

k1

o T

ypic

al a

ccid

ents

2

o N

on T

ypic

al a

ccid

ents

3

o T

otal

A

vera

ge n

umbe

r of

fata

litie

s

0.

0248

0.

57

0. 5

95

0.

000

1.51

1.

51

0.

34

0.

31

0.

30

0.

30

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

3. (i

i) So

cial

and

Eco

nom

ic

Nee

ds:

Frei

ght t

raff

ic c

arrie

d by

EN

R

To

tal a

nnua

l net

-ton-

km

of fr

eigh

t tra

ffic

(m

illio

n)

2,

020

1,

591

29

45

32

40

35

65

39

18

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

1 C

alcu

late

d as

the

tota

l ann

ual n

umbe

r of v

ictim

s on

ENR

net

wor

k pe

r one

bill

ion

pass

enge

r-km

. EN

R sh

all d

evel

op a

n in

tern

al sy

stem

for c

olle

ctin

g da

ta

conc

erni

ng th

e nu

mbe

r of f

atal

ities

(per

sons

kill

ed in

the

acci

dent

and

dec

ease

d af

ter t

he a

ccid

ent).

Fig

ures

abo

ut th

e to

tal a

nnua

l num

ber o

f fat

aliti

es a

nd th

e to

tal v

olum

e of

pas

seng

er-k

m w

ill b

e pr

esen

ted

for t

he a

nnua

l eva

luat

ion

of th

e in

dica

tor.

2 Acc

iden

ts p

rodu

ced

as a

con

sequ

ence

of r

ailw

ays m

alfu

nctio

ning

or r

ailw

ay st

aff h

uman

err

or.

3 Oth

er a

ccid

ents

invo

lvin

g ra

ilway

s (le

vel c

ross

ing

acci

dent

s ign

orin

g th

e si

gnal

ing

war

ning

s, pe

ople

’s n

eglig

ence

in th

e ra

ilway

are

a, e

tc.).

15

Inte

rmed

iate

Res

ults

and

Indi

cato

rs

Inte

rmed

iate

Res

ults

Indi

cato

rs

Core

Uni

t of M

easu

rem

ent

Bas

elin

e O

rigi

nal

Proj

ect

Star

t FY

07/F

Y08

Prog

ress

T

o D

ate

FY08

/09

Tar

get V

alue

s

Freq

uenc

y D

ata

Sour

ce/

Met

hodo

logy

Res

pons

ibili

ty

for

Dat

a C

olle

ctio

n C

omm

ent

FY11

/ 12

FY

13/

15

FY15

/ 16

FY

17/

18

Inte

rmed

iate

Res

ult 1

: C

ompo

nent

1: P

unct

ualit

y of

AC

trai

ns o

n th

e C

airo

-Ale

xand

ria a

nd B

eni S

uef –

Asy

ut L

ines

1. P

unct

ualit

y of

AC

trai

ns o

n th

e lin

e C

airo

-Ale

xand

ria

Tota

l num

ber o

f AC

tra

in a

rriv

ing

15

min

utes

to fi

nal

dest

inat

ion

late

dur

ing

one

year

div

ided

by

the

tota

l num

ber o

f A

C tr

ains

ope

rate

d in

th

e sa

me

perio

d of

tim

e.

0.

29

0.

31

0.

22

0.

18

0.

13

0.

07

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

2. P

unct

ualit

y of

AC

trai

ns o

n th

e B

eni S

uef-

Asy

ut li

ne

Sa

me

as a

bove

n/a

2.9

0.

29

0.

23

0.

16

0.

09

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

Inte

rmed

iate

Res

ult 2

: C

ompo

nent

2: M

aint

enan

ce c

osts

on

sect

ions

wer

e tra

cks a

re re

new

ed

3. A

nnua

l tot

al c

ost o

f tra

ck

infr

astru

ctur

e m

aint

enan

ce o

n se

ctio

ns re

new

ed u

nder

the

proj

ect.

