Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 60778-HR
PROJECT PAPER
ON AN
ADDITIONAL FINANCING LOAN
IN THE AMOUNT OF EURO 50 MILLION
(US$66.92 MILLION EQUIVALENT)
TO THE
PORT OF PLOČE AUTHORITY
WITH THE GUARANTEE OF THE REPUBLIC OF CROATIA
FOR THE
TRADE AND TRANSPORT INTEGRATION PROJECT
June 29, 2011
Sustainable Development Department
South Central Europe Country Unit
Europe and Central Asia Region
This document is being made publicly available prior to Board consideration. This does not
imply a presumed outcome. This document may be updated following Board consideration
and the updated document will be made publicly available in accordance with the Bank’s
Policy on Access to Information.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective December 31, 2010)
Currency Unit = HRK (Kunas)
HRK 1 = US$ 0.18
US$1 = HRK5.55
EUR1 = US$ 1.33835
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AF Additional Financing
BiH Bosnia and Herzegovina
BT Bulk Terminal
CPS Country Partnership Strategy
CT Container Terminal
DWT Dead Weight Ton
EBRD European Bank for Reconstruction and Development
EIA Environmental Impact Assessment
EMP Environmental Management Plan
EU European Union
ISR Implementation Status Report
LP Luka Ploče d.d. (concessionaire for BT and CT)
MT Million Tonne
NPV Net Present Value
ORAF Operational Risk Assessment Framework
PDO Project Development Objective
PIU Project Implementation Unit
PPA Port of Ploče Authority
TEU Twenty Foot Equivalent Unit
TTI Trade and Transport Integration
Vice President: Philippe H. Le Houérou
Country Director: Peter Harrold
Country Manager: Hongjoo Hahm
Sector Manager: Henry G. R. Kerali
Task Team Leader: Gerald Ollivier
CROATIA
Trade and Transport Integration Project
CONTENTS
I. Introduction ............................................................................................................................ 1 II. Background and Rationale for Additional Financing ............................................................ 1
III. Proposed Changes ................................................................................................................. 4 IV. Appraisal Summary ............................................................................................................. 5
Annex 1: Results Framework and Monitoring........................................................................... 7 Annex 2 Operational Risk Assessment Framework (ORAF) ................................................... 12
Annex 3: Updated Financing Plan and Cost Table .................................................................. 15
Croatia
TRADE AND TRANSPORT INTEGRATION PROJECT
Additional Financing Data Sheet
Basic Information - Additional Financing (AF)
Country Director: Peter Harrold
Sector Director: Peter D. Thomson
Sector Manager: Henry G. R. Kerali
Team Leader: Gerald Ollivier
Project ID: P118260
Expected Effectiveness Date: December 15,
2011
Lending Instrument: Specific Investment
Loan
Additional Financing Type: Scaling up and
Financing Gap
Sectors: ECSSD
Themes: Ports, Waterways and
Shipping (100%)
Environmental category: A- Full
Assessment (carried out for the
original project)
Expected Closing Date: June 30,
2014
Joint IFC:
Joint Level:
Basic Information - Original Project
Project ID: P093767 Environmental category: A-Full
Assessment
Project Name: Trade and Transport
Integration Project
Expected Closing Date: June 30,
2014
Original Closing Date : December 31,
2011
Lending Instrument: Specific Investment
Loan
Joint IFC:
Joint Level:
AF Project Financing Data
[ x] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:
Proposed terms: Euro denominated Flexible Loan with variable spread, with a 23 year
maturity including a 12 year grace period, with level repayment of principal.
AF Financing Plan (US$m)
Source Total Amount (US $m)
Total Project Cost:
Cofinancing:
Borrower:
Total Bank Financing:
IBRD
66.92
66.92
Client Information
Recipient: Port of Ploče Authority
Responsible Agency: Port of Ploče Authority
Contact Person: Mr. Tomislav Batur, Executive Director
Telephone No.: +385 20 603 281
Fax No.: + 385 20 670 271
Email: [email protected]
AF Estimated Disbursements (Bank FY/US$m)
FY 2012 2013 2014
Annual 10.0 38.0 18.92
Cumulative 10.0 48.0 66.92
Project Development Objective and Description
Original project development objective:
The project objective is to develop trade along Corridor Vc by improving the capacity, efficiency
and quality of services on the southern end of Corridor Vc with particular focus on the port of
Ploče and on coordination aspects among all corridor participants.
