Document of The World Bank FOR OFFICIAL USE ONLY Report No. 6531-BR STAFF APPRAISAL REPORT BRAZIL FEPASA RAILWAY REHABILITATION PROJEC. May 7, 1987 Projects Department Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their offical duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents Currency Unit - Brazilian Cruzados (Cz$) US$1 - Cz$ 23.88 (April 20, 1987) Cz$ 1 - US$0.0419 (April 20, 1967) Weights and Measures Metric System Fiscal Year January 1 - December 31 Abbreviatiois and Acronyms BNDES - Banco Nacional de Desenvolvimento Economico e Social National Economic and Social Development Bank CBTU - Companhia Brasileira de Trens Urbanos Brazilian Urban Train Company CFP - Comissao de Financiamento da Producao Agricultural Production Financing Commission CIP - Conselho Interministerial dos Precos Interministerial Committee for Price Control CTRIN - Comissao do Trigo Nacional National Wheat Commission CVRD - Companhia Vale do Rio Doce Rio Doce Valley Company DER - Departamento de Estradas de Rodagem (Estatal) State Roads Department DERSA - Desenvolvimento Rodoviario, S.A. Highway Development Corporation DNER - Departamento Nacional de Estradas de Rodagem National Federal Roads Department EBTU - Empresa Brasileira de Transportes Urbanos Brazilian Urban Transport Enterprise EFVM - Estrada de Ferro Vitoria-Minas Vitoria-Minas Railway Company ERR - Economic Rate of Return FEPASA - Ferrovia Paulista, S.A. Sao Paulo Railway GEIPOT - Empresa Brasileira de Planejamento de Transportes National Transport Planning Agency INPC - Indice Nacional de Precos ao Consumidor National Consumer Price Index MDU - Ministerio de Desenvolvimento Urbano Ministry of Urban Development MIS - Management Information System MT - Ministerio dos Transportes Minist-y of Transport OIS - Operations Information System PORTOBRAS - Empresa de Portos do Brasil, S.A. Brazilian Port Enterprise RFFSA - Rede Ferroviaria Federal, S.A. Federal Railway SEP - Secretaria de Planejamento do Estado de Sao Paulo Secretariat of Planning - Sao Paulo State SEPLAN - Secretaria de Planejamento Federal Planning Secretariat ST - Secretaria dos Transportes do Estado de Sao Paulo Secretariat of Transport - Sao Paulo State SUNAMAM - Superintendencia Nacional da Marinha Mercante National Agency for Merchant Marine STAFF APPRAISAL REPORT FOR OMCL41 USE ONLY BRAZIL FEPASA RAILWAY REHABILITATION PROJECT TABLE OF CONTENTS Page No. I. PROJECT SUMMARY ............. ............ ........................ 1 II. THE TRANSPOR: SECTOR .............3 A. An Overview in the National Context ... 3 B. Transport in the State of Sao Paulo 4 C. The FEPASA Railway, an Overview 6 Do Country Sector Strategy 7....... .......................... 7 E. Bank Experience in the Sector 7 III. THE FEPASA RAILWAY ........ 8 A. Organization and iinances 8 B. Economic Role of the Railway 10 C. Tariffs and Marketing 11 D. Operations and Maintenance ...............................1.. 1 E. Personnel Management and Training 13 F. Investment Program 1987-1991 ........................ ....... 14 IV. THE PROJECT *.o .......... .... ........... ............ ..... 15 A. Project Objectives and Rationale ........................... 15 B. The Policy and Institutional Development Action Program . .. 16 (-i) Actions to be Taken ...*................ 16 (ii) Targets ......... ...................... .. 19 C. Project Description ....................................... 19 (i) The Rehabilitation Program ........................... 19 (ii) The Technical Assistance Program ..................... 20 (iii) The Training Program ................................. 20 D. Project Cost and Financing ..,............................. 21 E. Project Implementation, Disbursements and Audits ........... 21 F. Procurement ...................... ...................... 24 G. Projected Financial Performance ..................... ....... 25 H. Project Economic Evaluation ................................ 26 I, Project Risks ....@ ............................o......eeo. 26 V. AGREEMENTS REACHED AND RECOMMENDATION .................... 27 This report is based upon the findings of an appraisal mission which visited Brazil in September 1986. The mission comprised Messrs. J. Cellier (Project Officer), J. Baigorria (Railway Engineer), T. Markus (Financial Analyst), D. Klaus (Loan Officer) and Consultants Messrs. J. Bergouignan (Railway Operations Specialist), R. Carruthers (Railway Economist) and P. Lindemann (Training Specialist). This document has a restricted distribution and may be used by recipients only in the perfotmance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - TABLE OF CONTENTS (Continued) Page No. TABLES 2.1 National Transport Output by Mode, 1980-1986 ..................... 30 2.2 Federal Investments in the Transport Sector ..................... 31 2.3 Some Key Characteristics of the Brazilian Railways .............. 32 2.4 Sao Paulo State Freight Transport Output by Mode, 1975-1985 .....0 33 3.1 FEPASA Income Statements, Total Operation, 1980-1993 ............ 34 3.2 FEPASA Fund Flow Statements, 1980-1993 .......................... 35 3.3 FEPASA Balance Sheets, 1980-1993 ................................ 36 3.4 Price Structure of Petroleum Automotive Fuels ......., ........... 37 3.5 FEPASA Traffic, 1975-1993 .......................... ,,, , 38 3.6 FEPASA's Operating Statistics, 1980-1986 ........................ 39 3.7 FEPASA's Motive Power, 1986 ....... .............................. 41 3.8 Summary of FEPASA's Motive Power Requirements, 1987-1993 ........ 42 3.9 FEPASA's Rolling Stock, 1986 .................................... 44 3.10 Summary of FEPASA's Rolling Stock Requirements, 1987-1993 ....... 45 3.11 FEPASA's Investment Plan, 1987-1991 ............................. 46 4.1 Project Cost Summary . 47 4.2 Action Program, Technical Assistance and Training - Cost Table t. 48 4.3 Araguari-Santos Corridor - Cost Table ........................... 49 4.4 Broad Gauge Corridor -Cost Table ............................... 50 4.5 Meter Gauge Corridor -Cost Table ............................... 51 4.6 Track Plants, Workshors and Rolling Stock - Cost Table ........... 52 4.7 Project Financing Plan ..................... . 53 4.8 Action Program, Technical Assistance and Training - Financing Table ,., 54 4.9 Araguari-Santos Corridor - Financing Table ...................... 55 4.10 Broad Gavue Corridor - Financing Table 56 4.11 Meter Gauge Corridor - Financing Table 57 4.12 Track Plants, Workshops and Rolling Stock - Financing Table ....., 58 4.13 Estimated Schedule of Disbursements 59 4.14 Allocation of Loan Proceeds ..................................... 60 ANNEXES I - Bank Assistance to the Transport Sector in Brazil 1............ h 2 - FEPASA Financial. Performance ................................. 67 3 - FEPASA Costing, Tariffs and Marketing . 77 4 - FEPASA Freight Traffic Forecast .............................. 81 5 - FEPASA operating Performance ................................. 91 6 - The Rehabilitation Program 4444444444.4444444.*44444....444444 93 7 - The Technical Assistance Program ......4444 ................. 107 8 - The Training Program 4 44444.4...4 44 4 115 9 - Economic Evaluation of FEPASA's Investment Program 119 10 - Econotnic Evaluation of the Project and Project Components 125 11 - Economic Evaluation of FEPASA's Electrifica:ion Project 141 12 - ProjA'ct Implementation and Monitoring ........................ 155 13 - Selected Documents and Data Available in the Project File .... 161 CHARTS 1 - Organization of the Ministry of Transport ................... 162 2 - Organization of the Sao Paulo State Transport Secretariat 163 3 - organization of FEPASA 164 MAPS IBRD 20356 - BRAZIL - Railroads IBRD 11571R1 - BRAZIL - Sao Paulo State Railroads BRAZIL FEPASA RAILWAY Rk~'ABILITATION PROJECT I. PROJECT TSUMMARY Borrower: Ferrovia Paulista S.A. (FEPASA) Guarantor: Federative Republic of Brazil Amount: US$100 million equivalent Terms: Repayment in 14 years, including three and one half years of grace, at the Bank's standard variable interest rate. Project The project would provide assistance to FEPASA in the Description: implementation of (i) an action program for the financial rehabilitation and the improved commercial performance of the railway and (ii) an investment component designed to increase transport efficiency in the three main railway corridors leading ti' Sao Paulo and to the port of Santos. The action program includes measures for an organizational and financial restructuring of FEPASA, the rationalization of railway operations and improved corporate and business planning, appropriate tariffs and effective marketing and cost-control, upgraded operations and maintenance management systems, and effective personnel management and training. The investment component essentially incluces the rehabilitation and improvement of the most critical line sections, yards, telecommunication systems, rolling stock and workshops, and track maintenance and intermodal facilities. Beneficiaries: Quantifiable project benefits would be realized by FEPASA in the form of cost savings on train and yard operations and on track maintenance, and, because of the competition with the trucking industry, they will, to a large extent, be passed over to the railway users. Substantial benefits would accrue particularly to agricultural, industrial and export producers in the areas of influence of the three corridors. The action program would support Federal and State Government and FEPASA's management efforts to turn the State railway into a financially and commercially viable enterprise. Risks: Project benefits could be aff_cted by lever-than-expected economic performance, particularly in the agriculture and export sectors in the regions served by the project corridors, and by unexpected delays in project implementation. However, assuming that the transport demand is 20% below the forecast and project costs are 20% higher than the estimates, the project would still have a 14% rate of return. An appropriate project monitoring system would be established to minimize the risks. -2- Estimated Costs: 1/ -US$ Million … Local Foreign Total Civil Works 34.7 19.6 54.3 Materials 36.5 45.9 82.4 Equipment 24.2 50.4 74.6 Mechanical Works 13.7 15.6 29.3 Technical Assistance 7.0 2.7 9.7 Training 1.5 0.8 2.3 Total Base Cost 117.6 135.0 252.6 Physical Contingencies 8.6 9.0 17.6 Price Contingencies 6.8 8.0 14.8 Total Project Cost 133.0 152.0 285.0 Financing Plan: -- US$ Million- Local Foreign Total IBRD - 100.0 100.0 BNDES 69.3 38.5 107.8 Cofinanciers - 13.5 13.5 FEPASA 63.7 - 63.7 Total 133.0 152.0 285.0 Estimated Disbursements: Bank FY 86 89 90 91 92 93 94 Annual: 9.0 2/ 15.0 24.0 25.0 ,0 7.0 3.0 Cumulative: 9.0 2/ 24.0 48.0 73.0 90.0 97.0 100.0 Rate of Return: about 21%, basel on an evaluation of the investment component, which represents 94% of the total project cost. 1/ Including estimated local taxes and duties totaling US$45.8 million. 2/ Including initial deposits into the Special Accounts totaling US$5.0 million. - 3 - 1I. THE TRANSPORT SECTOR A. An Overview in the National Context 2.01 Brazil's rapid economic growth in the 1960s and 1970s, the development of widely spread agricultural and mineral resou es, and the large industrial base led to unprecedented increases in transport needs. Transport output growth exceeded the average GDP growth of 7.5% per annum, with freight and interurban passenger trafric increasing at an average 9% and 13% per annum respectively. Freight traffic stabilized with the recession in the early 1980s, w'iereas passenger traffic continued to grow, but at a much slower pace. With the economic recovery beginning in 1984, traffic growth resumed at annual rates on the order of 6 to 7% (Table 2.1). Transport growth in the medium term is expected to be close to GDP growth. Road transport remains the dominant mode, with 55% of total freight and 95% of interurban passenger traffic, but the railways have increased their participation in freight transport from 17% in the early 1960s to 24% at present, specializing in fewer commodities and longer hauls. Coastal shipping, virtually stagnant for many years, developed after 1973, specializing in liquid- and dry- bulk cargoes, and Brazilian flag particlpation in foreign trade incroased markedly. Inland water transport, although not very significant countrywide, is important in the Amazon basin and has developed recently in the South. 2.02 The management of the sector is shared among the Federal, State and Municipal Govermnents, generally through large subsectoral agencies and public enterprises under the jurisdiction of the (Federal) Ministry of Transport and the State Secretariats for Transport (Chart 1). The National Highway Department (DNER) administers the interstate trunk highways, while the State Roads Departments (DERs) and the Municipal Governments are responsible for other highways and the teeder roads. The Federal Railway Company (RFFSA), a consolidation of 18 independent regional railways, recently curtailed its commercially non-viable inter-city passenger services and spun off its passenger train systems in the major metropolitan areas into a subsidiary, the Brazilian Urban Train Company (CB,U), and it now operates mostly freight services in Southeastern, Southern, and part of Northeastern Brazil. The Sao Paulo State Railway (FEPASA), under the State Government's jurisdiction, operates mainly freight services on a rail network which serves the country's most developed region, formed by the State of Sao Paulo and neighboring areas, as well as some passenger services, including in the Sao Paulo metropolitan region. The large mining group Companhia Vale do Rio Doce, which is under the Ministry of Mines and Energy, owns and operates two essentially ore-carrier railways in the Southeast and in the North. The administration of ports and inland waterways is handled by PORTOBRAS, a Federally owned holding company which controls individual port companies and agencies, and shipping is under the National Merchant Marine Superintendency (SUNAMAM). 2.03 Public investments in the sector were directed, during the past two decades, toward expanding the capacity of the transport system in line with demand growth, and particularly toward construction and paving of the network cf primary highways. After the 1973-74 oil shock, more emphasis was put upon the development of rail and water transport. The Steel Railway and deep-sea - 4 - ports at Sepetiba and Tubarao were undertaken in conjunction with the expansion of the steel industry, and specialized terminals were built in the Southern ports to enable the expansion of agricultural exports. Considerable resources were also allocated to shipbuilding programs and to developing a national merchant marine, and programs were started to increase the capacity and efficiency of the passenger train systems in the major metropolitan regions. In the early 1980s, public investments were scaled down drastically (Table 2.2). The completion of the Steel Railway was postponed, and port investments were geared to the completion of integrated industrial projects (the Tubarao steel mill and the Albras-Alunorte aluminium projects in the North) and the Sepetiba coal terminal. The only significant new investments made during this period were the recently completed Northwest Highway and Carajas Railway, which were part of tne integrated Northwest development program and the Carajas iron ore project respectively, both with Bank support. The emphasis has also gradually shifted from new construction to maintenance and to the rehabilitation of essential facilities. However, the Government's austerity program and the containment of the tariffs of the revenue-earning entities led to the postponement of needed maintenance and rehabilitation works sectorwide and to the deterioration of substantial portions of the transport system. 