Mill

ion

EGP4

2.77

2.

96

2.

44

2.

12

0.

94

0.

54

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Targ

et

valu

es a

re

year

ly a

nd

not

cum

ulat

ive

Inte

rmed

iate

Res

ult 3

: C

ompo

nent

3: A

vera

ge m

anag

emen

t tra

inin

g tim

e

4. T

he ra

tio b

etw

een

the

num

ber o

f st

aff-

days

allo

cate

d fo

r tra

inin

g du

ring

a ye

ar a

nd th

e av

erag

e

Num

ber s

taff

days

/ave

rage

m

anag

emen

t sta

ff at

n/a

2.9

9 10

12

12

Onc

e ev

ery

two

year

s

ENR

st

atis

tics

ENR

Ta

rget

va

lues

are

4 F

ive

year

rolli

ng a

vera

ge o

f the

cos

t of m

echa

nica

l mai

nten

ance

and

mat

eria

ls’ c

ost f

or th

e Pr

ojec

t sec

tions

.

16

Inte

rmed

iate

Res

ults

and

Indi

cato

rs

Inte

rmed

iate

Res

ults

Indi

cato

rs

Core

Uni

t of M

easu

rem

ent

Bas

elin

e O

rigi

nal

Proj

ect

Star

t FY

07/F

Y08

Prog

ress

T

o D

ate

FY08

/09

Tar

get V

alue

s

Freq

uenc

y D

ata

Sour

ce/

Met

hodo

logy

Res

pons

ibili

ty

for

Dat

a C

olle

ctio

n C

omm

ent

FY11

/ 12

FY

13/

15

FY15

/ 16

FY

17/

18

num

ber o

f man

agem

ent s

taff

at

ENR

5EN

R

. ye

arly

and

no

t cu

mul

ativ

e

5 EN

R sh

all c

omm

unic

ate

the

cate

gorie

s of s

taff

con

side

red

as m

anag

emen

t sta

ff (f

irst s

ix le

vels

of m

anag

emen

t).

17

AN

NE

X 2

: OPE

RA

TIO

NA

L R

ISK

ASS

ESS

ME

NT

FR

AM

EW

OR

K (O

RA

F)

Pro

ject

Dev

elop

men

t Ob

ject

ive(

s)

Th

e D

evel

opm

ent o

bjec

tive

of th

e Pr

ojec

t is t

o as

sist

the

Gov

ernm

ent o

f in

impr

ovin

g th

e re

liabi

lity,

eff

icie

ncy

and

safe

ty o

f the

railw

ays’

serv

ices

thro

ugh

sign

alin

g an

d tra

ck re

new

al

inve

stm

ents

by

ENR

and

the

mod

erni

zatio

n of

its m

anag

emen

t and

ope

ratin

g pr

actic

es in

ord

er to

enh

ance

the

railw

ays’

sect

or re

spon

sive

ness

to e

cono

mic

and

soci

al n

eeds

and

st

reng

then

the

finan

cial

via

bilit

y of

the

Proj

ect I

mpl

emen

ting

Entit

y.

PDO

Lev

el R

esul

ts In

dica

tors

: 1.

Lo

com

otiv

e pr

oduc

tivity

2.

Lo

ng d

ista

nce

pass

enge

r tra

ffic

3.

Pa

ymen

t of P

SOs

4.

Yea

rly a

vera

ge n

umbe

r of f

atal

ities

due

to ra

ilway

s acc

iden

ts o

n EN

R n

etw

ork

5.