Revised project development objective:
The project development objective remains the same as in the original project. The end outcome
targets in terms of productivity and capacity are raised to capture expected improvements in service
quality and capacity.
Project description:
The project seeks to achieve this objective through: (i) investments in increased capacity of the port
infrastructure (new bulk terminal and new container terminal); (ii) introduction of a modern
electronic port community system; (iii) strengthened corridor dialogue among corridor participants;
(iv) establishment of cost recovery based concession arrangements; and (v) increased private sector
involvement.
Safeguard and Exception to Policies
Safeguard policies triggered:
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waters (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
[x]Yes [ ] No
[x]Yes [ ] No
[ ]Yes [x] No
[ ]Yes [x] No
[ ]Yes [x] No
[ ]Yes [x] No
[ ]Yes [x] No
[ ]Yes [x] No
[x]Yes [ ] No
[ ]Yes [x] No
Does the project require any exceptions from Bank policies?
Have these been approved by Bank management?
[ ]Yes [x] No
[ ]Yes [ ] No
Conditions and Legal Covenants:
Financing Agreement Reference Description of
Condition/Covenant
Date Due
Guarantee Agreement,
Section 2.03. (a) and
Letter of Development Policy,
Section (e)
The Guarantor shall take all
necessary measures to reduce
the state ownership in Luka
Ploče to no more than twenty
percent (20%), in accordance
with its existing laws and
regulations and in consultation
with the Bank. This process
shall be based on fair market
value principles and be
completed in due time to
enable Luka Ploče to secure
sufficient financing, on
commercial terms, for the
purchase of equipment for the
new terminals to be
constructed under Part A of
the Original Project.
This is not a dated covenant.
Not yet due.
The reduction in state
ownership in Luka Ploce dd
is ongoing and will take
place in two steps: the sale
of about 23 percent of
existing shares to employees
on a nominal basis with a
five year lock-in period
(done) and the issuance of
new shares based on fair
market value principles
bringing down the state
ownership to no more than
20 percent, in case of full
placement of the new shares.
Loan Agreement,
Schedule 2 Section V
Except as the Bank shall
otherwise agree, the Borrower
shall not incur any debt unless
the net revenues, net non-
operating income and
accumulated earning of the
Borrower, shall be at least 1.1
times the estimated maximum
debt service requirements of
the Borrower.
This is a recurrent covenant.
Complied with.
Loan Agreement,
Schedule 2 Section I C
The Borrower shall take all
necessary measures to ensure
that the Project is implemented
in accordance with the EMP.
Complied with.
Loan Agreement
Schedule 2 Section I A 2
The Borrower shall implement
the Project in accordance with
the Project Implementation
Plan agreed upon between the
Bank and the Borrower, as
such plan may be amended
from time to time upon the
agreement between the
Borrower and the Bank.
Complied with.
I. INTRODUCTION
1. This Project Paper seeks the approval of the Executive Directors to provide an additional
loan in the amount of EUR50 million to the Port of Ploče Authority (PPA), with a guarantee of
the Republic of Croatia for the Trade and Transport Integration (TTI) Project (P093767, Loan
No. 7410-HR).
2. The proposed additional loan of EUR50 million would help finance the total additional
costs of EUR51.3 million associated with: (i) a scaling up (EUR5 million) and financing gap
coverage (EUR35.9 million) for the Bulk Terminal (BT) to be constructed under the project; and
(ii) financing gap coverage (EUR10.4 million) for the Container Terminal (CT), which is
completed. The remainder of the additional cost would be covered by reallocating EUR1.3
million from the category interest accrued in the original loan to the category civil works. This
would reflect lower than anticipated interest rates during the past three years.
3. Other significant changes from the original project would include: (i) extension of the
closing date for the original project and for interest capitalization from December 31, 2011 to
June 30, 2014, allowing for completion of the scaled-up BT; (ii) adjustment to the minimum debt
service coverage ratio of PPA to 1.1 instead of 1.3 (see paragraph 21); and (iii) adoption of the
World Bank procurement guidelines published in May 2004, and Revised in October 2006 and
May 2010.
4. The original project is co-financed with an EBRD loan of EUR11.2 million that would be
used for financing a portion of the BT costs, as incorporated in the overall BT financing plan.
The amount of Government contribution to the project costs would remain unchanged at
EUR21.1 million.
II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING
5. The strategic objective of Croatia is to join the European Union (EU) as a competitive
economy. Pan-European Transport Corridors carry the vast majority of trade, transit and tourist
traffic between the EU and the Southeast European region, and within the region. Corridor Vc,
running from Ploče in Croatia to Budapest in Hungary, is one of these Corridors.