2.04 The railway subsector, including RFFSA and CBTU, FEPASA and CVRD's two railways, currently represents a combined network of over 30,000 km and a total annual output of 86 billion ton-km, 13 million inter-city passengers and 560 million metropolitan passengers (Table 2.3). Over the past two decades, with the development of the paved highway network, the railways have lost significant shares of the inter-city passenger, break-bulk and short- haul freight markets to the competitive road transport industry. Meanwhile, they have been given a key role in the Brazilian Economy by the mining and industrial development in the Southeast, and the expansion of the agricultural frontier to the West, away from the major consumption centers and ports, as well as by the recent growth of exports. The railways have therefore gradually specialized in the transport of a few bulk products over long hauls. However, Government control over railway tariffs and intervention into RFFSA's and FEPASA's operations and investments, combined with the railways' institutional weaknesses in many areas - particularly planning, marketing and cost control - have led to recurrent deficits, to inappropriate investments, and to excessive borrowing. In 1985, RFFSA management and the Federal Government, with the support of the Bank (Loan No. 2563-BR), undertook a comprehensive action plan for the financial rehabilitation and the commercially oriented operation of the Federal railway. The project would assist FEPASA's management and the Sao Paulo State Government in implementing similar objectives. B. Transport in the State of Sao Paulo 2.05 The economy of the State of Sao Paulo accounts for about 40% of Brazil's GDP. It is highly diversified, with about 50% of the labor force employed in services, 40% in industry and 10% in agriculture. The State's contribution to external trade is also significant. State exports represent about 40% of the country's export total, and more than three-fourths, in value terms, are manufactured products or semi-processed goods, the balance being primary commodities. 2.06 Transport output in the State, measured in freight ton-km, represents about 27% of the national transport output. It increased, in line with the State GDP, at about 7% per annum in the second half of the 1970s, decreased slightly during the recession, and had recuperated previous growth rates beginning in 1985. Road transport accounts for 73% of the freight and 96% of the passenger traffic (Table 2.4). The railways, however, including most of FEPASA's system and some sections of RFFSA's lines, have succeeded in increasing their share of the freight market from 13% in the mid-1970s to 21% at present, specializing in the transport of bulk cargoes such as petroleum products, cement, industrial inputs, grain and soya products. The remaining freight transport (about 6%) is mostly liquid fuels moved by pipelines between port terminals and the refineries. Port traffic for both domestic coastal shipping and maritime external trade, the bulk of which is through the port of Santos, totals about 30 million tons. Althougn air transport and, to a Linaller extent, inland water transport have been developing rapidly, their shares of the freight market remain marginal. In the medium term, transport output in the State is expected to increase in line with the State GDP, i.eo, at annual rates on the order of 5 to 6%. 2.07 The transport system in the State is well developed, with a road network comprising about 20,000 km of primary highways, of which 90% are paved and 8% are motorways, and 175,000 km of mostly unpaved municipal feeder roads. The State Highways Manag2ment Project-Sao Paulo, which is currently being processed, would assist the State Government to rehabilitate and /or strengthen about 3,000 km of primary highways which have deteriorated as a result of ncadequate maintenance and higher-than-expected traffic. The railways have about 6,000 km of lines in the State; approximately 5,000 km constitute FEPASA's network, and the rest are owned and operated by RFFSA (Map IBRD 11571R1). Pipelines total about 1,400 km in length, and the port of Santos has 11.5 km of quays. The airport system consists of three major airports under Federal jurisdiction and 23 regional airports under the State's jurisdiction. 2.08 The State's institutional organization in the sector is similar to the Federal structure. Overall management responsibility for sector policy and for coordination among subsectors is vested in the Secretariat of Transport (ST), headed by the State Secretary for Transport, who reports directly to the State Governor. Subsector management responsibilities are 4elegated to State agencies and to public enterprises. In particular, road transport and State highways are administered by the Roads Department (DER- SP), with the exception of toll motorways, which fall under the Highway Development Corporation (DERSA). FEPASA, the State Railway, and the Sao Paulo Airways (VASP), which is the second domestic airline, are under the Secretariat's jurisdiction. The administration of ports and inland waterways is vested in the Department of Waterways (DH), and that of regional aviation in the Department of Aviation for the State (DAESP). The organizational structure of ST is flexible; the State Secretary is assisted, in its policy definition and sector coordination functions, by several permanent advisory units staffed with a small number of highly qualified professionals and by ad-hoc committees (Chart 2). In particular, the policy and planning advisory unit, assisted by private consultants and public agencies such as GEIPOT and the Sao Paulo Institute of Technology under long-term contracts, coordinates sectoral planning. Coordination with the Federal Government is made through GEIPOT and ad-hoc committees. - 6 C. The FEPASA Railway, an Overview 2.09 FEPASA was formed in 1971 by the merger of five separate rail:oads; it is owned basically by the State of Sao Paulo. The network, which consists of about 5,200 km of trackage, is organized into three main corridors which converge toward the Sao Paulo metropolitan region and Santos: the Araguari- Santos corridor, which originates North, in Minas Gerais; the broad gauge corridor, which serves Northwest Sao Paulo State and part of Mato Grosso; and the meter gauge corridor, to the West and toward Mato Grosso do Sul (Map IBRD 11571R1). About 1,300 km of lines were electrified more than 40 years ago: the rest of the system is diesel o erated. FEPASA owns about 500 locomotives and 13,000 wagons, and it h. a staff of about 20,000. 2.10 FEPASA is predominantly a frclght, heavy-haul railway. Over 80% of the railway's operating revenues are derived from the freight business, and about 90% of the freight traffic consists of a small number of bulk commodities, mostly petroleum products and automotive alcohol, minerals, cement, grains and soya products. Freight traffic increased at an average annual rate of 14% during the second part of the 1970s, and it stabilized at about 20 million tons (7.0 million ton-km) during the early 1980s. It started to increase again in 1985, although a number of bottlenecks in the system, including the poor condition of important line-sections and of a large portion of the locomotive fleet are preventing FEPASA from attending the demand fully. Freight traffic is forecast to increase at an average 5% to 6% p.a. in the medium term, provided the bottlenecks are removed, and then to gradually stabilize. FEPASA's long-distance passenger traffic has been decreasing constantly; it is now about six million passengers p.a. Passenger commuter traffic in the metropolitan area increased rapidly, after 1978, to close to 87 million p.a. at present, as a result of the capacity investments made in the system. 2.11 FEPASA's freight business has generally been lucrative, with freight revenues covering operating costs including depreciation, and generating a cash surplus more than sufficient to compensate for the cash deficits of the metropolitan and long-distance passenger services. The railway, however, has constantly incurred losses because of its enormous interest and other financial expenses. The Federal control over railway tariffs and inappropriate interventions of the State Government into FEPASA's investments and operations, together with FEPASA's own inefficiencies in various areas, particularly planning, cost-control and management, led the railway to rely excessively upon borrowings and quickly drove its debt to the practically unmanageable level of about US$1.6 billion equivalent. The State Government has recently signed an agreement with FEPASA to service and capitalize FEPASA's obligations under the debt contracted prior to the end of 1986, assumed payment responsibility for future debt until FEPASA is permitted to operate on a commercial basis, ane undertook to establish an adequate normalization system for the efficient operation and the rationalization of the commercially non-viable services and for the appropriate financial compensation of FEPASA. The Federal Government has confirmed that the gradual tariff freedom which was granted to RFFSA would also apply to FEPASA. The present project has been designed to support the full implementation of these decisions, together with the necessary institutional adjustments within FEPASA, with a view to achieve the financial rehabilitation of the railway and to establish the conditions for its operation on a basically commercial basis. -7 D. Country Sector Strategy 2.12 Transport policy in the second half of the 1980s, which is outlined in the New Republic's First National Development Plan and in supporting transport policy papers, should aim primarily to improve the efficiency and performance of both private and public transport operators and to support the country's agricultural growth, export development, and energy conservation objectives. Priority is to be given to the financial rehabilitation of the public enterprises and to the rationalization of their operations, and to improving pricing, marketing and management, through greater reliance upon market mechanisms. Emphasis would be put upon facilitating external trade through improving operatiot,1l efficiency and intermodal coordination in the export corridors and in the port systems, and upon ensuring adequate transport in the agricultural regions. Public investments in the sector should be focused upon the rehabilitation and maintenance of essential facilities and upon cost-effective improvements to existing systems rather than new construction. The Bank's strategy for the transport se.tor supports these objectives; their implementation would be carried on with the project as well as through continued sector dialogue with the Government. E. Bank Experience in the Sector 2.13 The Bank, until the m!d-1970s, supported the expansion of the transport system, with five loans totaling US376 million for highways, three loans totaling US$296 rmiillion for railways, and one loan of US$45 million for ports. After 1975, Bank lending in the sector shifted toward the maintenance and rehabilitation of the primary hignway network with two loans totaling US$324 million, and toward the improvement of the secondary and feeder roads systems, with three loans totaling US$319 million and with transport components of 14 agricultural or rural development projects. In the early 1980s, the Bank also supported the construction of the Northwest Highway, of the Porto-Alegre metropolitan train, and, through the integrated Carajas Iron Ore project, of an 890-km railroad in the Northern region. In 1985, the Bank approved a loan to the Federal Railway (RFFSA) to support its financial rehabilitation and broad policy and institutional reforms for its operation on a commercial basis. The Bank's experience with these projects, all of which but the ongoing Third Feeder Roads, the Federal Highway Sector, and the Federal Railway Projects are completed, has been successful, with, besides physical investments, significant achievements in strengthening the institutions' capabilities (Annex 1). 2.14 The Bank made a loan to FEPASA in 1975 (Loan 1171-BR for US$75 million) to finance the first two years of the railway's 1975-1979 investment plan. The project was completed in 1982, after substantial delays and reformulation. The project performance audit report 1/ concluded, in particular: that the investment program, at an estimated cost of about US$1.6 billion, which the project supported was too large for FEPASA to implement and was lacking an indication of priority among the numerous individual investments; that control over executili was inadequate; but that, although 1/ Issued with Secretary's Memorandum M-86-844 of July 17, 1986. - 8 - FEPASA failed to achieve the targeted traffic and financial performance, the project clearly contributed to significant improvements in the railway's properties and train operations, to large increases in freight traffic, and to reductions in staff and other cost savings. Th. design of the new project has been influenced significantly by this experience. In particular, FEPASA's investment program for 1987-1991 has been limited essentially to the rehabilitation program, which constitutes the investment component of the project, and to the completion of its ongoing electrification and metropolitan train modernization projects; investment expenditures would total about US$600 million over the plan's period, which is consistent with the railway's expected fund-generating capacity. Also, an appropriate monitoring system would be established to plan and control the project's execution effectively. III. THE FEPASA RAILWAY A. Organization and Finances 3.01 FEPASA is a public corporation controlled by the Sao Paulo State Government (virtuallv all the shares are owned by the State) through ST. It is managed by a Dire-torate of eight directors, appointed by the State Transport Secretary; the President of FEPASA is the chairmaut of the Directorate. An Administrative Council, with representatives from various Government entities, controls FEPASA's management. FEPASA is organized into six functional departments, namely Transportation, Technical, Planning, Finance, Administration, Legal and Patrimonial, and a recently created department responsible for the operation of FEPASA's metropolitan train system; each department is headed by a director (Clart 3). Freight and long- distance pas3enger services are also organized into seven regional units headed by superintendents appointed by the President. FEPASA has recently undertaken the task of separating the administration and the finances of the socially oriented metropolitan train services, which have recently been expanding rapidly, from the essentially market-driven businesses. The Government is expected to exercise a more direct control over the operations and finances of the metropolitan train department, while providing FEPASA with the required management autonomy to operate its commercial businesses. The project would provide support to FEPASA and to the Government to complete and consolidate this reorganization (para 4.05). 