Frei

ght t

raff

ic c

arrie

d by

EN

R

R

isk

Cat

egor

y

Ris

k

Rat

ing

Ris

k D

escr

ipti

on

Pro

pos

ed M

itig

atio

n M

easu

res

Pro

ject

Sta

keh

old

er R

isk

s

Med

ium

-L

Cou

ntry

Lev

el E

ngag

emen

t with

gov

ernm

ent a

nd st

akeh

olde

rs:

Egyp

t’s e

ngag

emen

t with

the

Ban

k is

ver

y st

rong

. Ove

r the

pas

t fe

w y

ears

, the

Wor

ld B

ank

Gro

up h

as sc

aled

up

its su

ppor

t to

Egyp

t,

with

a c

ompr

ehen

sive

pro

gram

of a

ctiv

ities

by

IBR

D, I

FC, a

nd M

IGA

. Th

is e

ffort

is g

eare

d to

war

ds su

ppor

ting

the

impl

emen

tatio

n of

the

ongo

ing

refo

rm p

rogr

am. T

he G

over

nmen

t see

s the

Ban

k as

a re

liabl

e pa

rtner

and

has

requ

este

d fu

rther

Ban

k su

ppor

t in

a br

oad

rang

e of

sect

ors.

The

Ban

k w

ill c

ontin

ue t

o re

info

rce

the

ongo

ing

dial

ogue

with

key

stak

ehol

ders

in E

gypt

.

Imp

lem

enti

ng

Age

ncy

Ris

ks

Med

ium

-L

Impl

emen

tatio

n ca

paci

ty w

ithin

EN

R is

wea

k, a

lthou

gh im

prov

ing

unde

r th

e co

mpa

ny’s

tran

sfor

mat

ion

and

mod

erni

zatio

n pl

an, d

ue a

mon

g ot

hers

to

out

date

d in

tern

al p

roce

dure

s an

d la

ck o

f ex

perie

nce

wor

king

with

in

tern

atio

nal f

inan

cial

inst

itutio

ns.

As a

con

sequ

ence

of t

he o

ngoi

ng tr

ansf

orm

atio

n pl

an

and

unde

r th

e pr

ojec

t, a

num

ber

of m

easu

res

have

be

en o

r ar

e pl

anne

d to

be

take

n in

to a

ccou

nt t

o m

itiga

te th

e im

plem

enta

tion

risks

. •

The

reor

gani

zatio

n of

EN

R a

long

bus

ines

s uni

ts,

initi

ativ

es to

stre

ngth

en c

apac

ity o

f sta

ff, t

he

intro

duct

ion

of n

ew p

ract

ices

with

the

assi

stan

ce

of e

xper

ienc

ed fo

reig

n ra

ilway

spec

ialis

t are

en

hanc

ing

ENR

cap

acity

ove

r the

boa

rd.

• A

hig

h le

vel s

teer

ing

com

mitt

ee in

volv

ing

the

18

min

istri

es o

f Tra

nspo

rt, In

tern

atio

nal

Coo

pera

tion,

and

Fin

ance

, has

bee

n cr

eate

d to

ov

erse

e th

e im

plem

enta

tion

of th

e Pr

ojec

t. •

A P

MU

has

bee

n es

tabl

ishe

d an

d is

fully

staf

fed.

EN

R is

als

o se

lect

ing

an o

utsi

de c

onsu

lting

firm

to

supp

ort t

he P

MU

in p

roje

ct m

anag

emen

t du

ring

the

first

two

year

of i

mpl

emen

tatio

n an

d to

pr

ovid

e on

-the-

job

train

ing

to P

MU

staf

f.

• Th

roug

hout

dire

ct p

ract

ice

and

train

ing

prov

ided

by

the

Ban

k, E

NR

is b

ecom

ing

mor

e fa

mili

ar

with

safe

guar

d an

d fid

ucia

ry re

quire

men

ts,

parti

cula

rly p

rocu

rem

ent.

Con

stru

ctio

n su

perv

isio

n co

nsul

tant

s will

supp

ort E

NR

with

re

spec

t to

cont

ract

pro

gres

s cer

tific

atio

n.