6. The Port of Ploče, located on the Adriatic coast, is the gateway to Corridor Vc. It directly
influences the overall efficiency and capacity of this corridor. It is the natural port for industries
located in southern Dalmatia (Croatia) and in Bosnia and Herzegovina (BiH). As a result, the
TTI project, while investing primarily in port development, contributes significantly to regional
economic prosperity and stability.
7. The original TTI project cost was estimated at EUR91 million with a World Bank loan of
EUR58.8 million to the Port of Ploče Authority. The loan was approved on November 14, 2006
and became effective on March 20, 2007. The overall development objective is to develop trade
along Corridor Vc, by improving the capacity, efficiency and quality of services on the southern
2
end of the corridor, with particular focus on the port of Ploče and on coordination aspects among
all corridor participants. The project seeks to achieve those objectives by providing financing to
build two new port terminals,1 introducing a modern electronic port community system,
establishing concession arrangements for terminals based on cost recovery and increasing private
sector involvement to secure financing for cargo handling equipment.
8. The project is progressing well towards meeting its development objectives, with
satisfactory ratings over the last three years, despite a temporary setback in 2009 due to the
global economic crisis. In particular: (i) traffic grew rapidly from 2005 to 2008 (+83 percent)
using almost the entire port bulk cargo capacity; (ii) the concessions for both the CT and BT
were signed on January 18, 2010 with cost recovery terms for concession fees and major
investments expected2 from the concessionaire, Luka Ploče dd (LP); (iii) the financial
performance of the PPA and LP steadily improved until 2008 building on traffic growth and tight
cost control; (iv) the transport corridor through Ploče continued to be price competitive for its
main markets compared with alternative corridors; (v) the CT is completed and in operation; and
(vi) preparatory civil works for the BT are nearing completion.
9. After a sharp drop in 2009, traffic rebounded by 58 percent in 2010, and the existing bulk
terminal is expected to be used at full capacity in 2011. 2010 traffic was below original estimates
as it needs to further recover from the setback in 2009. Traffic projections completed in
November 2010 continue to support the need for a new terminal. In February 2010, LP received
new letters of intent from its main bulk clients, confirming their future production plans and their
intent to channel a total of 4.5 million tons of bulk cargo throughput annually through Ploče,
excluding transshipment. The main transshipment client also indicated that the port would be the
most suitable transshipment port for its purposes. Clients emphasized that the new terminal
should provide increased handling productivity, storage capacity and be able to accommodate
larger vessels (so called “Capesize” vessels).
10. In March 2010, the Government consented to the process of capital increase for LP,
overall in line with the project letter of development policy. This will allow LP to secure the
private funds needed to acquire and install equipment on the new terminals. The reduction in
state ownership in Luka Ploce dd is ongoing and will take place in two steps: the sale of 51,771
shares out of 222,614 existing shares to employees on a nominal basis with a five year lock-in
period (completed), and by the issuance of new shares based on fair market value principles
bringing down the state ownership to no more than 20 percent, in case of full placement of the
new shares. The transaction is expected to be completed by September 2011.
11. The project implementation performance ratings and implementation capacity have been
satisfactory, as assessed during the mid-term review (April 2009), and moderately satisfactory as
rated in the latest supervision mission (April 2011). The downgrading to moderately satisfactory
reflects mostly the delays in completing the design of the BT. Delays resulted primarily from
adjustments in the design of the terminal to make it more market responsive. The project is in
compliance with its key legal covenants, as defined in the Loan Agreement. All project risks
1 BT with an originally planned capacity of 4.0 million tons and CT with an initial capacity of 66,000 TEU.
2 Investments by the concessionaire are expected to be higher in value over the life of the concession than State
investments made through the port of Ploče authority, including the present project.
3
rated “high” in the original project have been mitigated at this point: concessions have been
signed, the approach to increase private participation is finalized and will be implemented in
2011, and both BiH and Croatia are actively upgrading the remainder of Corridor Vc.
12. The risk for project implementation is lower than at the time of the original project
preparation. The main risk factor is the ability of LP to finance and install terminal equipment
on time for the opening of the terminal. The recently signed concession agreements for both
terminals and the Government consent to support a capital increase mitigate this risk. LP has
already ordered the gantry crane equipment for the CT, to be delivered in 2011.