3.02 FEPASA has been operating at a loss since it was created in 1971 (Tables 3.1 to 3.3 and Annex 2, Section A). The metropolitan train operation and the long-distance passenger services have been the main sources of the losses, while the freight business has been relatively lucrative. The annual working surpluses of the freight business (about US$26 million equivalent), which has not been subject to normalization payments, have, over the past five years, been sufficient to cover the relevant depreciation costs and to generate an operating surplus before interest of about US$8 million equivalent. The two other operations had, on the average, operating losses of US$12 million for the metropolitan train and US$10 million equivalent for the long-distance passenger services respectively. The State Government makes normalization payments to FEPASA for these two operations, but these payments have been insufficient to cover the losses adequately. FEPASA and the - Government recently undertook to establish an appropriate normalization system. The State's decree No. 26.772 of Februmary 18, 1987 provides the legal framework for the new system. The project would provide support for an actiont program for the gradual rationalization of these services and the implementation of the improved normalization system (para 4.06). 3.03 Rationalization programs were carried out by FEPASA's successive managements. Several branch lines with low traffic densities totaling about 700 km were de-activated in the late 1970s and early 1980s, and long-distance passenger services were gradually reduced from about 11.5 to 6.0 million train-km p.a. Of more significance, FE.PASA's staff has been reduced from about 36,000 in 1'171 to about 20,000 at present through various rationaliza- tion measures in operations, track and fleet maintenance, and administration. Further rationalization measures are still needed, however, from both the commercial and economic viewpoints, on the few remaining low-density branch lines with unfavorable prospects in the medium term, which make up a total of about 350 line-km in length, and, more important, in the long-distance passenger services. However, the Government has consistently required FEPASA to maintain such commercially non-viable services for social reasons. The improved normalization system, which would be established under the project, would require the State Government and FEPASA to regularly review the costs and benefits of maintaining such services and clearly specify the individual services to be maintained at the Government's request, and the Government to make the appropriate normalization payments to FEPASA. Such mechanisms, together with appropriate pluriannual plans and financial performance targets, would achieve the gradual reduction, the rationalization, and the efficient operation of FEPASA's remaining, commercially non-viable services (paras 4.06 and 4.07). 3.04 FEPASA has had to borrow on an increasing scale, and essentially on the more expensive short-term basis, mainly to finance investments and to pay off debts. These heavy borrowings led FEPASA to a practically unmanageable financial position. With accumulated debts reaching about US$1.6 billion equivalent at the end of 1985, annual interest, financial fees and payments of principal have been exceeding the company's annual revenues, and both the State and the Federal Governments, as guarantors, had to service the company's debts. It is estimated that FEPASA would have to pay some US$2.3 billion equivalent in principal and interest to meet its obligations over 1987-1991. The main problem has been that, with Federal control over railway tariffs, and with investment decisions often made at Government level without taking full account of FEPASA's priorities and fund-generating capacity, the company could not operate as a commercial enterprise. In order to alleviate the situation and to establish an appropriate framework for an effective financial management of the company, the State Government recently signed an agreement with FEPASA to pay and capitalize all FEPASA's debts guaranteed by the State and contracted prior to January 1, 1987, and assumed responbility for servicing the new debts to be contracted from 1987 onward until FEPASA is permitted to operate on a commercial basis. The State Government also undertook to negotiate with the Federal Government the latter's possibl participation in the proposed financial restructuring of FEPASA and has decided to sssume responsibility for payments of Federally guaranteed debts ~aitil completion of these negotiations. The project would support the full implementation of these and other measures for an appropriate management of FEPASA's debts (para 4.05)v. - Ju - B. Economic Role of the Railway 3.05 FEPASA has gradually specialized in the transport of heavy bulk products. With the development of the paved highway network, FEPASA lost significant shares of the break-bulk, short-haul and passenger markets to the competitive road transport industry. Meanwhile, industrial development in the Southeast region and the expansion of the agricultural frontier to the West, as well as the recent growth of exports, particularly through the port of Santos, have given FEPA3A a key role in the regional and national economies. FEPASA's freight traffic increased very rapidly, at average annual rates of about 14%, in the second half of the 1970s, then stabilized at the level of 20 million tons and 7.0 billion ton-km during the 1980-1984 recession. With the economic recovery, freight traffic started to increase again, reaching 22 million tons and about 7.2 billion ton-km in 1986, but FEPASA has been unable to fully attend the demand for its services as a result of the various physical and operational bottlenecks which are discussed in the following sections. The lower costs of the railway for large volumes of bulk products, whicl-, on the average, are ranging between 40% and 70% of trucking costs, have been the major factor of FEPASA's traffic growth (Annex 3), The allocation of traffic between road and rail transport has been distorted in the past because of inadequate rail tariffs and diesel oil prices. However, the price of diesel oil is now well above international prices (Table 3.4), With other recent adjustments to road user charges, road vehicles are now charged for at least the routine and periodic road maintenance costs attributable to them, and there are no major distortions in the traffic allocation. Petroleum products and automotive alcohol, some minerals and other heavy industrial inputs, construction materials, grains and soya products, sugar and fertilizers make up the bulk of FEPASA's freight business; the 15 major products now represent almost 90% of total freight traffic (Table 3.5). 3.06 FEPASA's freight traffic is expected to increase at rates close to GDP growth in the medium term, i.e., at about 5 to 6% p.a., provided that the major physical and operational bottlenecks are removed. As part of project preparation, FEPASA developed a traffic forecast which was based both upon a comprehensive transport study carried out by ST to update the State transport plan and upon the market surveys which FEPASA undertakes and updates regularly for operations and investment planning purposes (Annex 4). Over the project's implementation period, the demand for petroleum products and alcohol is expected to increase at about 3% and 5% p.a. respectively, and FEPASA's traffic of these products would increase at slightly higher rates as a result of the increasing proportion of longer hruls. The demand for, and FEPASA's traffic of, industrial inputs are forecast to grow at rates close to or below GDP growth, ranging between 2% and 6% p.a. The recent expansion of agriculture in the Center-West subregions, which are served by the railway, offers FEPASA good prospects for the transport of grains, soya and their derivatives; with the project's investments and action programs, FEPASA would be expected to increase its traffic of soya beans and pellets by a total of almost 2.0 million tons over the seven-year period (Table 3.5). 3.07 FEPASA's long-distance passenger business has become marginal; it decreased from 14 million passengers in 1975 to about 6.9 million in 1986, and it now represents less than 3% of the company's total revenues. With the exception of a few specific services, the railway is unable to compete - 11 - successfully with the bus and air transport induistries. This traffic is expected to continue to decrease, at a rate of about 5°. p.a., since FEPASA and the State Government are committed to rationalize these services further through the improved normalization system and appropriate rinancial targets (para 4.06). The metropolitan passenger traffic has increased rapidly from 44 million passengers p.a. in 1979 to about 87 million in 1986 as a result of the capacity investments made in the system. Metropolitan traffic is expected to continue to increase with the completion of the ongoing modernization program, although at the slower pace of about 5% p.a. C. Tariffs and Marketing 3.08 Railway tariffs and, to a large extent, contract rates are controlled by an interministerial committee (CIP), which determines the prices of commodities and services in Brazil. Since a uniform tariff policy is applied to the various railways, FEPASA has benefited from the global and selective real term tariff adjustments which were made prior to and after Board approval of Loan No. 2563-BR to the Federal railway (RFFSA). Until recently, freight revenues were sufficient to recover the relevant operating costs, but the price freeze which was established with the Cruzado Plan in February, 1986, would have resulted in about an 8% real term loss of freight revenues in 1986. FEPASA has taken short-term measures including the revision of its discount policy and special contracts to recuperate this loss; as a result, by the end of 1986, average revenues had increased by about 5.911, In early 1987, two tariff adjustments were authorized, which, by April 1987 as compared to March 1986, increased the average freight revenues by 14% and the long-distance passenger revenues by 23% above the inflation for the corresponding period. Average revenues, however, are still below average costs for a number of the main products, while, for a few products such as petroleum and alcohol, they are comparatively high (Annex 3). Further tariff increases will be needed for the financial rehabilitation of the company, and, since tariffs require substantial restructuring, the increases should be made through appropriate selective adjustments, consistent with a new cost-related, market-based tariff structure to be develonpd (para 4.08). Passenger tariffs also need to be increased, although the rationalization of the passenger services, which will he monitored through working ratio and reducing normalization payment targ2ts, will have a greater impact on FEPASA's finances (Annex 2). 3.09 FEPASA sales efforts are essentially directed toward the satisfaction of the customers' short-term transport needs, which are monitored by the Commercial Superintendency of the Transportation Department, and toward maximizing production with, the available resources. The marketing function will therefore have to be strengthened, with teclhnical assistance, to emphasize the profit maximization objective. In particular, FEPASA needs to maintain more comprehensive market information for strategic planning purposes and to strengthen sales planning and control to support corporate objectives. Also, the company's cost accounting system, which produces average commodity traffic costs, will have to be improved to produce line- specific and individual origin-destination traffic costs and to provide the appropriate cost information for marketing and for tariff monitoring purposes (para 4.08 and Annex 3). - 12 - D. Operations and Maintenance 3.10 FEPASA's operating perfor:mance has been mixed since 1980, following substantial improvements made during the last decade; overall performance, however, as compared to that of other railways in developing coulntries, remains satisfactory (Annex 5). In particular, the availability of the diesel and electric locomotives decreased (from 79% and 71% in 1980 to 66% and 68% in 1986 respectively). Of greater significance, their reliability and effectiveness deteriorated, further affecting their productivity, despite the relatively good and improving utilization of the available locomotives (Table 3.6). Wagon productivity is also low, with average turnaround times remaining at about nine days as a result of demurrage in terminals. Train compositions have continued to improve, the average net train load now reaching 726 tons. The major improvement, however, was in staff productivity, as a result of the substantial staff reductions. The main factors affecting FEPASA's operational performance, besides difficult natural terrain conditions, have been the recent economic recession and Government austerity program which, with the associated fund shortages and import restrictions, led FEPASA to drastically reduce the maintenance of the locomotive fleet and to defer essential track renewals and infrastructure rehabilitation works at a time when the unusually heavy rains of 1982-1984 did catlsiderable damage. The project would support action programs for improvements in FEPASA's operations (paras 3.11 to 3.17). 3.11 Operations management responsibilities are vested essentially in the regional units, and central staff is mainly responsible for interregional coordination. FEPASA employs two data systems, for operating and for revenue accounting, based upon a central mainframe computer system, and data input is through separate communications networks of microcomputers and teletype terminals, or directly keystroked at the company's headquaters. Locomotive and wagon movement data processed on the mainframe computer are at least 24 hours behind real time and therefore can be used essentially for statistical or analytical purpose. FEPASA recently undertook to prepare for th- development and implementation, in coordination with RFFSA and CODESP, of a real-time operations information system (OIS) which, by improving locomotive and wagon control, including control of wagon interchanges with RFFSA and the Santos port and of demurrage at terminals, would particularly contribute to a more effective use of the rolling stock. As part of this plan, FEPASA management would also revise the organization and procedures for operations planning and control, and consolidate the regional units as appropriate. The project would provide support to FEPASA for the appropriate development and implementation of the system (para 4.09). 