P

roje

ct R

isk

s

Med

ium

-L

• De

sign

Med

ium

-L

The

prep

arat

ion

of th

e te

chni

cal s

peci

ficat

ions

and

bid

ding

doc

umen

ts fo

r si

gnal

ing

mod

erni

zatio

n re

quire

s de

ep

tech

nica

l sk

ills

and

good

kn

owle

dge

of s

tate

-of-

the-

art

solu

tions

. EN

R la

cks

this

cap

acity

for

the

m

ost p

art.

The

tech

nica

l sp

ecifi

catio

ns a

nd b

iddi

ng d

ocum

ents

fo

r th

e EN

RR

P si

gnal

ing

inve

stm

ent

have

be

en

prep

ared

by

an in

depe

nden

t int

erna

tiona

l con

sulta

nt.

Mor

eove

r, EN

R,

with

the

ass

ista

nce

of t

he s

ame

cons

ultin

g fir

m,

has

alre

ady

prep

ared

si

mila

r te

chni

cal

docu

men

ts f

or t

he B

eni

Suef

– A

syut

op

erat

ion.

Dur

ing

exec

utio

n of

wor

ks,

the

Proj

ect

Man

ager

bei

ng h

ired

by E

NR

for

eac

h co

nstru

ctio

n co

ntra

ct in

acc

orda

nce

with

Ban

k ru

les w

ill su

perv

ise

the

qual

ity o

f wor

ks.

•

Soci

al a

nd E

nvir

onm

enta

l

Med

ium

-L

Envi

ronm

enta

l im

pact

s are

exp

ecte

d m

ostly

dur

ing

cons

truct

ion

phas

e an

d in

clud

e hi

gh n

oise

lev

els,

incr

ease

d le

vels

of

loca

l ai

r po

lluta

nts,

and

deto

urs a

roun

d le

vel c

ross

ings

.

As a

ll pr

ojec

t inv

estm

ents

are

on

exis

ting

rail

right

s-of

-way

. Rai

lway

cor

ridor

has

no

sens

itive

en

viro

nmen

tal h

abita

ts.

ENR

has

pre

pare

d an

Env

ironm

enta

l M

anag

emen

t Pl

an to

add

ress

env

ironm

enta

l and

soc

ial i

mpa

cts.

It ha

s co

nfirm

ed t

hat

the

impa

cts

of i

nves

tmen

ts a

re

man

agea

ble,

and

agr

eed

upon

miti

gatio

n m

easu

res

durin

g an

d af

ter

cons

truct

ion

are

deta

iled

in a

n en

viro

nmen

tal

mon

itorin

g pl

an a

nd a

n in

stitu

tiona

l ca

paci

ty b

uild

ing

plan

. An

envi

ronm

enta

l con

sulta

nt

19

will

be

se

lect

ed

by

ENR

to

as

sist

on

th

e im

plem

enta

tion

of t

he e

nviro

nmen

tal

man

agem

ent

plan

. Th

e en

viro

nmen

tal

cons

ulta

nt

will

als

o he

lp t

he

esta

blis

hmen

t of

an

En

viro

nmen

tal

Aff

airs

D

irect

orat

e w

ithin

the

EN

R s

truct

ure

to h

elp

the

sust

aina

bilit

y of

man

agin

g th

e en

viro

nmen

tal

and

soci

al a

spec

ts d

urin

g th

e op

erat

ion

phas

e of

the

pr

ojec

t.

• Pr

ogra

m a

nd D

onor

Med

ium

-I

Whi

le t

he p

roje

ct d

esig

n pe

rmits

the

im

plem

enta

tion

of t

he p

roje

ct a

s a

stan

dalo

ne o

pera

tion,

the

full

bene

fits o

f the

pro

ject

can

onl

y m

ater

ializ

e if

ENR

impl

emen

t the

pla

n or

an

equi

vale

nt re

form

pro

gram

.

As m

entio

ned

abov

e, th

e m

oder

niza

tion

of E

NR

is a

n im

porta

nt

Gov

ernm

ent

prio

rity.

Th

e on

goin

g in

itiat

ives

pre

sent

an

impo

rtant

and

wel

l tho

ught

road

m

ap

for

ENR

’s

mod

erni

zatio

n.