13. Rail transport along corridor Vc remains the primary transport mode for bulk cargo
transport from the port to its users. Rail corridor conditions are improving through major
rehabilitation of rail infrastructure in BiH. In 2006, railway companies of Croatia and BiH signed
a Memorandum of Cooperation on rail transport along Corridor Vc. The Memorandum, together
with an Action Plan specifying individual coordinated activities is now under implementation. It
includes activities needed to improve the technical capacity and operational quality in the Ploče
railway yard and to better coordinate corridor activities. Progress on this aspect has been
relatively modest to date, but corridor discussions are gaining momentum at a regional level.
14. The additional financing would cover a financing gap for the BT (estimated at EUR35.9
million) to ensure the soundness of the new BT infrastructure and reflect current price levels.
After the original project was approved, Croatia adjusted its design codes for structural
engineering works towards the Eurocode. Following additional geotechnical studies, design work
and review by official reviewers, the technical solution originally foreseen for the quay (use of a
combiwall) was reevaluated and found to be insufficiently stable considering the quality of the
subsoil, earthquake and safety factors. The design was adjusted accordingly for the quay
structure using a standard open structure (steel piles with rear slope) assessed as suitable by
independent authorized reviewers. The estimated financing gap reflects both the increased
structural need and price adjustments related to accumulated delays in the BT implementation.
15. The BT scaling up (estimated at EUR5 million for infrastructure) would enhance the port
commercial responsiveness by better matching the BT infrastructure with current and expected
market needs. It would increase the port resilience to market fluctuations, by offering higher
quality services3 to a wider range of clients. The port traffic evolved rapidly in the past five
years. Transshipment, which was not using the port in 2005, now represents 30 percent of cargo,
despite inadequate infrastructure. At the same time, flows from traditional BiH companies
experienced rapid fluctuations. This led PPA and LP to select a more flexible design, competitive
for a broader range of market segments than the original design, which primarily targeted exports
from BiH.
16. The additional financing would also cover a financing gap for the container terminal. The
CT construction is completed with a Permit for Use issued in August 2010. The original designer
estimates proved to be too low for the quay construction and storage area compared to the
3 Allowing loading and unloading of two vessels at a time, handling of vessels up to 120,000 DWT instead of 80,000
DWT, and unloading speed of 2200 t/hour instead of 890.
4
contracted price. The contract was awarded after proper competition. The original design for the
container terminal has not been changed.
17. The use of additional World Bank financing offers multiple advantages compared to
other potential sources of financing. In particular: (i) all necessary implementation arrangements
are in place; (ii) ongoing dialogue under the project involves both policy aspects and
implementation aspects warranting continuity; (iii) the additional financing would finance a
contract already included in the original project; (iv) World Bank financing is competitive
compared to alternatives. Considering current economic conditions, the amount of Government
contribution to the overall project financing would remain the same as in the original project,
with the new loan covering all additional costs.
III. PROPOSED CHANGES
18. Project Development Objectives. Project Development Objectives would remain
unchanged. However the associated end outcome targets would be raised to capture the expected
improvements in service quality and capacity. Traffic forecasts would be adjusted downward to
reflect the latest projections and the traffic setback in 2009. Intermediate values for results
indicators would be adjusted to reflect the current implementation schedule as per Annex 1.
19. BT Scaling Up. The new scaled up BT will increase service quality by providing
infrastructure that can accommodate higher capacity equipment from the port concessionaire and
larger vessels. This would increase the capacity of the terminal from 4.0 to 4.6 million tons. This
entails a pile-based pier structure instead of a combi-wall structure, a maritime basin with a depth
of 18 meters instead of 15 m to accommodate larger vessels up to 120,000 DWT instead of
80,000 DWT, an adjusted berth position and layout to enable efficient transshipment operations,
an access bridge to accommodate simultaneous handling of two vessels, foundation for higher
capacity handling equipment (+ 30 percent for each), increased power supply and installation,
and adjusted railway tracks within the port.
20. Financing Plan. The amounts of Government, PPA and EBRD contributions to the
financing plan remain unchanged, while the additional costs would be covered by the additional
financing. The updated financing plan for the project is provided in Annex 3. Since interest rates
were lower than anticipated over the past three years, EUR1.3 million would be reallocated from
the category “interest and other charges” to the category “works” in the original loan.
21. Reduced Debt Service Coverage Ratio. In line with the status of PPA as a non-profit
organization, the target debt service coverage ratio for PPA would be adjusted to 1.1, instead of
1.3 as currently indicated in the Loan Agreement. This would reduce the need for government
contributions to PPA and enable PPA to maintain its debt service coverage ratio in line with
actual needs.