3.12 FEPASA's motive power currently consists of 491 locomotives, of which 140 are electric and 351 are diesel-electric units. About three-fourths of the electric units are over 40 years old, and more than half of the diesel fleet is over 20 years old (Table 3.7). The condition of both fleets has deteriorated significantly during the past five years as a result of aging and of FEPASA's inability to perform the necessary heavy overhauls and rehabilitation works because of fund shortages and import restrictions. FEPASA's strategy to improve the availability and reliability of its locomotives is. in the short term, to carry out the deferred general overhauls, accidental repairs and rehabilitation of diesel units and components; then to gradually retire and scrap older electric and diesel - 13 - units when subject to a major failure and to replace them with the electric locomotives which have been purchased as part of the electrification project and will be gradually delivered over the next few years (Table 3.8). FEPASA has also undertaken to strengthen preventive maintenance (para. 3.13). The preceding measures are expected to gradually improve the average locomotive availability from 67% in 1986 to 80% by 1993 (para 4,11). FEPASA also operates a fleet of almost 13,700 freight cars, of which about 1,200 are owned by shippers and 1,200 are used for FEPASA's own account transport needs (Table 3.9). Although almost 40% of the fleet is over 30 years old, its general condition is good. FEPASA has no other plan for new car purchases in the short term than 230 specialized units for petroleum products since substantial productivity increases are expected from the operations management action program (Table 3.10). 3.13 Locomotive and freight car repairs and maintenance are carried out in four main workshops, ten locomotive sheds and 22 freight car ancillary shops. FEPASA has, since 1971, gradually been rationalizing the ill-matched facilities inherited from its five individual predecessors, consolidating specific tasks at specialized facilities. However, additional measures are needed to improve maintenance effectiveness, including the revision of locomotive and wagon maintenance cycles in line with verified actual requirements; the further consolidation of some types of major works on locomotives, wagons and components; the concentration of locomotive and wagon maintenance into fewer sheds and ancillary shops; and the renewal and complementation of workshop and shed equipment and tools. Also, a computerized rolling stock maintenance MIS should be established as part of the OIS to improve the planning and control of maintenance. FEPASA recently started to reorganize rolling stock maintenance by placing both repair and preventive maintenance activities, which were previously divided between the Technical and the Transportation Departments, under a Gereral Superintendent for Maintenance who reports to the Transportation Director, and to prepare a maintenance and repair plan to define the above-mentionned measures. The proposed project would help FEPASA to consolidate the reorganization and to finalize and implement the maintenance and repair plan (para 4.09). 3.14 Track maintenance has been insufficient over the past several years because of fund shortages; expenditures for that purpose decreased from about 20% of the company's revenues in the mid-1970s to between 4% and 9% in 1980- 1985, and only 86 km of rails were purchased in the same period. Erosion developed on many line sections in mountainous terrain, especially where drainage systems are insufficient, as a result of the heavy rains which occurred in recent years. The poor condition of the infrastructure led to a rapid deterioration of the superstructure, in particular on the important, high-traffic sections; rails suffered damage because of poor ballast support as well as from wear on sections where steep gradients and sharp curves prevail. FEPASA's maintenance strategy, which consists of carrying out selective track renewals, using heavier rails with welded joints on high traffic-density sections, and using the released rails to renew secondary lines and yards, is adequate. Maintenance effectiveness, however, needs to be improved through increased mechanization and better planning and control. The project would, by providing appropriate funds and technical assistance, help FEPASA to gradually reduce and eliminate the backlog of track maintenance and to strengthen its track maintenance management system (paras 4.09 and 4.13). - 14 - E. Personnel Management and Training 3.15 FEPASA's existing personnel management tools and systems do not permit an appropriate organizational dimensioning or an effective personnel management. FEPASA's recruitment and training policies for both staff and management need to be revised and based upon new criteria, especially regarding dimensioning, job content, and recruitment and training alternatives, consistent with the targeted market-driven operation of the railway. The essential personnel management tools such as promotion and career plans, performance and potential evaluation, and monitoring, cost control and evaluation of training need to be established or improved. FEPASA would then need to gradually restructure its entire institutional training program in line with the revised policies. For the short term, specific training programs for managers from section chiefs to superintendents - focusing upon organization and rationalization of work, marketing and management and data systems - should be developed further and implemented to support the project's implementation. The personnel management and training component of the project, with appropriate technical assistance, would help FEPASA to design and implement these actions and programs (para 4.10). F. Investment Program 1987-1991 3.16 s?EPASA's 1987-1991 investment program basically consists of: (a) the present project, which would be completed in 1993 (Chapter 4 and Annexes 6 to 8); (b) an ongoing electrification project, financed by a foreign consortium and scheduled for completion by 1989; and (c) an ongoing metropolitan train modernization project, financed by BNDES and scheduled for completion by 1990. The electrification project consists of the rehabilitation and strengthening of existing power systems in the broad- and meter-gauge corridors, the electrification of the 524-km Ribeirao Preto-Samarita section of the Araguari-Santos corridor, and the improvement of signaling and telecommunications on sections being electrified; a total of 80 electric locomotives have been ordered for the three electrification components. The metropolitan train project consists of the improvement of train control systems, the modernization and construction of stations designed to improve integration with other systems, and the remanufacturing of some old electric multiple units. The total cost of the program is estimated at about US$626 million equivalent, the three main components representing 45%, 43% and 9% of the total cost respectively (Table 3.11). The investment program would be financed from the proposed Bank loan of US$100 million (or 16% of the program cost), loans from BNDES (25%), suppliers' credits (38%), State Government capital contributions (11%) and FEPASA's own resources (10%). FEPASA's average annual investments under the program would be about 50% higher than those achieved during 1980-1986; the program, however, with the proposed action program, would be well within FEPASA's financial and implementation capacities, and it is consistent with FEPASA's investment requirements. 3.17 FEPASA's investment program for the non-metropolitan businesses, i.e., the rehabilitation program (the present project) and the electrification project together, taking into account the sunk costs of the electrification project, was found at appraisal to have an estimated economic internal rate of return (ERR) of about 13% (Annex 9). The estimated ERR of the present project is 21% (para 4.27 and Annex 10). Regarding the electrification project, which was about 44% completed at the end of 1986, it - 15 - was found that the two rehabilitation and strengthening components had estimated ERR, including sunk costs, of 10% and 11% respectively and that the new electrification component had an estimated ERR of about 8% including sunk costs; however, the remaining investments for the latter component, excluding sunk costs, would yield an ERR on the order of 40%. Since: (a) the remaining investment to complete the new electrification component would yield satisfactory returns and the component's estimated ERR, including all sunk costs, is only marginally below 10%; (b) the alternative of cancelling the contracts would, at this stag(, lead to excessive compensation payments to contractors, with no benefits from the considerable sunk investments; and (c) the alternative of extending the completion schedule would result in a lower rnet present value for the project; the fixed installation works of the three components should be completed as scheduled. In order to improve the project's cost-effectiveness, FEPASA has undertaken to renegotiate with the consortium some of its aspects, including the delivery schedule of the locomotives (Annex 11). The metropolitan train modernization project was found at appraisal to have an estimated ERR, including sunk costs, of 21% (Annex 9). IV. THE PROJECT 4.01 The main purpose of the proposed project is the financial rehabilitation of FEPASA and the establishment of the necessary conditions for operating the railway on a commercial basis. The project was designed to provide support to FEPASA and the Sao Paulo State Government in implementing the required policy and institutional adjustments, as well as the needed rehabilitation of essential railway and intermodal facilities. A. Project Objectives and Rationale 4.02 The objectives of the project are: (a) the financial rehabilitation and improved commercial performance of FEPASA; and (b) increased transport efficiency in the main corridors leading to Sao Paulo and to the port of Santos. By achieving these objectives, the project would contribute to more efficient resource use in the transport sector, particularly through further specializing the railway in the services for which it has a comparative advantage over road transport. It would also facilitate agricultural development and external trade through more efficient transport services between the agricultural frontier, the industrial metropolitan region and the country's major port. 4.03 The Bank's involvement in the project would help to implement the appropriate mix of policy and institutional adjustments and of physical investments necessary to gradually turn FEPASA into a commercially viable railway. In particular, it would help to ensure an adequate separation of the metropolitan train operation and the resolution of the debt problem, streamline the railway's and the Government's respective responsibilities, focus expenditures on necessary rehabilitation and maintenance rather than on new construction or purchases, and adhere to appropriate operational and financial policies and targets to achieve the stated objectives. By helping to establish the conditions for an effective management of the railway, the project would also contribute to the Bank's public sector management objective for Brazil. - 16 - 4.04 The proposed strategy includes a policy and institutional development action program and an investment component to be financed under the project. The action program would consist of the implementation of policies and actions for: (a) an organizational and financial restructuring of FEPASA; (b) the rationalization and improved operation and financing of FEPASA's commercially non-viable services, and effective corporate and business planning; (c) appropriate tariffs, marketing and cost-control; (d) the development of the operations and maintenance management systems; and (e) effective personnel management and training. The investment component would consist of FEPASA's rehabilitation program, and of technical assistance and training programs which would support the implementation of the action program (paras 4.12 to 4.15). B. The Policy and Institutional Development Action Program (i) Actions to be Taken 4.05 The organizational and financial restructuring action program aims at establishing an appropriate organizational and financial framework to achieve the project's objectives. It would consist of consolidating the recent organizational restructuring which separated the socially oriented metropolitan train operation from FEPASA's freight and long-distance passenger businesses and of implementing an appropriate plan for the management of FEPASA's debt. It was confirmed and formalized in an agreement between the State and FEPASA dated February 28, 1987, that past debt payments made by the State on behalf of FEPASA would be capitalized, and that future payments of the State-guaranteed debt contracted prior to January 1, 1987, or of any new debt necessary to complete investments already contracted in 1986, would be assumed by the State and capitalized through increasing the State's equity in FEPASA when debt payments (for both principal and interest) are made. The servicing of any other new debt would be FEPASA's responsibility, unless otherwise agreed between FEPASA and the Government under the normalization system (para 4.06). The Federal and the State Governments also undertook to study and define the treatment of FEPASA's Federally guaranteed debt not later than November 30, 1987, as per an adequate action program included in a Protocol signed by the relevant parties, and dated February 28, 1987. It was also confirmed during loan negotiations that FEPASA would: (a) limit its future borrowings, as a percentage of internally generated funds, to the targets shown in paragraph 4.26; and (b) maintain separate accounts and operating and capital budgets for the metropolitan train operation, refrain from transferring funds to this operation from its other revenues unless it is required under normal business compensation practices, and complete the separation of the balance sheet items by the end of 1987. 