Whi

le

som

e m

odifi

catio

ns t

o th

e in

itial

pla

n ha

ve o

ccur

red

as

ENR

pro

gres

ses

in it

s im

plem

enta

tion

and

furth

er to

th

e ap

poin

tmen

t of a

n ne

w M

inis

ter o

f Tra

nspo

rt la

st

Janu

ary,

the

ove

rarc

hing

prin

cipl

es a

nd o

bjec

tives

re

mai

n an

d re

stat

ed p

riorit

ies

com

fort

them

giv

en th

e br

oad

unde

rsta

ndin

g,

espe

cial

ly

at

high

go

vern

men

tal

leve

ls,

for

the

need

of

th

e m

oder

niza

tion

of E

NR

. Th

e B

ank

team

will

con

tinue

ass

essi

ng th

e pr

ogre

ss

of

the

mod

erni

zatio

n of

EN

R

durin

g pr

ojec

t su

perv

isio

n m

issi

ons.

•

Deliv

ery

Qual

ity

M

ediu

m-L

Pr

ojec

t ind

icat

ors a

re c

ompl

ex a

nd d

iffic

ult t

o as

sess

.

In li

ght o

f th

e im

plem

enta

tion

of t

he m

oder

niza

tion

and

stre

ngth

enin

g pl

an,

ENR

is

pe

riodi

cally

co

llect

ing

indi

cato

rs

refle

ctin

g its

ov

eral

l pe

rfor

man

ce.

The

proj

ect

perf

orm

ance

in

dica

tors

w

ere

thor

ough

ly d

iscu

ssed

and

agr

eed

upon

with

EN

R a

nd t

he d

efin

ition

and

met

hods

for

est

imat

ing

thes

e in

dica

tors

wer

e ha

rmon

ized

with

exi

stin

g EN

R

proc

edur

es a

nd m

etho

ds.

O

vera

ll R

isk

Rat

ing

at

Pre

par

atio

n

Ove

rall

Ris

k R

atin

g D

uri

ng

Imp

lem

enta

tion

Co

mm

ents

Med

ium

-L

Med

ium

-L

20

ANNEX 3: DETAILED DESCRIPTION OF PROPOSED PROJECT SCALE UP

A key itinerary, Beni Suef-Asyut, was selected for the modernization of the signaling system. When completed, this section will be the most modern part of the Egyptian railway network in terms of signaling and safety standards. The modernized system could become a model to be replicated throughout the core railway network of ENR. With a length of 250 kilometers, the section Beni Suef–Asyut currently consists of a non-electrified double track line run by diesel electric locomotives hauling mixed traffic (freight and passenger). This section is part of the busiest railway corridor in Egypt, Alexandria – Asyut, and is a bottleneck in terms of transport capacity because of the obsolete signaling system in place:

a) Existing signaling boxes are equipped with old mechanical interlocking of points and signals (some built in 1928 & 1936) ensuring safety of the trains through arrangements of rods that physically prevent conflicting moves being set up.

b) Unidirectional lines that can be operated on the wrong direction only through heavy and time consuming procedures when it is necessary to allow for single working over one track of a two track railway. In such cases, safety is only ensured through procedures applied by signalmen and no technology (through interlocking tables) is providing safety.

c) The mechanical signaling system compels big time intervals between following trains as no train is allowed to enter in an interval before this interval has been freed by the previous train and confirmed by a signalman through mechanical devices.