22. Implementation Period. The project closing date would be extended to June 30, 2014,
to be aligned with the expected completion of the new bulk terminal. The capitalization of
interest and other financial charges under the project would be extended similarly.
5
23. Contributions during repayment period. The Government would provide support to
PPA during the first loan servicing period. PPA will need Government support to service its
existing loan during the repayment period from 2012 to 2021, since the repayment period of the
loan principal for the existing loan (10 years) is much shorter than the economic life of the
corresponding asset (45 years). The exact amount will depend on traffic and port dues, but is
estimated at about EUR5.7 million per annum during the period of repayment of the first loan,
while such amount can be repaid by PPA in subsequent periods. Confirmation of the
Government commitment to provide contribution to PPA during the repayment period is
captured through the Guarantee Agreement, but PPA is not expected to need budget support for
the repayment of the additional loan.
IV. APPRAISAL SUMMARY
24. The need for additional financing was identified in 2008 and is reflected in the Country
Partnership Strategy (44879-HR). It was reviewed during the project mid-term review (April
2009). The Minister of Finance, based on a request from the Ministry of Sea, Transport and
Infrastructure, requested an additional loan from the World Bank on behalf of PPA on April 30,
2009, to cover the scaling up cost for the BT and financing gap for the completed CT. An
updated economic and financial evaluation has been carried out for the scaled up BT.
25. The new scaled-up BT would better respond to the needs of the market and would be
aligned with the business plan prepared by the concessionaire as part of the conditions preceding
the BT concession agreement. The scaling up will enhance the project development impact and
the port long-term competitiveness and resilience to market changes. An updated economic and
financial evaluation has been carried out for the scaled up BT and confirms its feasibility.
26. Economic Aspects. The economic analysis of the proposed scaled-up BT indicates that it
is economically sound with an NPV of EUR33.9 million (using a 12 percent discount rate) and a
rate of return of 15.3 percent. Compared with the original design, the scaled-up terminal brings
an economic rate of return of 73.8 percent (NPV of EUR75 million), as a result of greater
productivity and expanded potential client base.
27. Financial Aspects. Based on current projections and assumptions, the overall project
would be financially viable for PPA, even though PPA will need to receive cash flow support
during the debt servicing period of the first loan. The overall financial return for the scaled up
BT is estimated to be 10.7 percent, well above the project estimated cost of capital of 8 percent
with an NPV of EUR28.2 million (discounted at 8%). For PPA, the expected financial rate of
return is 5.8% and the NPV is EUR18.0 m (discounted at PPA cost of capital of 4.5%). Based
on concession fees and port dues, PPA is expected to reach full cost recovery over the life of the
concession.
28. Technical. The main design for the proposed scaled-up bulk terminal layout is being
finalized. The design has been prepared by a consortium of international designers in close
cooperation with authorized reviewers for different types of structures. A Location Permit has
been issued based on the scaled up layout (received on July 7, 2009). This design has been
6
validated by independent authorized reviewers. The technical aspects of other project
components remain unchanged.
29. Safeguards. The project is rated as an environment category A project due to its location
near an environmentally sensitive area. Compared to the original design for the bulk terminal, the
scaling up is not expected to result in any significant incremental change from an environmental
point of view, since there would not be: (i) additional areas affected by civil works and future
port layout; (ii) any expansion of civil works into sensitive habitats or protected areas to be
converted into port operational areas; (iii) any additional connectivity construction such as roads,
railway links or bridges. There will be additional dredging works in the coastal waters adjacent
to the port, but in the same location as originally foreseen, and all addition material will be
deposited in the same area as foreseen by the original project. The Croatian Ministry of
Environmental Protection has officially confirmed that the scaled up terminal does not require
modifications of existing EIA. However upon the Bank request, PPA prepared an addendum to
the EIA which has been properly disclosed as per Bank requirements. The proposed modification
does not trigger any new safeguards policy, and does not require any exception from existing
Bank policies.
30. Institutional. The additional loan would continue using the existing project management
structure, and institutional arrangements. The procurement guidelines published in May 2004
and revised in October 2006 and May 2010 would be applied to the project. The project’s
financial management (flow of funds, accounting, reporting and auditing) and disbursement
arrangements would not be modified as a result of additional financing.