4.06 The normalization and planning action program aims at streamlining respective 'EPASA and State Government responsibilities regarding the operation and development of the railway's services, at gradually rationalizing operations and at consolidating the company's market-based corporate stategies and plans. It would first consist of setting up an improved normalization system providing for an appropriate financial compensation by the State to FEPASA for FEPASA's losses on the commercially non-viable services which the State Government would require FEPASA to maintain. The new system, as part of the annual budgeting process, would require: FEPASA and the State Government to review the costs and benefits of - 17 - maintaining individual such services for social or regional development purposes; the State Government to clearly define, in quantitative and qualitative terms, the commercially non- viable services which FEPASA would have to maintain during the forthcoming budget year; FEPASA and the State Government to agree on the normalization payments, i.e., the financial compensation, which the State Government wou.d make to FEPASA for the purpose; and FEPASA's and the State Government's respective responsibilities to be stated explicitly in the budget document. In order to reduce the amount of Government subsidies to users and to promote the rationalization of FEPASA's operations, the proportion of the normalization payments in the total corresponding operating revenues would be gradually reduced. The State Government: (a) issued decree No. 26.772 of February 18, 1987, regulating the normalization system in a manner satisfactory to the Bank; and (b) presented a policy statement, satisfactory to the Bank, regarding FEPASA's commercially non-viable services: comparative costs to low-income users and costs to the State under the respective transport alternatives would be the main criteria to be used in determining the services to be maintained under the normalization system. It was confirmed during loan negotiations that FEPASA would: (a) reduce and/or rationalize its commercially non-viable passenger and freight services to achieve the working ratios targets shown in paragraph 4.26 for the respective long-distance passenger, metropolitan train, freight and total businesses, and to contain Government normalization payments for the long-distance passenger and freight services, as a percentage of corresponding operating revenues, below the limits shown in paragraph 4.26; and (b) by September 30 of each year, forward to the Bank, for review and comment, the normalization arrangements for the forthcoming budget year. 4.07 The normalization and planning action program would also consist of preparing a pluriannual plan for FEPASA's metropolitan train, aiming at defining an appropriate institutional organization for this operation, consistent with the urban transport policy action plan being carried out by the Ministry of Urban Development (MDU) under the aegis of the Bank-assisted Fourth Urban Transport Project, and at an appropriate coordination of FEPASA's and CBTU's mass t-ansit systems; of defining a Government medium-term strategy and a plan for the rationalization and financing of FEPASA's long-distance passenger services; and of consolidating FEPASA's corporate objectives and business and operating plans accordingly. It was confirmed during loan negotiations that: (a) the State Government and FEPASA would, in coordination with MT and CBTU, prepare the pluriannual plan for the metropolitan train and present it to the Bank for review not later than December 31, 1987, and implement it thereafter; (b) the State Government and FEPASA would prepare the pluriannual plan for the railway's long-distance passenger services and present it to the Bank for review not later than December 31, 1987, and implement it thereafter; (c) FEPASA would prepare a corporate plan and present it to the Bank for review not later than June 30, 1988, and implement it thereafter; and that (d) FEPASA would analyze the feasibility of its new investments in accordance with technical and economic criteria satisfactory to the Bank, and, by November 10 of each year, discuss its pluriannual investment program and financing plan with the Bank, and revise it accordingly thereafter. 4.08 The tariff, marketing and cost-control action program aims at maximizing FEPASA's net revenues through more effective and selective marketing, and improved tariffs and cost-control. It would consist of - 18 - appropriate tariff adjustments and of the definition and implementation of a market-based, cost-related tariff policy; of the development and implementation of an adequate sales planning and control system based upon improved market, competition and cost information systems; and of the implementation, in association with private firms, of a pilot program of construction and operation of intermodal grain terminals at FEPASA's main railheads. It was confirmed during loan negotiations that the Federal Government's policy of gradually freeing RFFSA's tariffs would also apply to FEPASA, which would enable FEPASA to start adjusting freight tariffs in early 1988, and to set freight tariffs on a commercial basis upon completion of the revaluation of its assets and of the development of a cost-related market based tariff structure by the end of 1988. It was also confirmed that FEPASA would: (a) adjust freight tariffs and rates and passenger fares to achieve the working ratios targets shown in paragraph 4.26 for the respective freight, lotig-distance passenger, metropolitan train and total businesses; (b) develop, in coordination with RFFSA, a cost-related, market-based tariff structure, present it to the Bank for review not later than December 31, 1988, and implement it thereafter; (c) develop an appropriate sales planning and control system, not later than July 31, 1988, and put it into effect thereafter; (d) upgrade, by December 31, 1988, its cost-accounting system, including through a revaluation of fixed assets on a technical basis, to provide and disseminate appropriate cost information for the individual services; and (e) finalize joint-venture arrangements for the construction and operation of intermodal grain terminals at FEPASA's main railheads, present them to the Bank for review not later than July 31, 1988, and implement them thereafter. 4.09 The operations and maintenance management action program aims at increasing operating efficiency and maintenance effectiveness by modernizing FEPASA's management systems and strengthening the planning and control of operations, locomotive and wagon maintenance, and track maintenance. A computerized operations information and control system (OIS) would be developed to improve locomotive and empty wagon distribution, train formation, billing and invoicing, and the management of wagon interchanges with RFFSA and the Santos port. The recent reorganization of locomotive and wagon maintenance would be consolidated through a revision of maintenance schedules and plans, the consolidation of workshop facilities and sheds, the development of a computerized management information and control system (MIS), and appropriate reassignment and training of personnel. A computerized MIS would also be developed, and the organization, methods and procedures for track maintenance planning and control would be streamlined. It was confirmed during loan negotiations that FEPASA would undertake not later than December 1, 1987 and complete not later than June 30, 1989: (a) the consolidation of the organization of operations and maintenance and the development and implementation of an OIS and a locomotive and wagon maintenance MIS; and (b) the development and implementation of a track maintenance MIS. 4.10 The personnel management and training action program aims at consolidating FEPASA's personnel management system, at restructuring and updating FEPASA's ongoing institutional training programs and at developing and implementing the specific training programs which are essential for the successful implementation of the project. Basic personnel management tools, including organizational dimensionning and job descriptions, career and - 19 - access planning, performance and potential evaluation would be introduced and/or strengthened. Existing permanent or semi-permanent training programs would be reviewed in the light of present corporate objectives and reformulated as appropriate. The training component of the project would consist of four specific training programs for middle-management personnel and for operating and administrative staff in the areas of organization and methods, management, and information systems, which would be developed and implemented with external assistance from specialized consultar:ts and institutions (para 4.15 and Annex 8). It was confirmed during loan negotiations that FEPASA would undertake not later than December 1, 1987 and complete not later than December 31, 1990 the development and implementation of such personnel management and training programs. (ii) Targets 4.11 The implementation of the action program would be monitored against the following operational performance targets, which were agreed during loan negotiations, and against the financial performance targets shown in paragraph 4.26. It was confirmed during loan negotiations that FEPASA would give the Bank an opportunity to review its operating and financial performance and its overall investment program and financing plan annually. ______-------------------------------------------------------__---------____ Operational Performance Targets 1987 1988 1989 1990 1991 1992 1993 ______-_______________________________________________ -__________________ 1. Freight Traffic (billion net ton-km) 8.0 8.8 9.8 10.1 10.4 10.7 11.0 2. Locomotive Availability (%) 70 73 76 78 79 80 80 3. Locomotive Utilization (%) 67 69 70 72 73 74 76 4. Loco. Productivity (million gross ton-km) 64 68 76 84 86 88 88 5. Freight Car Availability (%) 91 91 92 92 93 93 94 6. Freight Car Turnaround Time (days) 9.0 8.3 7.5 6.8 6.7 6.7 6.7 7. Average Wagon Load (net tons) 45 45 45 46 46 46 47 8. Maximum Number of Staff (in '000) 20.0 20.0 20.0 19.7 19.5 19.2 19.0 …------------------------------------------------------------------__-------- C. Project Description (i) The Rehabilitation Program 4.12 The Rehabilitation Program, which is described in Annex 6, includes: the rehabilitation of infra- and/or superstructure on critical line sections, the rehabilitation or expansion of yard and intermodal terminal facilities, the improvement of the railway's telecommunication system, the purchase of track maintenance equipment and materials, the rehabilitation of locomotives and components, the purchase of specialized wagons and equipment for workshops. 4.13 The track rehabilitation program would consist of infrastructure works including earthworks (about 2.0 million m3) for the stabilization of cuts and embankments, the improvement of the drainage systems on about 70 line-km, the construction of retaining structures (about 9,000 m3), and the construction of about 6.5 km of track-bed for sidings to facilitate train crossings; and of superstructure works including the replacement of rails, sleepers, fastenings and/or ballast on a total of about 580 line-km in the - 20 - Araguari-Santos corridor, 916 line-km in the Broad-Gauge corridor and 494 line-km in the Meter-Gauge corridor, and the superstructure for the above-mentionned sidings (Map IBRD 11571R1). The yard and intermodal terminal program would consist of the rehabilitation or improvement of yard facilities including a total of about 50 km of yard track and yard utilities, and of the construction or expansion of four intermodal terminals at FEPASA's main railheads, including silos of static capacities ranging from 6,000 to 17,000 tons to facilitate intermodal transfers of grains and grain produets. The telecommunication program would consist of replacing existing wire systems wiLh radio systems on a total of about 1,067 line-km in the three corridors and with a fiber optic system on the 246-km Sao Paulo-Sorocaba-Campinas trunk route. The track maintenance program would consist, besides the above- mentioned action program, of purchases of track plant equipment, track machinery, spare parts, and track materials, essentially rails and switches. The motive power, rolling stock and workshop program would consist of the general overhaul of 51, rehabilitation of five, and re-engining of 15 diesel locomotives, the rehabilitation of traction motors and generators, the purchase of locomotive spare parts and of 230 specialized wagons, the rehabilitation or improvement of workshop buildings, and of the purchase and installation of workshop equipment. (ii) The Technical Assistance Program 4.14 The technical assistance program was designed to help FEPASA and the Government to implement the action program. Consultants and/or specialized institutions would be financed under the project to assist in: preparing the medium-term plans for the metropolitan and the long-distance passenger services and FEPASA's corporate plan; upgrading FEPASA's cost-accounting and information system and developing a cost-related, market-based tariff structure and an appropriate sales planning and control system; consolidating the organization of operations and maintenance and developing the OIS/MIS; and in developing effective personnel management system components and training programs. The scope and timing of these technical assistance components, and the related resource requirements are defined in Annex 7 and in Table 4.2. (iii) The Training Program 4.15 The training component has been designed to support the implementation and the gradual consolidation of the major policy changes and institutional reforms included in the action program, in particular the consolidation of the organizational changes for the separation of the metropolitan train and for operations and maintenance, the strengthening of marketing and cost-control, and the development of FEPASA's operations and management information systems. It consists of: advanced in-service training for about 470 managers, from superintendents to section chiefs, and about 800 operations and administration supervisory staff in organizatici and methods, basic management skills and specific skills for the marketing, operations and maintenance functional areas; in-service, job-specific training for some 10,000 operational and administrative staff; and training of managers and staff for the implementation and operation of thie management and data systems for operations, maintenance and personnel, which will be developed under the action program. Management personnel will he directly involved in the detailed design and implementation of the training of their subordinates. The - 21 - proposed loan would provide financing for: (a) consultant services (aboat 60 man-months) to assist FEPASA in the planning and monitoring of the training program; (b) technical assistance from specialized experts (about 50 man-month) for the detailed design of specific training courses; (c) specific courses and seminars to be provided by training specialists or specialized institutions in Brazil or abroad (Annex 8). D. Project Cost and Financing 4.16 The total cost of the project is estimated at about Cz$ 6.8 billion, equivalent to abotit US$285.0 million, including US$275.5 million for the rehabilitation program, US$6.9 million for the technical assistance program, and US$2.6 million for the training program. The foreign exchange cost component is about US$152.0 million, or 53%, and the tax component is about US$45.8 million, or 16% (Table on the next page and Tables 4.1 to 4.6), Total project cost includes physical contingencies for US$17.6 million, or 7% of base cost, and price contingencies for US$14.8 million (or 6% of base cost plus ohysical contingencies) estimated on the basis of the disbursement schedule and of the following forecast of price escalation for both local and foreign