The modernization of the signaling system will comprise the complete removal of the existing equipment and the installation of state-of-the-art solution. The signaling system to be implemented will mainly comprise an automatic block signaling system (on open line), electronic interlocking systems (in stations), and a level-crossing protection system. All necessary cables and cabling equipment related to the signaling system will be installed, all signaling equipment will be remote controlled, and diagnosis systems for all components will be available. All components of the signaling system, protection systems in level crossings, and train and security brake systems will be in conformity with a train speed of 160 km/hour. The contra-flow facilities with crossover between upstream and downstream main tracks on the whole section of the line and the bi-directional signaling will be installed. Bi-directional signaling provided on the double track will allow traffic to run safely in either direction along a running line improving the safety of traffic in cases of failures of trains or emergency works and allowing track maintenance works more easily. An Operation Control Centre (OCC) that will be working 24/24 and 7/7 will be put in place for the efficient and reliable operation of the railway line. It will organize the traffic on the whole section of the line and it shall deal with running train traffic, according to its priority between

21

Beni Suef and Asyut. The OCC will be equipped with a Centralized Traffic Control (CTC)6

a) Operate by remote control signaling equipment and switches, and to set routes (vehicle route supervision);

System, thus enabling it to:

b) Control forecast traffic, monitor real time traffic at all stations and on all sections of line, and quickly take adequate measures to recover normal operations after interruptions (traffic regulation);

c) Allow works on tracks, either planned or in case of emergency; d) Monitor and manage the use of rolling stock via direct links to depots to provide the best

service (vehicle supervision); e) Help driver in case of engine failure (driver assistance) f) Monitor and manage on-board staff to provide the best service (driver supervision)

CTC functionality will be based on non-proprietary interfaces in order to enable data collection from signaling equipment provided by different suppliers and for data exchange with the local equipment in railway stations. A Local Command Console will be available in the main stations of the section for local command of signals, switches, shunting activities, etc., and for the exchange of information with the CTC. The non-proprietary interface will ensure its interoperability among different components of the signaling system, and enable the extension of traffic controls beyond the initial extent of this particular system as other sections are modernized. The installation of the new systems will offer the opportunity to optimize the operations of the target section through the rationalization of railway stations (unnecessary stations may be closed), remodeling of track layout at stations, and the rationalization – based on traffic needs – of the number of “objects” (points, signals, etc.) controlled by the interlocking systems in each railway station. The power supply for the CTC and the signaling system components will be provided by two independent sources. In the event of an interruption of the main power system, the CTC and the other vital functions would be supplied by an uninterrupted power source over buffer-charged accumulators that can provide steady energy. ENR operation and maintenance staff will be trained for the proper utilization of the new signaling system funded by the Project. So far ENR has not yet decided how and when to modernize the still functional but outdated Automatic Train Protection system (onboard locomotive equipment and related track equipment). A decision is expected soon on a technical option and on the financing of the equipment which is not part of the project.

6 CTC: Centralized Traffic Control consists of a centralized train dispatcher’s office that controls railway switches and signals. The dispatcher is constantly aware of the position of each train as it is electrically reported, and controls the switches and signals remotely. In the dispatcher’s office there is a graphical depiction of the railway, and the dispatchers can keep track of trains’ locations across the territory that the dispatcher controls.

22

ANNEX 4: ECONOMIC ANALYSIS

a) Results of the base case: The results of the economic analysis in terms of the Net Present Value (NPV), the Economic Internal Rate of Return (EIRR), and the Benefit Cost Ratio (B/C) are presented in the following table.

Table 1: Results of the economic appraisal

Indicator Value NPV(@12%) US$323 million

EIRR 21.8% B/C Ratio 2.22

The economic analysis indicates that the signaling component of the proposed project is economically viable, returning a positive NPV of US$323 million, following an investment of US$ 330 million. The EIRR is 21.8% and the estimated B/C ratio is 2.22, which is greater than one and therefore would support a decision to invest in the project.