7
ANNEX 1: RESULTS FRAMEWORK AND MONITORING
CROATIA: AF-TRADE & TRANSPORT INTEGRATION
Results Framework
Revisions to the Results Framework Comments/
Rationale for Change
PDO
Current (PAD) Proposed
To develop trade along Corridor Vc by
improving the capacity, efficiency and
quality of services on the southern end of
Corridor Vc with particular focus on the
port of Ploče and on coordination aspects
among all corridor participants.
Unchanged.
PDO indicators
Current (PAD) Proposed change*
Effective bulk port capacity End target value changed.
Increase in new terminal
capacity from 4 MT to 4.6 MT.
Increase resilience of the port to
traffic fluctuation by serving a
broader market, including
transshipment.
Effective direct container handling
capacity
Unchanged.
Gross bulk crane productivity End target value changed.
Increase in power supply
infrastructure for unloading
equipment allowing the use of
un-loaders of 2000 t/h nominal
capacity instead of 1500 t/h.
This is equivalent to 1100 t/h in
gross bulk unloading crane
productivity instead of the
original 890 t/h.
Provide higher quality of services
to enable fast unloading of vessels
calling in the port and reduce their
waiting time. Investment in
equipment to be made by
concessionaire.
Gross Bulk Unloading Capacity at new
terminal
New indicator. Increase in
infrastructure for unloading
equipment allowing for two un-
loaders of 2000 t/h nominal
capacity instead of one un-loader
or 2200 t/h in gross bulk
unloading capacity.
Provide high quality of services to
enable fast unloading of vessels
calling in the port, reduce their
waiting time and offer greater
reliability. Investment in
equipment to be made by
concessionaire.
Gross container crane productivity Unchanged.
Rail commercial speed Changed intermediate targets.
Unchanged end target.
Ongoing reconstruction of rail line
in BiH is temporarily slowing
down the rail commercial speed at
this point.
Vessel waiting time Unchanged.
Cargo tracking in port End target unchanged, timeline
adjusted.
Adjustments to reflect current
implementation status.
Cargo throughput Reduced to reflect drop in traffic The 2009 global crisis postponed
8
Revisions to the Results Framework Comments/
Rationale for Change in 2009. some of the original targets to a
later time.
Corridor cost compared to alternative
corridors
Unchanged.
Private sector participation Unchanged.
Intermediate Results indicators
Current (PAD) Proposed change*
Port Development
Construction of Bulk Terminal,
Container Terminal and Port
Infrastructure completed respectively by
2011, 2009 and 2010.
Construction completed
respectively by end 2013, 2010
and 2012.
Adjustments to reflect current
implementation status
Trade and Transport Integration
Electronic exchange of documents in
place within the port for all stakeholders
End target unchanged, timeline
adjusted.
Adjustments to reflect current
implementation status
Systematic Corridor Performance
Measurement System in use.
End target unchanged, timeline
adjusted.
Adjustments to reflect current
implementation status
Project Implementation
Suitable concession agreement for new
terminals by June 2007 as per Letter of
Development Policy
Unchanged.
Clients satisfaction with the Port of
Ploče
Unchanged.
Comprehensive supervision reports Unchanged.
9
REVISED PROJECT RESULTS FRAMEWORK
Project Development Objective (PDO): To develop trade along Corridor Vc by improving the capacity, efficiency and quality of services on the
southern end of Corridor Vc with particular focus on the port of Ploče and on coordination aspects among all corridor participants.
PDO remains unchanged.
PDO Level Results Indicators
Co
re UOM4
Baseline
Original
Project
Start
(2005)
Progress
To Date
(2010)
Cumulative Target Values5 Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Comments
2011 2012 2013
Increased Capacity
Bulk Cargo Capacity Mil tons p.a. 3.1 4.2 4.2 4.2 8.8 Annual
Technical
documentation LP Annual
Direct Loading/Unloading
Capacity for Container Cellular
Vessels
1,000 TEU
p.a. NA 66 66 66 66 Annual
Technical
documentation LP
General Cargo Capacity Mil tons p.a. 1.2 1.4 1.4 1.4 1.4 Annual
Technical
documentation LP
Rail yard Capacity
Number of
shunting
tracks
8 8 8 8 12 Annual Technical
documentation LP
Efficient Operations
Gross Container LoLo
Productivity Cellular Vessels
Moves/hour/
gang or
crane
NA 15 18 18 18 Annual Operational
documents LP
Gross Bulk Unloading Crane
Productivity Tons/hour 100 700 700 700 1100 Annual Operational
documents LP
Gross Bulk Unloading capacity
at new terminal Tons/hour 100 700 700 700 2200 Annual Operational
documents LP New indicator
Gross General Cargo
Crane/Gang Productivity Tons/hour 42 50 65 65 65 Annual Operational
documents LP
Average Commercial Speed of
Vc Corridor Km/h 7.5 7.5 7.5 7.5 10.3 Annual Operational
documents Railways
Safety: Lost Time Accidents Accidents 3.1 1.8 1.8 1.8 1.6 Monthly Operational PPA/LP