expenditures expressed in US dollars: 3.0% in 1987, 1.0% in 1988-1990 and 3.5% thereafter. Base costs correspond to April 1987 prices. The costs of goods are based upon supplier quotations for similar Brazilian made or imported items. The costs of civil works are based upon detailed engineering designs and prevailing unit prices. Cost estimates for consultant services are based upon prevailing local and foreign man-month rates; they provide for the cost of local transport, office equipment and other minor items and, where appropriate, international travel and per-diem. 4.17 The project would be financed from the proposed Bank loar of US$100 million (or 35% of the project cost), loans from BNDES totaling US$107.8 million equivalent (or 38% of the project cost), suppliers' credits totaling US$13.5 million equivalent (or 5% of the project cost), and FEPASA's own resources in an amount of about US$63.7 million equivalent (or 22% of the project cost, Tables 4.7 to 4.12). During loan negotiations, agreement was reached on: (a) the project financing plan; and (b) the guarantee of the State and Federal Governments regarding all the necessary counterpart funds. FEPASA has presented appropriate evidence of the feasibility of the proposed co-financing arrangements and an appropriate action program to formalize them. BNDES' board of directors have approved BNDES' loans for the project. It was also agreed, during loan negotiations, that: (a) the Bank could exercise its remedies if BNDES' loans were not effective by November 30, 1987, or if they were suspended or terminated; and (b) retroactive financing in an aggregate amount of not more than USS1.0 million equivalent will be available for consultant and training expenditures incurred after May 1, 1987, and before the date of the Loan Agreement. E. Project Implementation, Disbursements and Audits 4.18 Project implementation would be the responsibility of FEPASA, which has the appropriate capabilities. The various action program,; would be carried out by FEPASA's respective head office departments with support from the regional units and with the external technical assistance; the State and the Federal Governments would participate, as previously indicated, in some of the action programs. The investment program would be executed by the - 22 - BRAZ IL FEPASA RAILWAY REHABILITATION PROJECT ProJ.ct Cost EstImates and Bank Financing (USS mIlllon equivalent) Bank Partlclpatlon Local Foreign total US$m 5 of Total A. Clvil Works Rahabllltatlon of permanent way Infrastructure 10.0 5.4 15.4 9.3 60 Rehabilitatlon of permanent way supstructure 6.9 3.8 10.7 6 4 60 Welding ot raIls 0.5 1.1 1.6 - - Rohabilltatlon of yard track 6.8 5.6 10.4 Rehabilltatlon or expansion of buildings 0.4 0.2 0.6 - Installation of telecommunicatlon systms 59 5.2 9.1 - - Construction or expanslon of terminals 2.2 1.3 S 5- lmprovement of accesses to termlnals 1.2 0.6 1.8 Rshabllltatlon of utility system 0.8 0.4 1_ Sub-total ClvIl Works 34.7 19.S 54.> '5.7 29 B. #.trIals Ral Is 15.7 29.2 44.0 35.9 80 Sleepers 16.5 8.9 25.4 12.7 50 Fastenings 5.0 7.1 10.1 8.1 80 Ballast 1.1 0.6 1.7 - - Other 0.1 0. 1 0.2 0I 80 Sub-Total MaterleIs 36.4 45.9 82.4 6,8 69 C. EquIpment Switch" 1,4 2.6 4.0 3.2 SO Telecommunication equIpment 8.0 '8.5 26.5 Workshop equipment 2.1 6.2 8.3 5 S.0 Track machinery and plant equipment 1.7 5.1 6.8 2.7 40 Cargo transfer equIpmnt 0.5 1.1 1.6 - - Wagons 6.0 9.2 15.2 - - Machinery spare parts 0.1 0.7 0.8 - - Locomotive spare parts 1.0 3.5 4.5 - - Cooputer hardware 3.4 3.5 8.9 - - Sub-Total EquIpment 24.2 50.4 74.6 10.9 15 0. lMechanlcal Works Rehabilitation of locomotives 12,8 14.8 27.6 Rehabilltatlon of motors 0.9 0.8 1.7 Sub-Total echanlcl Works 13.7 15,6 29.3 - - E. Technical Assistance Studlos 0.2 0.1 0.3 0.1 50 Engineering and work supervision 4.5 1.5 6.0 3.0 50 Development of manageent systes 23 16 1 3.4 -_7 50 Sub-Total Technical Assistance 7.0 2.7 9.7 4.8 50 F. Tralning of PSr3onnel Oayvlopxent & monItoring of training programs 0.5 0.2 0.7 0.4 50 Implementation of tralning program 1.0 0 6 1.6 1.1 60 Sub-Total Tralning of Personnel 1.5 0.8 2.3 1.5 65 8ase Cost (April 198? prices 117.6 135.0 252.6 89.? Physical Contingencies t/ 8.6 9.0 17.6 5.6 Price Contingencies 2/ 6 8 _.0 14.8 4.7 Total Project Cost 13350 152.0 2S5.0 100.0 35 eas .6. . 20asS s 1/ Physlcal contingencies: from 5% to 10% overaging 7$ of base toots. 2/ Price contingencles for both local and forelgn costs were calculated over the Sta'idartj proftlie disbursemnt period of seven years. at 1% for 1IW71 15 for 1988 to 1990, sind 3.50 thereafter. Source. FEPASA and mission estimtes. May 1987 - 23 - Engineering (track rehabilitation and maintenance, yard, and telecommunica- tion programs) and Tranisportation (motive power, rolling stock and workshop programs) Departments, with support from their regional units and from the Admii.tstration, Finance and Planning Departments. The intermodal terminal program would be executed jointly by FEPASA (through its Transportation Department) and private firms in joint ventures. A Project Coordination Unit would be established, under FEPASA's President, to assist in coordinating the various organizational units. FEPASA, with technical assistance, would develop and maintain an effective organization and a monitoring system for project implementation, including appropriate reporting to the Bank (Annex 12). During loan negotiations, agreement was reached on: (a) a project organization and monitoring action plan, including the reporting require- ments; (b) the project time-schedule, including the procurement time-schedule (Chart of Annex 12); and (c) outline terms of reference for the technical assistance and training components. It was agreed that FEPASA would: (a) as a condition for loan effectiveness, put into effect the project organization and monitoring system; and (b) thereafter maintain organizational arrange- ments and the project monitoring system satisfactory to the Bank and staff with adequate qualifications for the implementation of the project. 4.19 Project implementation and disbursements, based upon the seven-year standard disbursement profile for railway projects, were scheduled over a seven-year period, and therefore the loan is expected to be fully disbursed by June 30, 1994 (Table 4.13). Within the 35% level of cost-sharing, the Bank would disburse for (Table 4.14): (a) civil works (rehabilttation of permanent way infra- and superstructure) at the rate of 60% of total expenditures; (b) purchases of materials (rails, concrete sleepers, fastenings and welding portions) and (c) purchases of equipment (switches, workshop equinment, and track machinery and plant equipment) at the rate of 100% oc foreign expenditures or, for the bids won by local manufacturers, 100% of local expenditures (ex-factory costs excluding taxes); and (d) teenhical assistance and (e) training of personnel at the rate of 50% of local expenditures for consultants residing in Brazil and for training in Brazil, or 100% of foreign expenditures for other consultants and for training abroad. 4.20 Thl crder to reduce the time period during which FEPASA would pre-finance tne Baiik's share of project costs, two Special Accounts in US dollars, wit':i iniltial deposits of US$3.5 million and US$1.5 million respectively, would be established in the Central Bank and in a bank, acceptable to the Bank, for the local and foreign expenditures, respectively. Withdrawals in amounts below the thresholds established in paragraph 4.23 would be on the basis of Statements of Expenditure, showing the payments made by FEPASA; the supporting documentation would be retained by FEPASA and would be available for inspection during project supervision. In order to ensure consistent availability of counterpart funds, FEPASA would establieh, in a local commercial Bank, a Project Account, in Brazilian Cruzados, with a guaranteed credit line in as large an amount as required by the project, but not less than US$1.0 million equivalent. The establishment of the Project Account in form and substance satisfactory to the Bank would be a condition for loan effectiveness. During loan negotiations, it was confirmed that FEPASA would: (a) make regular deposits to the Project Account to ensure the availability of sufficient funds for the project expenditures - 24 - of the forthcoming months, according to work and procurement schedules; (b) continue to retain independent _uditors, acceptable to the Bank, to audit its accounts, including the project accounts, in accordance with appropriate auditing principles; (c) forward the annual audit reports to the Bank not later than five months after the end of the fiscal year; and that (d) the Special Account would be audited by independent auditors acceptable to the Bank. F. Procurement 4.21 Procurement arrangements are summarized as follows: Procurement Arrangements Estimated Cost in US$ million Procurement Methods 'vxpenditure Category ICB LCB Other Total Cost A. Civil Works - 62.8 62.8 (17.9)1/ (17.9) B. Materials 79.9 11.2 91.1 (61.5) (1.3) (62.8) C. Equipment 12.1 63.1 8.82/ 84.0 (8.5) (3.5) (12.0) D. Mechanical Works - 28.5 4.72/ 33.2 E. Technical Assistance - - 11.3 11.3 (5.8)3/ (5.8) F. Training of Personnel - - 2.6 2.6 (1.5)3/ (1.5) Total 92.0 165.6 27.4 285.0 (70.0) (22.7) (7.3) (100.0) 1/ Figures in parentheses indicate proposed financing by the Bank. 2/ Supplier credits. 3/ According to Bank Guidelines. Goods financed from the Bank loan would be procured by FEPASA through international competitive bidding (ICB) in accordance with "Bank Guidelines for Procurement" (May 1985), except that, for contracts of US$400,000 equivalent or less, which would be too small to attract foreign firms not already represented in Brazil, the award would follow local competitive bidding (LCB) procedures, satisfactory to the Bank; the related documentation is in the project file. The Bank-financed portion of purchases under LCB would not aggregate more than US$5.0 million including contingencies. Local manufacturers are likely to compete for most items to be procured under ICB and, since they are often competitive in the world market, as much as 50% of the orders to be financed from the Bank loan might be awarded locally. Local - 25 - bidders would be granted a margin of preference by adding 15% (or the applicable custom duties, whichever is lower) to the CIF value of the foreign bids. 1/ 4.22 The value of the civil work contracts would normally vary between US$200,000 to US$3.0 million equivalent. Since these works are geographically scattered and scheduled over the entire seven-year implementation period, they do not lend themselves to being combined into larger contract packages. These contracts would be awarded under LCB procedure3s, acceptable to the Bank. There is a sufficient number of experienced Brazilian contractors, and LCB procedures should achieve meaningful competition. Nevertheless, foreign firms would be allowed to participate in LCB. 4.23 All contracts for goods estimated to cost the equivalent of US$250,000 or more, and all contracts for works estimated to cost the equivalent of US$2.0 million or more, which overall would represent about 77% of all Bank-financed goods and civil works, would be subject to the Bank's prior review of the procurement documentation. Consultants, which are expected to aggregate about US$9.7 million, would be selected and engaged following the Bank's "Guidelines for the Use of Consultants" (August 1981). These procurement arrangements were confirmed during loan negotiations. G. Projected Financial Performance 4.24 FEPASA's financial performance, even without tariff adjustments, would gradually improve as a result of the proposed physical and operating improvements, increased freight traffic and appropriate normalization payments for non-commercial services (Annex 2, Section B). During the seven-year project implementation period, the company's revenues from the freight business would increase by 58% and the working costs would decrease by some 11%; operating costs, however, would increase with the asset revaluation scheduled for 1988. Normalization revenues would increase substantially in 1987-1988, with the appropriate payments to be made by the State Government under the new normalization system, but they would gradually decrease thereafter through the planned rationalization of the long-distance passenger services and efficiency improvements in the metropolitan operation. FEPASA's working income would increase, reaching about US$75 million equivalent by 1993, and its working ratio would gradually improve from 1.20 in 1986 to .69 by 1993 (or .76 without normalization payments). All the working surplus would originate from freight operations; in 1993, long-distance passenger services, without tariff adjustments, would result in a working deficit of about US$6 million equivalent, and, for achieving a working ratio not worse than 1.0, a 50% revenue increase, or equivalent cost saving, would be necessary. The metropolitan services would break-even with the normalization payments. 4.25 Operating losses would be reduced by about 32% over the period despite the asset revaluation, and the overall results, including interest 1/ A local bidder is a Brazilian firm (or a consortium) offering goods containing components manufactured in Brazil and representing at least 50% of the value of the complete goods. - 26 - costs, would improve considerably as a result of the financial restructuring. FEPASA, however, would still incur an overall loss of about US$50 million in 1993. In order to turn overall losses into profit by 1993, an additional 20% increase in revenues, equivalent to an annual average increase in real freight tariffs of about 2.5% over 1987-1993, would be needed. Although its funding position is expected to improve, FEPASA would still have to rely on short-term borrowings during the next two years. With the assumption and capitalization by the State of its pre-1987 debts, the railway's long-term debt obligations in 1993 would be about 38% less than in 1986, and its debt/equity ratio would improve from 46/54 in 1986 to 28/72 in 1993. It was agreed during loan negotiations that FEPASA would take all the necessary tariff and/or cost saving actions to ensure that, by the end of 1993, its total operating revenues, including normalization payments within the stipulated limits, would cover all its costs, including depreciation of its revalued assets, and interest related to the post-1986 borrowings. 4.26 FEPASA's financial performance would be monitored against the following targets, which were agreed during loan negotiations: ----------------------------------------------------------__----------------- Financial Performance Targets 1987 1988 1989 1990 1991 1992 1993 --------------------------------__--_------__----------------------__-------- 1. FEPASA Working Ratio 1/ .93 .84 .77 .75 .73 .71 .69 2. Freight Business Working Ratio 1/ .93 .84 .75 .70 .67 .64 .61 3. Long-Distance Passenger Working Ratio 1/ 1.6 15 1.4 1.3 1.2 1.1 1.0 4. Metropolitan Train Working Ratio 1/ 1.4 1.0 1.0 1.0 1.0 1.0 1.0 5. Maximum Normalization (% Op.Revenue) 2/ 12 12 10 8 7 5 3 6. Maximum Borrowings (% Int.Gen.Funds) 3/ 3404/3404/ 80 45 40 40 40 7. Collection of Accounts Receivables (Days) 60 60 60 60 60 60 60 -----------------------------------------------------------------------__---- 1/ Including normalization payments within the stipulated limits. 