Year Investment cost In EGP

Time savings for existing traffic

GC savings for diverted traffic

Generated traffic benefits

Savings in highway

maintenance costs

Savings in maintenance costs of the signaling system

Safety benefits Total Benefits in EGP

Total net benefits in EGP

Total in US$

2011 588,500,000 - - - - (588,500,000) (110,000,000)

2012 588,500,000 - - - - (588,500,000) (110,000,000) 2013 588,500,000 - - - - (588,500,000) (110,000,000) 2014 150,954,596 2,959,919 20,099,822 332,042 20,000,000 137,241,144 331,587,523 331,587,523 61,978,976

2015 155,483,234 6,237,272 21,456,813 677,424 20,000,000 156,289,597 360,144,340 360,144,340 67,316,699 2016 160,147,731 9,863,329 22,907,458 1,036,687 20,000,000 176,257,790 390,212,994 390,212,994 72,937,008

2017 164,952,163 13,872,694 24,458,305 1,410,393 20,000,000 197,201,447 421,895,002 421,895,002 78,858,879 2018 169,900,728 18,303,704 26,116,366 1,799,130 20,000,000 219,180,798 455,300,726 455,300,726 85,102,939

2019 174,997,749 23,046,806 27,889,146 2,203,294 20,000,000 241,743,722 489,880,718 489,880,718 91,566,489 2020 180,247,682 28,258,012 29,784,680 2,623,689 20,000,000 265,364,354 526,278,416 526,278,416 98,369,797 2021 185,655,112 33,980,570 31,811,569 3,060,970 20,000,000 290,100,519 564,608,740 564,608,740 105,534,344

2022 191,224,766 40,261,911 33,979,021 3,515,821 20,000,000 316,013,911 604,995,430 604,995,430 113,083,258 2023 196,961,509 47,154,094 36,296,894 3,988,951 20,000,000 343,170,396 647,571,844 647,571,844 121,041,466

2024 202,870,354 54,714,287 38,775,743 4,481,101 20,000,000 371,640,353 692,481,839 692,481,839 129,435,858 2025 208,956,464 63,005,316 41,426,866 4,993,041 20,000,000 401,499,044 739,880,731 739,880,731 138,295,464 2026 215,225,158 72,096,271 44,262,361 5,525,572 20,000,000 432,827,010 789,936,373 789,936,373 147,651,658

2027 221,681,913 82,063,184 47,295,179 6,079,530 20,000,000 465,710,516 842,830,322 842,830,322 157,538,378 2028 228,332,371 92,989,782 50,539,187 6,655,785 20,000,000 500,242,025 898,759,149 898,759,149 167,992,364

2029 235,182,342 90,531,572 54,009,232 5,527,744 20,000,000 463,796,322 869,047,211 869,047,211 162,438,731 2030 242,237,812 92,022,013 57,721,210 5,436,524 20,000,000 459,275,661 876,693,221 876,693,221 163,867,892

2031 249,504,946 93,486,687 61,692,143 5,341,656 20,000,000 454,574,174 884,599,606 884,599,606 165,345,721 2032 256,990,095 94,919,828 65,940,253 5,242,994 20,000,000 449,684,627 892,777,796 892,777,796 166,874,354 2033 264,699,798 96,315,142 70,485,053 5,140,384 20,000,000 444,599,499 901,239,877 901,239,877 168,456,052

2034 272,640,791 97,665,770 75,347,438 5,033,671 20,000,000 439,310,965 909,998,635 909,998,635 170,093,203 2035 280,820,015 98,964,235 80,549,778 4,922,689 20,000,000 433,810,890 919,067,607 919,067,607 171,788,338

2036 289,244,616 100,202,404 86,116,029 4,807,267 20,000,000 428,090,812 928,461,128 928,461,128 173,544,136 2037 297,921,954 101,371,434 92,071,842 4,687,229 20,000,000 422,141,931 938,194,389 938,194,389 175,363,437 2038 306,859,613 102,461,714 98,444,682 4,562,389 20,000,000 415,955,094 948,283,492 948,283,492 177,249,251

2039 316,065,401 103,462,811 105,263,962 4,432,555 20,000,000 409,520,784 958,745,513 958,745,513 179,204,769

23

As reflected in the following table, the majority of economic benefits are derived from improvement in safety level, representing about 57% of total discounted benefits. Time savings for existing traffic represent 28% of total discounted benefits, whereas generated traffic benefits are about 7%.