4 UOM = Unit of Measurement.
5 Interim Target values reflect the latest expected value at the time of the additional financing.
10
per 200k
man hours
documents
Quality of Service
Average vessel waiting time for
available berth Hours <2 <2 <2 <2 <2 Monthly
Operational
documents PPA
Ability to track cargo (Port
Community System
implementation percentage
complete)
% 0% 0% 40% 70% 90% Monthly Operational
documents PPA
Support Regional Development
and Competitiveness
Cargo Throughput (excluding
liquid bulk)
Mil tons p.a. 2.5 3.8 4.6 4.8 5.8 Monthly Annual report PPA
Demand
constrained
by capacity
until new BT
opening
Ploče Corridor (inland costs) cost
vs Rijeka and Bar (to be less than
target %)
% 53% 49% <80% <80% <80% Annual Survey PPA
Private Sector Involvement
Revised and signed Priority
concession agreement
0% 100% Annual Agreement PPA
Private sector participation in
Ploče operations (as % of tons
handled, excl liquid bulk)
% 40% 40.3% 80% 80% 85% Annual Annual report
Ministry of
Sea, Transport
and
Infrastructure/
Ministry of
Finance
Intermediate Results and Indicators
Intermediate Results Indicators
Co
re
Unit of
Measur
ement
Baseline
Original
Project
Start
(2005)
Progress
To Date
(2009)
Target Values
Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Comments 2010 2011 2012 2013
Intermediate Result 1: Port Development
Bulk Terminal Construction % 0 0 0 25 75 100 Every six
months
Project
Monitoring
Reports
PPA
11
Intermediate Results and Indicators
Intermediate Results Indicators
Co
re
Unit of
Measur
ement
Baseline
Original
Project
Start
(2005)
Progress
To Date
(2009)
Target Values
Frequency Data Source/
Methodology
Responsibility
for Data
Collection
Comments 2010 2011 2012 2013
Container Terminal Construction % 0 80 100 100 100 100
Every six
months Project
Monitoring
Reports PPA
Other Port Infrastructure % 0 50 60 80 100 100
Every six
months Project
Monitoring
Reports PPA
Intermediate Result 2: Trade and Transport Integration
Port Community System –
Electronic exchange of documents
within the port
% 0 0 40% 70% 90% Every six
months
Port
Community
System
statistics
PPA
Rail corridor performance
measurement NA 0 80% Annual
Railway
companies
and Port
Community
System
Railway and
PPA
Supported by regional
corridor cooperation
Intermediate Result 3: Project Implementation
Concession agreement for new
terminal 100%
One time
event
Revised
agreement PPA
Client satisfaction
Regular
client
feedback
Annual Annual
survey PPA
Monitored to date
through interviews with
main clients. Feedback
reflected in project
design.
Supervision report for works Received Quarterly Supervision
reports PPA
12
ANNEX 2
OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)
Negotiation and Board Package Version
Project Development Objective(s)
The project objective is to develop trade along Corridor Vc by improving the capacity, efficiency and quality of services on the southern end of Corridor Vc with particular focus on the port of Ploče and on coordination aspects among all corridor participants.
PDO Level Results Indicators:
1. Increased capacity 2. Efficient operations 3. Quality of services 4. Support to regional development and competitiveness 5. Private sector involvement
Risk Category Risk Rating Risk Description Proposed Mitigation Measures
Project Stakeholder Risks Medium-I
The increase in capital by Luka Ploče to finance the necessary equipment may require more time than anticipated and lead to some delays. Main port users are exposed to global market fluctuations and depend on the long term stability of the region. As such traffic may experience fluctuations. Railway capacity may be insufficient and companies may fail to operate the corridor properly.