2/ Normalization payments for long-distance passenger and freight services only, as a percentage of the corresponding total operating revenues, including payments for the long-distance passenger services to reduce to no more than 25% of long-distance passenger operating revenues in 1993. 3/ Excluding Bank loan and funds borrowed from the Federal Government for servicing Federally guaranteed debt. 4/ Based on the 1987-1988 combined results. H. Project Economic Evaluation 4.27 The investment component of the project was evaluated overall, and the major individual investments were evaluated separately (Annex 10). The economic evaluation of the project overall was based upon estimates of both train operating cost savings to be derived from the project's investments and total transport cost savings related to traffic which would transfer to road transport if the project were not implemented. Since project components are highly interdependent, the economic evaluation of the individual components was based only upon those train cost savings which were directly attributable to them; results are therefore conservative. In summary, the net present value of the benefits from the project's investments is estimated at about US$110 million equivalent, for a Jiscount rate of 12% and under base cost and traffic assumptions, and the project's ERR is estimated at about 21%. The estimated ERRs of the main project components are: 16% for the track program; - 27 - 24% for the yard and intermodal terminal program; 18% for the telecommunications program; 30% for the track maintenance equipment program; 16% for the locomotive overhaul, rehabilitation and re-engining program; and about 28% for the workshop program. I. Project Risks 4.28 Although the traffic forecast upon which the economic evaluation is based represents a best estimate under presen. economic prospects, actual traffic could be lower if the economic recovery in Brazil and/or the international demand for the project region's exports are below current expectations. Assuming that the demand for transport remains, during the period of analysis, 20% below the forecast, the project would have an estimated ERR of 17%. Although project cost estimates are based upon detailed engineering designs, unexpected delays in project execution or changes in factor prices might lead to higher costs. If, in addition to the 20%0 lower- than-expected traffic, investment and maintenance costs were 20% higher than the estimates, the project would still have an attractive ERR of 14%. The project, which essentially includes the rehabilitation of existing railway facilities, would not have any adverse impact upon the environment. V. AGREEMENTS REACHED AND RECOMMENDATION 5.01 During loan negotiations, agreement was reached on the following: (a) (i) The State to assume and capitalize FEPASA's State-guaranteed, pre-1987 debt as per agreement between the State and FEPASA dated February 28, 1987; (ii) the Federal and the State Governments to study and define the treatment of FEPASA's Federally guaranteed debt not later than November 30, 1987, as per Protocol dated February 28, 1987; and (iii) FEPASA to limit its future borrowings, as a percentage of internally generated funds, to the determined targets (para 4.05); (b) FEPASA to maintain separate accounts and operating and capital budgets for the metropolitan train operation, refrain from transferring funds to this operation from its other revenues unless required under normal business compensation practices, and complete the separat.on of the balance sheet items by the end of 1987 (para 4.05); (c) FEPASA to: (i) reduce and/or rationalize its commercially non-viable passenger and freight services to achieve the determined working ratios targets for the respective long-distance passenger, metropolitan train, freight and total businesses, and to contain Government normalization payments for the long-distance passenger and freight services, as a percentage of corresponding operating revenues, below the determined limits; and (ii) by September 30 of each year, forward to the Bank, for review and comment, the normalization arrangements for the forthcoming budget year (para 4.06); - 28 - (d) (i) the State Government and FEPASA to prepare a pluriannual plan for the metropolitan train and a pluriannual plan for the railway's long-distance passenger services not later than December 31, 1987; (ii) FFPASA to prepare a corporate plan not later than June 30, 1988; and (iii) FEPASA to analyze the feasibility of its new investments in accordance with technical and economic criteria satisfactory to the Bank, and, by November 10 of each year, discuss its pluriannual investment program and financing plan with the Rank (para 4.07); (e) the Federal Government's policy of gradually freeing RFFSA'j tariffs to also apply to FEPASA, to enable FEPASA to set freight tariffs on a commercial basis upon completion of new tariff structure (para 4.08); (f) FEPASA to: (i) adjust freight tariffs and rates and passenger fares to achieve the determined working ratios targets for the respective freight, long-distance passenger, metropolitan train, and total businesses; (ii) develop a cost-related, market-based tariff structure not later than December 31, 1988, and implement it thereafter; (iii) develop a sales planning and control system not later than July 31, 1988; (iv) upgrade its cost-accounting system not later than December 31, 1988; and (v) finalize joint-venture arrangements for the construction and operation of grain terminals not later than July 31, 1988 (para 4.08); (g) FEPASA to undertake not later than December 1, 1987 and complete not later than June 30, 1989: (i) the consolidation of the organization of operations and maintenance, and the development and implementation of an OIS and a locomotive and wagon maintenance MIS; and (ii) the development and implementation of a track maintenance MIS (para 4.09); (h) FEPASA to undertake not later than December 1, 1987 and complete not later than December 31, 1990 the development and implementation of a personnel management and training program (para 4.10); (i) (i) operational performance targets; and (ii) annual Bank reviews of FEPASA's operating and financial performance, investment program and financing plan (para 4.11); (j) (i) the project financing plan; (ii) the guarantee of the State and Federal Governments regarding all the necessary counterpart funds; (iii) cross default clauses for BNDES' loans; and (iv) retroactive financing (para 4.17); (k) (i) a project organization and monitoring action plan, including the reporting requirements; (ii) the project time-schedule; (iii) outline terms of reference for technical assistance and training programs (para 4.18); (1) (i) FEPASA to maintain a Project Account in Cruzados with a guaranteed credit line of not less than US$1.0 million equivalent; and (ii) auditing arrangements (para 4.20); - 29 - (m) procurement arrangements (para 4.23); (n) FEPASA to take all necessary tariff and/or cost saving actions to recover, by the end of 1993, all costs, including depreciation and interest, from operating reventues (para 4.25); and (o) financial performance targets (para 4.26). 5.02 The following would be conditions for loan effectiveness: (a) FEPASA to put into effect the project organization and monitoring system (para 4.18); and (b) FEPASA to establish a Project Account irn form and substance satisfactory to the Bank (para 4.20). 5.03 Subject to the above, the project provides a suitable basis for a Bank loan of US$100 million. The terms would be 14 years, including three and one half years of grace. May 7, 1987 - 30 - BRAZIL TABLE 2.1 FEPASA RAILWAY REHABILITATION PROJECT National Transport Output by Mode, 1980-1986 1980 1981 1982 1983 1984 1985 1986 Freight 352 339 353 355 391 424 447 (billion ton-km) Highways 208 205 212 215 219 228 231 Railways 86 79 78 75 92 101 105 Marine (Coastal 44 42 50 52 64 78 89 Pipelines 12 11 11 12 15 16 20 Aviation 1 1 1 1 1 1 2 Share of Total () 100 100 100 100 100 100 100 Highways 59 60 60 61 56 54 52 Railways 25 24 22 21 24 24 24 Marine (Coastal 13 13 14 15 16 18 20 and Inland) Pipeline 3 3 3 3 4 4 4 Aviation 0 0 0 0 0 0 0 Passengers 434 452 471 489 508 529 550 Highways 410 427 444 461 480 499 517 Railways 12 13 13 14 15 16 16 Aviation 10 10 11 11 10 11 14 Underground Rail 2 2 3 3 3 3 3 Marine (Inland) 0 0 0 0 0 0 0 Share of Total (%) 100 100 100 100 100 100 Highways 95 95 94 95 95 94 94 Railways 3 3 3 3 3 3 3 Aviation 2 2 2 2 2 2 3 Underground Rail 0 0 1 0 0 1 0 Marine (Inland) 0 0 0 0 0 0 0 Source: GEIPOT, Anuario Estatistico dos Transportes, 1986; estimates for 1986. May 1987 - 31 - TABLE 2.2 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Federal Investments in the Transport Sector (in million Cz$ at June 1986 prices 1/) Shipping and Year Highways Railways Ports Shipbuilding Others Total 1976 10,075 18,394 2,400 7,200 6,878 44,947 1977 9,418 12,778 1,906 6,504 4,709 35,315 1978 7,435 10,507 2,827 6,792 4,766 32,327 1979 10,555 14,491 2,890 6,984 3,202 38,122 1980 8,813 11,458 2,362 7,843 1,968 32,4h4 1981 7,982 9,619 1,714 7,483 2,213 29,011 1982 6,994 7,978 3,859 6,422 4,042 29,295 1983 5,741 8,424 2,357 6,562 4,387 27,471 1984 4,915 4,080 1,464 9,427 4,330 24,216 1985 3,932 5,354 2,466 4,043 3,721 19,516 1/ Converted to Cz$ based upon the value of the ORTN/UTN. Source: Ministry of Transport May 1987 - 32 - TABLE 2.3 BKAZIL FEPASA RAILWAY REHABILITATION PROJECT Some Key Characteristics of the Brazilian Railways 11 RFFSA CBTU FEPASA EFVM EFC TOTAL Network length (km) 22,587 600 5,072 773 890 30,163 2/ Of which electrified (km) 643 390 1,515 - - 2,548 Employees (thousand) 67 19 20 - 3 118 Tons transported (million) 81.9 - 20.9 75.0 5.0 182.8 Ton-km (billion) 36.8 - 7.3 38.0 4.0 86.1 Of which iron ore (billion ton-km) 13.6 - - 32.0 3.6 49.2 Average haul length (km) 450 - 350 510 800 470 Passengers, intercity (million) 6.1 - 5.0 2.5 n.a. 13.6 Passengers, suburban (million) - 488 75 - _ 563 1/ 1985 data 2/ Including "Estrada de Ferro Amapa and Estrada de Ferro Campos do Jordao Source: RFFSA, CBTU, FEPASA and CVRD. May 1987 - 33 - TABLE 2.4 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Sao Paulo State Freight Transport Output by Mode, 1975-1985 (in billion ton-km) 1975 1980 1985 Ton-Km % Ton-Km % Ton-Km % Highways 54.2 80 70.5 76 69.2 73 Railways 8.8 13 17.0 18 19.7 21 Pipelines 4.7 7 5.1 6 6.0 6 Total 67.7 100 92.6 100 94.9 100 _ =- Source: State Secretariat of Transport (estimates) May 1987 BUL 8HMA RailvAy tadim Poject FEPAM lrtt SUtazin-Tc*al OF'°ti0' (pLL1 19t7. CZ$ tLLlitm) 1980 1981 t992 1983 1984 15 . I8i 187 19 1989 1990 1991 1992 JwQ3 RVENUE5 AIbMl Pe1Iu1zmry Fracst Fretqht 2816.0 2990.7 ; 247.t 28t 2.8 2976.0 3250.6 307.3 86 3791.3 4180.5 450 t.1 46'9. 485b.0 Passancer 214.7 220.9 221.3 151.9 145.9 136.1 125.8 115.5 79.2 ;83. 8'.4 91.7 96.3 101.1 Suburban 64.6 79.3 74.5 61.8 53.3 65.3 69.8 73.0 77.0 90.8 84.2 88.3 p2.6 97.1 Other 10)3. 75.2 186.6 21S3. 53.8 136.3 129.0 128.0 t28.' 128.n i "B.n 123.6 128.0 228.0 Sub-total 3198.5 3366.0 3730.0 3239.8 3229.0 3588.2 3396.8 3599.0 4065.4 4471.8 4639.7 4814.1 49WM.2 5182.2 Normaalzation -pavment *ereved 351.2 97.2 425.2 320.1 133.5 155.6 222.2 *56.6 1013.6 922.5 809.2 694.4 585.5 498.9 -outstand. for year 160.6 ; 73.1 59.2 37.3 87.0 122.1 89.4 97.0 95.2 71.4 67.0 62.7 58.8 56.9 Total norealization 511.8 470.3 484.4 .57.4 220.6 277.' 311.7 1053.6 1108.9 993.8 876.3 757.0 644.3 555.8 TOTAL OPERATING REVENUES 3710.3 3836.3 4214.4 3597.3 3449.6 3865.9 3708.5 4752.7 5174.3 5465.7 5516.0 5571.1 5639.5 5738.1 EXPENSES Salaries and mases 2218.5 2456.4 2616.3 2330.2 2093.2 2219.8 2867.5 2913.9 2893.4 2859.9 2823.0 278'.2 2759.8 2715.5 Fuel 344.0 380.1 382.9 374.6 402.7 377.2 359.5 392.8 398.1 316.6 293.6 309. 323.7 339.8 Electricity 42.3 70.6 68.5 62.5 62.7 7 9.7 90,4 93.3 109.6 153.1 166.9 175.2 184.0 .n.3 Spares and eaterials 31 3 325.7 312.8 262.9 256. 331.8 332.0 254 7 271.0 281.9 281.0 289.6 298.7 3N0.0 Other(incl.contracts) 2ts.t 269.1 374.8 352.1 293.7 798.6 800.0 740.5 681.1 621.8 562.2 502.7 443.4 384.0 Total l rhino Ervenses 3133.2 3501.0 3755.3 3382.3 3108.6 3803.2 4-49.4 4395.2 4353.3 4231.7 41.6.7 4063.0 4009.6 3940.6 Depreciation 229.6 . 25.6 621.6 645.4 725.8 791.2 859.7 983.7 1278.5 2S91.3 2767.6 3840.0 2881.B 2889.6 Provision for d.debts 0.6 1.8 3.5 2.9 1.1 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TOTAL WERMII E1rfESES 3363.4 3829.2 4380.4 4030.6 3835.5 4595.4 5308.2 5378.9 5631.8 6922.9 6894.3 6903.1 6891.4 6830.3 1IN16 I IICOE/L°SSM 577,1 334.5 459.1 214.9 34t.0 62.7 -741.0 357.5 821.0 1234.0 1389.2 1508.0 1629.9 1797.4 OPtRATINl IN IIIE.fLOSS) 346.8 7.1 -166.0 -433.4 -385.9 -729.5 -159.7 -626.2 -457.5 -1457.3 -1378.1 -1332.0 -1251.9 -1092.2 let Non-Operatin Income 738.0 1271.8 2467.9 355.5 t14.0 524.2 728.0 728.0 728.0 728.0 728.0 728.0 728.O 728.0 Interest 406.1 2879.7 2448.0 1170.2 1877.0 3205.0 6101.8 4443.4 3493.0 26tS.7 1995.4 1564.4 1078.0 8S3.4 Other Fin. rEpenseslincome -2920.3 591.2 -1406.1 5581.B -588S.1 -2865.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Fin.lExpensesl/Incote 1 -509.4 -171.7 -1984.7 -553.8 156.2 -522.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 AWAL PR9IF17;iILDSS) -2751.O -1I81.2 -3537.0 3779.7 -7877.8 -6797.7 -6973.5 -4341.6 -3222.5 -3344.9 -2645.7 -2168.4 -1602.0 -1197.6 ftrline Ratio -wttt normalizatioe 84.4 91.3 89.1 94.0 90.1 98.4 120.0 92.5 84.1 77.4 74.8 72.9 71.1 68.7 -without normalization 98.0 104.0 100.7 104.4 96.3 106.0 131.0 118.8 tO7.1 94.6 88.9 84.4 80.: 76.0 Operating Ratio -with normalization 90.7 ".8 103.9 112.0 111.2 118.9 143.1 113.2 108.1 126.7 125.0 123.9 122.2 119.0 tthtout normalization 105.2 113.8 lij.4 124.4 118.8 128.1 156.3 145.4 138.5 154.8 148.6 143.4 138.0 !11.8 Normalization as I of Op.Rev. 13.8 12.3 11.5 9.9 6.4 7.2 8.4 22.2 21.4 19.2 15.9 13.6 11.4 9.7 Freight & Pass. Normalitation as Z of Op. Rev. 11.4 10.3 8,9 6.3 4.3 4.3 5.0 11.7 12.5 13.1 8.3 6.6 5.0 3.4 1/Poetatery adtustmewts representing realized values Smea: MAS& anl d atrm esdtas. FIiwm suject tD s Ezt dLffrwi:s. Apu 1987 OWAL FEPASA RAUJ-.V WU&nlnUMW Pr2r FEPASA FTnd Flow State,ts (April 1967, ;c$ mUlit) 1980 1981 191 1913 184 195 , 3S8b 87 1988 1919 1190 1l9 1992 1993 SOU9ETS 7PelmiTtmary FM t Operatino lfIncmeieLossl 346.8 7.1 -166.0 -433.4 -385.9 -729.5 - 159. 7 -626.2 -457.5 -145'.3 -1378.4 -1332.0 - 25.9 -1092.2 Met no'-cperataoI incose 738.0 1271.8 2467.9 355.5 114.0 524.2 728.0 128.0 n28.0 728.0 ?28.0 ?28. '289. 728.0) DepreCiation 229.6 325.6 621.6 645.4 725.8 791.2 858.7 983.7 1278.5 269l.3 2767.6 2840.0 28"1.8 2889.6 Pro;lslons 0.0 1.8 3.5 2.9 1.1 1.0 0. , 0.0 A.0 0.0 0.0 0. 0.0 0 Subtotal 1315.0 1606.4 2926.9 570.5 455.0 586.q -13.0 1095.5 1549.0 1962.0 2117.2 2236.0 2357.9 2525.4 yearly nore,payst. vutstand. 160.6 373. 1 59.2 37.3 87.0 122.1 89.4 97.0 952 71.4 67,0 62.7 58.8 56.9 Wors.rec d.re prev. years 149.4 87.4 11.8 122.1 89.4 97.0 95.2 71.4 67.0 62.7 58.8 Other Fn.rEDpenses)'Intome -509,4 -171.7 -1984.7 -553.8 156.2 -522.5 0.0 h.n n,n n.a 0A ^n0.0 9 n) TOTAL INTERNAL CASH SEMERPTI84 b45. 