Table 2: Percentage of different types of benefits relative to the total discounted benefits Type of Benefits Percentage of Total Discounted

Benefits Time Savings for Existing Traffic 27.5% Generated Traffic Benefits 7.1% Reduction in Total GC for Diverted Traffic 5.3% Highway Maintenance Savings 0.6% Savings in Maintenance costs of the signaling system 2.9% Improvement in Safety level 56.6%

b) Sensitivity and Switching Analysis: This section indicates the impact of uncertainty or variation in the key parameters of interest on the economic appraisal of the project. Those key parameters are perceived to be the growth rate of future freight and passenger traffic, the investment costs, the construction period and the discount rate. The impact of defined variation in these parameters is presented in the following table, together with the switching values, the percentage change in the former necessary to make the project unviable.

Table 3: Sensitivity Analysis

Capital Costs -20% Base Case +20% NPV US$376 million US$323 million US$270 million EIRR 25.4% 21.8% 19.2% Freight Traffic Growth -20% Base Case +20% NPV US$318 million US$323 million US$328 million EIRR 21.7% 21.8% 22.0% Passenger Traffic Growth -20% Base Case +20% NPV US$282 million US$323 million US$354 million EIRR 20.7% 21.8% 22.8% Construction Period -One year Base Case +One year NPV US$338 million US$323 million US$306 million EIRR 23.4% 21.8% 20.0% Discount Rate 8% 10% Base Case: 12% NPV US$689 million US$474 million US$323 million B/C Ratio 3.43 2.74 21.8%

Estimated Switching Values Increase in Capital Costs 120%

Reduction in Passenger Traffic Growth 95% Reduction in Freight Traffic Growth 130%

24

The table reveals that the proposed investment is relatively robust to the defined variation in the key parameters of interest, with significant changes in both the capital costs of the project, the forecast growth rates, and a delayed construction period still resulting in a positive NPV and an EIRR at the 12% threshold. The sensitivity analysis also reveals the estimated switching values, with capital costs needing to increase by 120%, passenger traffic growth falling short of the forecast by 95%, and freight traffic growth falling short of the forecast by 130%, before the project becomes unviable.

25

ANNEX 5: MAP

Ras Gharib

El Matariya

El Salhiya

Arab elRaml

El Qasabi

GizaSuez

Benha

Tanta

Damietta

Zagizig

Al Minya

Assiut

Sohag

Qena

Ismailia

Damanhur

Beni Suef

El Fayoum

PortSaid

El Mansura

Alexandria

Shibin el Kom

Kafr elSheikh

CAIRO

SOUTHERNSINAI

NORTHERNSINAI

SUEZ

G I Z A

AL BAHRAL AHMAR

ASSIUT

AL WADI AL JADID

EL FAYOUM

MARSAMATRUH

BENI SUEF

AL MINYA

SOHAG

KAFR EL SHEIKH

MENOUFIYA

SHARGIYAH

QALIUBIYA

ISMAILIA

CAIRO

DAMIETTA

PORTSAIDALEXANDRIA

BEHEIRA

GHARBIYA DAGAHLIYA

QENA

Gulf of Suez

M e d i t e r r a n e a nS e a

30°E 31°E 32°E 33°E

30°N

31°N

29°N

28°N

30°N

31°N

29°N

28°N

30°E 31°E 32°E 33°E

0 25

0 25 50 Miles

50 KilometersIBRD

36063R

NO

VEM

BER 2010

SELECTED CITIES AND TOWNS

GOVERNORATE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILWAYS

GOVERNORATE BOUNDARIES

ARAB REPUBLIC OF EGYPT

EGYPTIAN NATIONAL RAILWAYSRESTRUCTURING PROJECT

ADDITIONAL FINANCING

PROJECT WORKS:

SIGNALLING INVESTMENTS

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

ARAB REPUBLICOF EGYPT