Recruitment of an external transaction advisor, with an established track record for such transaction. The advisor provided realistic/cautious estimates for the traffic projection. Preliminary interactions with potential investors took place successfully at the end of 2010. Close follow up by the project team of the transaction implementation. If insufficient capital is raised, Luka Ploče will secure commercial loans. This was addressed during preparation by developing a design offering greater resilience to market conditions (ability to accommodate larger vessels, faster unloading), and by preparing cautious/conservative traffic forecast in close consultation with clients. The corridor is being physically upgraded to restore sufficient capacity for foreseen volumes. This upgrade will be completed by the time the terminal is constructed. In parallel, the EU supports the
13
establishment of regional railway markets and the existing TTI railway memorandum of cooperation enables continuous dialogue with the railways.
Implementing Agency Risks Low
Since the Project Implementation Team is relatively small, in case the project team loses some of its key members, implementation may be delayed.
The Port Authority will progressively recruit new staff to back up the existing team.
Project Risks
Design Medium-I
The bulk terminal design is not yet endorsed by reviewers. This may lead to delays in implementation. The implementation of the electronic port community system under development may be delayed due to its technical complexity.
The project team closely monitors development with respect to the design preparation. The design is now close to completion, with reasonable expectation that it will be completed in early 2011. The Port Authority will maintain its existing internal and external supervision mechanisms for this component to ensure close follow up of progress.
Social & Environmental Medium-L
The dredging and disposal of dredged material for the bulk terminal could disturb the natural surrounding if not implemented in accordance with the EMP.
The Port Authority will maintain its existing internal and external monitoring system to ensure the suitable implementation of the EMP.
Program & Donor Low
Difference of views may emerge between EBRD and the World Bank on some aspects of implementation.
The project team will maintain the existing close dialogue with EBRD.
Delivery Quality Low
The sequencing between the construction of the new terminal and the provision of equipment by the concessionaire may lead to a delayed implementation.
The signed concession agreement specifies the framework for the respective interventions of the concessionaire and the port authority. External supervision engineers will be hired to ensure a proper oversight of the process.
14
Risk Rating: Preparation
Risk Rating: Implementation Comments
Medium-I
Medium-I
The likelihood of not meeting the Project Development Objective is low, with moderate to high impact if a risk materializes. The Port Authority successfully implemented the first terminal. Effective implementation mechanisms are in place. The remaining contracts are straightforward (after completion of their design). The concession arrangements are in place and the approach to capital increase on the basis of public offering is suitable.
15
ANNEX 3: UPDATED FINANCING PLAN AND COST TABLE
Croatia: AF-TRADE & TRANSPORT INTEGRATION
Components by Financiers
(EUR Million) MoF World Bank I World Bank AF PPA EBRD Total
Amount % Amount % Amount % Amount % Amount % Amount %
A. Port Infrastructure Development
Bulk Cargo Terminal 7.4 9 16.6 19.8 49.9 59.5 - - 9.9 11.8 83.9 59.4
Container/Multipurpose Terminal 9.3 28 24.3 72.4 0.0 0.0 - - - - 33.6 23.8
Port Supporting Infrastructure 4.3 41.4 6.0 58.4 0.0 0.2 - - - - 10.3 7.3
Subtotal Port Infrastructure Development 21.0 16.4 47.0 36.8 49.9 39.1 - - 9.9 7.8 127.8 90.6
B. Trade and Transport Integration Component
Port Community System 0.0 - 1.5 100.0 - - - - - - 1.5 1.1
C. Project Implementation Component
Technical Assistance to PPA - - 1.4 100.0 - - - - - - 1.4 1.0
Consultant Services and Audit 0.0 - 2.3 100.0 - - - - - - 2.3 1.6
Consultant Services for Preparation - - 1.6 100.0 - - - - - - 1.6 1.1
Training and Implementation Costs 0.0 - 0.0 42.3 - - 0.1 57.7 - - 0.1 0.1
Subtotal Project Implementation Component 0.0 - 5.3 98.9 - - 0.1 1.1 - - 5.4 3.8
Total PROJECT COSTS 21.0 15.6 53.8 39.9 49.9 37.1 0.1 0.04 9.9 7.4 134.7 95.4
Interest During Implementation - - 4.7 80.0 - - - - 1.2 20.0 5.8 4.1
Commitment Charges - - 0.3 91.6 - - - - 0.03 8.4 0.3 0.2
Front-end fees - - - - 0.1 52.7 - - 0.1 47.3 0.2 0.2
Total Disbursement 21.0 14.9 58.8 41.7 50.0 35.5 0.1 0.04 11.2 8.0 141.1 100.0
This table reflects the overall financing plan while paragraph 2 reflects the financing gaps.