0 1061.6 1032.5 &b.8 536.0 -57.7 ]9.7 1077.9 1550.8 1985.8 2t21.r 2240.4 2362.8 2.577,3 *04sS For 1nvestwnts '7974 355.7 606.6 467.0 517.9 2043.5 3 473.4 4488.4 4638.5 2n70.5 1026.8 672.0 552.1 110.5 For Debt sevzce 1)6P.5 '953,.9 318'.5 191,4 2536.8 1504.2 11310.8 6325.2 40o8.5 3625.8 2535.9 1597.2 991.8 640.8 Total Loars 2347.8 430°.6 3790.1 658.4 3054.7 3547.7 14684.2 11013.6 8726.9 5696.3 33562.8 2269.2 1543.8 751.2 CAPITAL r01p1RBUTIO1 247.4 1169.0 1960.3 1801.9 1866.5 3,384.6 7618.7 5157.8 6213.3 5842.2 4985.5 4.4 . 7 , 49! .4 OECRE9SEA fISCqEASfi It [ASI 51.1 9.0 75.5 93.5 -84.8 -5.2 483.5 192.7 -1432.1 -2A10.3 -'95.3 201;.6 4 T I TOtAL SG7JCES 3291.4 6549.1 670e.4 262n.6 5373.4 6869.4 22806.1 17442.0 15059.0 11514.6 9974.6 8959.2 -7el 680'.* APPLICATION Investtmnt%-P,o,ett 0.0 0.0 0.0 0.0 0.0 0.0 0.0 601.8 1965.3 1337.3 1253.8 831.0 69. I 127.1 -Oth.mr 939.2 897.6 1666.4 1573.3 1129.9 956.3 3373.4 4007.0 3066.2 00).6 23.8 7.2 n.0 .2 Irterest 406.1 2879.7 2448.0 1170.2 1877.0 3205.0 6101.8 4443.4 3493.0 2615.7 1995.4 1564.4 1078.0 833i.4 Loari Redeevtion P'oJert 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -16.1 1014.0 991. 1071.7 -other 1780.0 2987.2 z575.7 877.3 2206.9 2614.9 12B27.7 87268.6 6479.1 6490.2 65e0.6 5513.2 416:.: 47!5.7 -other 1onQ tern 14.7 14.7 12.5 -1.1 2.9 15.5 0.0 n.0 0.0 0.0 0.0 0.0 0.0 °.0 Change in morking Capital 151.4 -130.1 4.8 -999.0 156.8 77.9 503.2 121.1 55.3 77.2 37.1 29.2 28.q 30.' 70TAL APPLICATION 3291.4 6549.1 6707.4 2626.6 5373.4 6869.4 22806.1 l'442.A 150Os.3 11514.0 9e74.6 8959.2 7752 78n.9 S&twz : FASA aul t lsuio etintes. f1giut g&jeact to riagdiog affetre m. ril 1987 UAZIL (Arl IW7, C1$ UIUM1) 1979 1990 2991 l2 1m 1 Ila7 r 917 19E9 18 90 1991 1992 1993 ASSETS it ftk11ezy Cash 83.4 74.4 t49.9 56.4 141.1 146.3 -337.2 -529.7 902.2 2912.5 3707.9 35nt.2 3432.9 340Q.0 RECEIVAIlES Trade 467.2 900.8 565.9 566.6 651.0 674.2 378.9 417.0 466.2 515.4 535.1 555.5 576.8 598.7 less Prov for O.Debts 5.3 4.3 5.8 5.1 2.7 1.8 n.8 0.9 0.8 0.8 0.8 0.8 0.9 0.8 net Trade Recetiables 461.9 896.5 560.0 561.4 648.3 672.5 379.1 416.2 465.4 514.6 534.3 554.' 576.0 597.9 State Bov*t. for per.-wavs 0.0 0.0 147.2 154.2 143.4 138.9 0.0 Cap. Contrib. t60.0 752.3 0.0 239.2 234.2 67.7 0.0 bior"ljzatjon 495.8 621.6 224.0 37.3 87.5 149.4 89.4 97.0 95.2 71.4 67.0 6,.7 58.8 56.9 Other 280.8 82.6 172.4 13.9 1823.0 1.8 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 Total froa State 6. 926.6 1456.5 542.6 444.6 2289.2 357.8 91.3 98.9 97.1 73.3 69.0 64.6 60.7 58.8 STtC 633.0 523.0 385.0 507.5 286.6 '22.4 400.0 400.0 400.0 400.0 400.0 400.0 400.0 400.0 OTiER *B6.7 229.8 74t.1 162.9 147.8 392.6 310.4 310.4 310.4 310.4 310.4 310.4 310.4 310.4 ZNWSTNEMTs 3.8 1.0 l .1 1.3 2.4 3.8 3.8 .8 3. 3. 3.98 3.8 3.8 3.8 tDTAlt CtRREIT ASSETS 2295.4 3181.2 2379.7 t534.1 3513.5 1895.4 946.5 699.5 2178.9 4214.7 5025.3 4839.8 4783.' 4770.9 LOW TERM RECFT4BLES 32.Y 1098.4 965.9 875.2 622.1 45,4 45t.4 451.4 451.4 451.4 451.4 451.4 451.4 451.4 FilEt ASSE5 3545;.8 45631.D 54769.9 73931.5 81826.2 87617.0 90990.4 95599.2 100630.7 1-4683.2 125960.8 126 79.0 1217t4.1 l ?725.4 less Depreciation 813.0 1212.5 2023.0 295.7 4t56.3 5791.7 6250.4 7234.1 8522.6 I120.9 1.7971.5 16811.5 296'73.Z .-3 NET f :tFED 4SETS 3464r.8 44430.5 52746.9 70083.0 77669.9 ri225.3 94740.0 88365.1 92128.1 2t34?9.3 2111I9.3 109987.5 107795. 105042.5 TOTAL ASSETS 37259.0 48680.0 56'e2.5 73:45.2 e1905.5 8457'.t 86037.9 895:6.0 94748.4 118145.3 117466.0 1;5278.7 113030.9 110264.7 LIAPILItiES apd tAPTAil Cutrrent Liabilittes Accounts payable IQI 1.7 1768.8 1175.4 1446.9 1609.1 1339.7 395.5 300.6 304.1 296.0 271.6 265.8 260.5 255.2 5alaries. Soc. sec. 166.4 269.8 289.4 309.3 131. 0 3730.7 239.0 . 42.8 241.1 238.2 235.3 232.3 2S0.0 226.3 Other 68.6 28.5 34.4 12.0 1516.0 49.8 49.9 4*.8 49.t 49. 8 4 9.9 49.8 49.S*9 * 9 Total Current Liab. t 254.' 2067.0 149".2 1768.2 3456.2, 1(Z0.2 68.2 601.2 595.0 574.0 556.6 547.8 540.1 531.' Lonai term liabilites 21426.7 30583.0 32088.3 31399.7 34872.7 3692.9 38748.4 41493.3 43741.1 42977.2 39945.5 35697.4 31277.0 26220.9 Equity Capital 7377.1 7317,1 7377.1 7377.2 7377.1 7377.1 7377.1 7377.1 7377.1 7377.1 7377.1 7377.1 '377.2 7377.1 Cap.Trsf. 1269.9 3109.4 46t9.4 6730.4 9756.5 12135.4 19754.1 24911.9 31125.2 36967.4 41952.9 46200.8 4997'.i 53469.6 Capital Reserve Y 82.! 3481.1 3481.1 3461.1 3481.1 3481.1 3481.1 3491.1 3481.1 3481.1 3481.1 3481.2 3491., 341 > Revaluation PReserve 6727.7 7521.8 15953.9 27105.3 3695'.3 42858-. 42859.6 .6 42858.6 64573.1 64573.1 64573.1 64573.1 64573.1 x Profit/fLoss' -4270.5 -5459.5 -396.5 -5216.6 -13094.4 -1"92.1 -26865.6 -31207 2 -34429.7 -37774.6 -40420.4 -42539.9 -4190.8 -45398.4 w TOTAL LIh?LIT1ES a4 EQUITY 2M9.0 6.0 5692.5 73245.2 1305.5 94572.; 9S037.9 69516.0 94746.4 1ti145.3 1174lt.0 115278.7 113030.9 110264.7 : IFAtt. md .nm ettnt. FigoW aubt* jet t .owIlr diffCtar. 411 1987 - 37 - TABLE 3.4 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Price Structure of Petroleum Automotive Fuels 1/ (as of April 1987, in USS per gallon) 27 Gasoline "C" Diesel Oil Ex-Refinery Price 0.86 0.55 Distribution Charges and Retailer's Margins 0.13 0.13 Taxes and Para-Fiscal Charges 1.35 0.18 Retail Price 2.34 0.86 Retail Price (Net of Distribution Charges and Retailer's Margins) 2.21 0.73 International Price 4/ (c.i.f.) Santos) 0.50 5/ 0.45 I/ Prices in effect since April 15, 1987. As of July 24, 1986, the Government introduced an additional 28% charge upon the price of gasoline; this charge would be paid back to the users after a three-year period. 2/ Exchange rate: US$1 = Cz 23.88 3/ 73 RON gasoline, retailed in a blend of about 20% of anhydrous biomass alcohol (RON = Research Octane Number). 4/ As of the Third Quarter of 1986 5/ 95 RON Gasoline Source: Ministry of Transport and mission estimates May 1987 RP AS;Af;I, q iy Mitti*an ProJect, FWASA Traf ic, 197-2SS3 a. in thoumd tons actuaI fo rc at malu.astJe _ r t Ckowities 197s 1s0D 29 2994 15 19o6 2997 2998 1999 190 2S91 1 1903 197S-O lSI4 197548 198t8 _ _ _- _ _ _ - - -S - - 4 x s X flarohwa p. 24KD 4578 3817 3667 3717 3w7 39M 404D 4170 4310 4410 4S2D 463 13.2 -2.5 4.3 2.4 Alcol ° 782 94 2499 21 25 2 3 311 a 338 3M 3a2 3730 am n.. 24.7 n.-. 4*S Cost 32 22S 1i39 No 4 669 740 76D 780 8W 810 8 83D 47.7 29.9 31.8 3.1 euxlet 173 967 742 731 812 91So 1( 1 2I2 lI=D lIM lI= 25.8 9.1 28.8 3.3 L.harbom 378 751 948 912 95 884 970 114D 2124 2240 1240 1240 14.7 2.8 8.0 6.0 Phoqphnt 0 1168 1332 28S8 2E1 1s6m 210D 216D 0 2 23ED 2410 2470 n.o. 5.5 n.e. 6.4 Sulfur 29 14D 2R1 284 35l 349 37D 39D 40 42D 43D 44D 4ED 37.0 15.4 25.4 3.7 Co"nC S928 1913 1432 1SS1 1412 1720 1im 17W I=|) 29102D1D 2D0s 15.9 -1.7 6.9 2.7 Wood 213 39D 372 448 44 414 S40 7 SOD s 640 6D 610 12.3 1.4 6.2 7.1 VIst 578 S22 2023 124 178 1237 239D 149D 1600 172D 1760 2VW0 1640 16.7 0.6 7.6 5.1 Corn us WI 719 182 221 513 48D 49D 6a0 60 68D 7CD 710 1.8 -1.8 -0.2 4.8 SO" 297 M67 5S1 S42 722 e8 S1D 14ED 13D 2mo9 2660 173D 15.8 1.4 7.7 25.2 Pol lets 470 2247 1641 14E5 2622 1117 2DeD 2170 229D 241D 26) 23D3 274D 21.5 -1.8 8.2 23.7 Su_r 654 135 2 14D 9J 8 953 2 I 1 1330 230D 2390 142 19.7 -6.3 3.5 S.9 Fortili ar 577 143 6 22 S1 1 731 924 W 9 D 1gD i0O 2) 210 1170 20.0 -7.1 4.4 3.4 Oim-r 2181 2314 3177 271 2718 32 3(30 336D 360 379D 3J8D 390D 1.3 1.6 1.4 2.9 Total 20541 234 3 2 242 215 29721D 90 39m 14.9 1.5 7.4 6.0 b. In miIlion ton-Im a - *ctual forec-at -_wMrot"- Cmodities 15 28 1 89 2i 1 l2ow 1996 1 1990 29t 1991 199 I1S1- 19905 17p58D 299 Fstrola p. 1225 1 956 2517 1490 6 1 298 II 2510 16 1680D 172 1760 D 28D1 0 .3 -3.2 2.7 1.S Alcohl 0 223 479 749 742 eE2 SW I9 I= 1030 114D 2YlO D21 0 n.u. 29.6 n.-. 9.2 CoI 10 64 128 172 174 257 140 140 2SD l20 2OD 180 16 46.0 26.1 28.4 0.3 luxitO 54 179 217 214 2 2S1 24D 240 240 26D 2J0 29D 2m 27.1 6.9 25.3 0.1 Lmtinm 71 140 2 178 14 2SD 110 20D 0 2D 2JD 29D 29D 14.5 1.2 7.0 8.2 "MOM 0 ass 6 SR 774 73 S9 m goo 99DD 2010 240D IO n.-. 2.6 n.s. 4.6 Sulfur 6 #5 12 1 SO 22 130 2 19 0 210 280 280 110 74.1 -21.8 22.5 33.9 C_nt 294 414 3am 34s 86 310 34D 31D 420 430 440 40D 470 7.1 -1.9 2.1 3.5 waed so 95 95 114 111 So 140 14D l2D l20 280 170 170 13.9 0.3 6.3 8.2 asmt 32F 5 440 396 So18 490 SD 50 0 6O S a0 680 a2.1 1.2 6.0 1.2 Cern 26 29O 291 76 de 227 210 22D 290 3S0 a 30 310 D -5.S 2.6 -1.4 6.0 So" 116 32 278 279 3 410 440 610 340 6D0 90 22.3 -3.6 7.6 2D.6 fble t1 178 4C6 54 478 572 446 810 10 2o ID nUS 22 1280 2.1 1.6 8.6 28.0 Sugr 242 en 518 4D1 325 299 39D 440 49D 410 490 49D am 18.3 -10.0 1.9 7.6 F_rti iIx 224 02D 237 2E8 336 4X 380 410 D MD SSSD SD 5D 22.6 -7.0 5.5 4.0 Oors 771 873 799 786 814 o76 9M0D 10 10D 1200 2.280 18 210 2.5 0.1 1.2 4.7 Total 3EOP 7390 67sm 7279 7208 Wm 88 9e00 101D 2043D 107) l22W 14.1 -0.4 6.0 6.3 Sourom: FPASA and mission estintes Mly 1987 - 39 - TABLE 3.6 Page 1 of 2 1AIL FEPASA RAiM REABILIICON PR cr FEPASA's Operating Statistics 1980 1981 1982 1983 1984 1985 1986 Total PDute (km) Metric 3,422 3,453 3,464 3,473 3,473 3,473 3,436 Broad 1,632 1,599 1,599 1,599 1,599 1,599 1,599 Total 5,054 5,052 5,063 5,072 5,072 5,072 5,036 Electrifiel 1,156 1,098 1,38 1,099 1,99 1,099 1,111 Non-electrified 3,898 3,954 3,965 3,973 3,973 3 973 3,924 Total 5,054 5,052 5,063 5,072 5,072 5,072 5,035 Total Staf 19,422 19,356 19,874 19,603 19,255 19,443 19,542 Traffic Passerger-nmnbers :3uhrban 56,413 57,511 56,167 63,019 72,839 77,009 86,908 Interior 5,159 5,883 5,240 4,617 4,936 5,085 6,867 Passenger-km (mLllion) Mbtan 1,072 1,093 1,067 1,197 1,384 1,463 1,651 Interior 1,335 1,467 1,306 1,130 1,188 1,069 1,290 Freight ns (000) 20,100 19,673 21,473 20,644 20,956 20,898 22,003 Tons--km (million) 7,380 6,893 7,293 6,799 6,998 7,279 7,206 Train-ln (0)0) Pasegr-eiburban 2,325 2,505 2,427 2,318 2,632 2,671 2,892 Passenger-interior 5,818 5,692 5,488 5,168 5,613 5,773 5,696 MIde 106 122 66 35 33 30 19 Freight 11,229 10,831 10,744 9,928 9,831 10,199 9,851 Diesel 5,658 5,305 5,225 4,825 5,007 5,373 6,100 Electric 5,571 5,526 5,519 5,103 4,824 4,826 4,751 Service 1,119 1,121 1,214 1,545 1 360 1,296 1,082 Total Train-km 20,606 20,271 19,939 18,994 19,469 19,969 19,540 Total Locamotive-lm (000) Diesel 17,912 16,845 17,346 17,217 17,043 17,459 16,359 Electric 12,208 12,270 12,219 11,16A 11,C'l 10,986 10,735 Mbtor cars 7,259 8,419 8,5'5 8,162 7,819 3,132 9,137 Autmoxtive 65 - - - - - Total 37,714 37,534 38,124 36,543 35,9?3 36,577 36,231 Fteight (rev in a (million) Wago-4nm (million) Loaded 178 170 175 158 158 159 153 H,ty 120 116 119 104 95 90 86 Total 298 286 294 262 253 249 239 Of itich: FEPASA's agons 262 252 250 224 218 214 205 Private wagons 36 34 44 38 35 35 34 - 40 - TABLE 3.6 Page 2 of 2 UlAZUL FEPAA RAILW REAUX1ATIGN PRUF FEPASA's Operating Statistics 1980 1981 1982 1983 1984 1985 1986 Gross Trailing Tor-o (mion) Passenger (including subirban) 2,794 2,776 2,608 2,681 2,747 2,834 2,890 Fteight, reven>-ea:rning 13,469 13,011 13,606 12,317 12,149 12,281 11,935 Mixed 30 28 15 8 5 7 4 Service 369 226 217 267 241 239 220 Tbtal 16,662 16,041 16,446 15,273 15,142 15,361 15,049 Gross ton4m (incxluing locos) (billion) Passmsenr (including suburban) 3,445 3,433 3,282 3,320 3,440 3,542 3,576 Freight, revue earning 15,53B 14,999 15,750 14,252 14,010 14,169 13,726 Mixed 40 40 21 12 8 11 6 Service 476 337 334 416 374 366 329 Tbtal 19,499 18,809 19,387 18,000 17,832 18,088 17,635 iDcOatives in Stock Diesel 370 369 367 364 363 361 361 Electric 140 139 147 146 146 146 146 %btor cars 146 174 lhU 14n 140 140 138 Automxtive 4 4 4 4 4 4 4 loamotive Perfomaxnce Locmntive Availability (%) Diesel 80.0 78.4 77.0 780 70.9 67.4 65.6 Electric 70.8 72.4 72.1 68.5 66.8 68.2 68.0 I.oCawtive Utilization (%) Diesel 56.0 56.1 58.6 60.6 63.5 65.5 63.7 Electric 71.0 73.2 72.1 70.8 70.5 68.2 67.0 lsawtive Productivity (million gross tomH p.a.) Diesel 49.9 46.( 48.0 45.9 45.3 45.5 44.1 Electric 45.2 50.1 50.0 42.6 41.3 39.8 3B.0 Freight 1hon and naiin Performance 7 loaded to total wign-4wa 59.7 59.4 59.5 60.3 62.5 63.9 64.0 it . wagon srevenue-erning) 13,400 13,341 13,258 13,184 13,070 12,446 12,808 Wgon-days in use (000): FEPA'8s wgons 3,826.2 3,854.3 3,830.2 3,918.3 4,217.3 4,219.1 4,234.3 Private ixons 397.1 430.6 439.9 395.7 392.3 376.0 440.7 lotal 4,223.3 4,284.9 4,270.1 4,314.0 4,609.6 4,595.1 4,675.0 Aver.ge Wagon Load (tons) 42.3 42.4 42.9 43.8 44.1 45.8 47.1 Nb. of Rgons loaded 476,305 465,927 500,849 475,476 485,956 472,250 476,448 1ign-4am per wiago-day in use 70.6 66.7 68.9 60.7 54.9 54.2 50.9 Net ton-km per wagort-day in use 1,748 1,609 1,708 1,576 1,518 1,584 1,536 tUgon tumnarourzd (days) 9.2 9.7 8.9 9.5 9.9 9.7 9.8 Wigon-4un between turuaroumW 648 646 613 575 541 526 511 Average no. of wagons per freight train: loaded 16 15 16 16 16 16 16 Eupty 10 11 11 11 11 9 9 SoLrce: FEPASA May 1987 UtAZIL FPASA RAIM ID2iABXrATI1 PFKE)Cr RWASA's lttIe Poer (1986) MIRC GJIiE 5D CAIJ l-leetric -tlectri- Mb. of I Seria N. Mw fdel HP's Years in Service Nb. of lceas Sera NtD. W del HP'S Years in Sevice Total Fleet 25 200D GE 1-0-1 2320 40 4 6100 GE 2-0-2 3818 46 20 2050 1 1 1 2330 40 4 6150 EST 2-40-2 3618 46 30 2100 GE B-B 1840 18 10 6350 GES C*C 43S6 19 20 6370 GE 2-C+0-2 3818 46 5 6410 1EST 0*C 1521 59 5 6450 GE 2-1).O-2 4650 35 9 6500 GE NB 458 62 B 6510 GE B 458 39 eb -Total 75 65 140 Dimi Dl 10 3100 GE CB U6C 600 35 17 7000 G1 SW9,GP18 1750 28 21 32X00 CB0 U12B 1200 29 18 7050 (GM GI2 1310 27 7 3500 GE AM RSa 500 29 36 7760 LEW [13/PA 770 19 36 3600 04 aX 875 26 23 78 0 E U20C 2n 9 30 3650 (M OR 1310 29 25 3700 W1 IEELS 770 18 15 3750 I" IEfI 1120 18 113 380 CEWA U20C 2000 10 Stb4btal 257 94 351 ITL 332 159 491 Source: WPASA May 1987 "-1 WRAZ WEPASA RA1lhW SEI8IaUIATAIC PNDJEr S9uary of iWSA's DMesl loc eotiveRRairmnt, 1987-1993 -Actual Frcs 1981 1982 1983 1984 1985 1986 1987 19'8 1989 1990 !991 1992 1993 A. Total Freight Trafftc (billion tonm-m) 13.0 13.6 12.3 12.2 12.3 12.0 13.4 14.6 16.1 17.0 17.2 17.4 17.8 8. Total diesel frel*ht traffic (b ilion tor-u) Metric 7.3 7.6 7.0 7.1 7.2 6.8 8.6 7.2 6.1 5.0 4.8 4.8 4.8 Boad 0.7 0.8 0.8 0.7 1.0 1.1 1.0 1.3 1.9 2.1 2.1 2.2 2.2 C. herage train loa (tons) Metric 1,587 1,689 1,707 1,651 1,S65 1,619 1,843 t,730 1,625 1,405 1,425 1,451 1,464 Broad 1,000 1,143 1,143 1,0( 1,250 1,222 982 970 953 9L4 989 1,0)) 1.03 D. Total train-hr (million kn) Metric 4.6 4.5 4.1 4.3 4.6 4.2 4.7 4.2 3.8 3.6 3.4 3.3 3.3 Broal 0.7 0.7 0.7 0.7 0.8 0.9 1.0 1.3 2.0 '.1 2.1 2.1 2.1 E. Avrage nD. of locanotlveF per train Meteic 1.8 1.95 2.03 1.98 1.93 1.90 2.00 1.90 1.79 1.69 1.72 1.75 1.78 Broad 1.42 1.41 1.38 1.33 1.40 1.44 1.40 1.38 1.36 1.33 1.37 1.41 1.46 F. Total loco--km (dillion kms) tetric 8.3 8.8 8.3 8.5 8.9 8.0 9.4 8.0 6.8 6.1 5.9 5.8 5.9 Broad 1.0 1.0 1.0 0.9 1.1 1.3 1.4 1.8 2.7 2.8 2.9 3.0 3.1 C. ND. of freigtht Iocrotives 1etric 150 151 145 152 157 149 143 125 107 90 90 90 90 Broad 22 24 23 20 23 30 24 24 25 26 30 33 37 H. Averaw amrvial mileage ('OOt) Io pa.) Metrtc 55.3 58.3 57.2 55.9 56.7 53.7 65.7 64.0 63.6 67.8 65.6 64.4 65.6 Br.a 45.4 41.7 43.5 45.0 47.8 43.3 58.3 75.0 108.0 107.7 96.7 90.9 83.a 1. PrrdLttvity O(illicn gcrtx tcru p.a.) Mptric 48.7 50.3 48.3 46.7 45.9 45.6 60.1 57.6 57.0 55.6 53.3 53.3 53.3 1 RtSme 31.8 33.1 34.8 35.0 43.5 36.3 41.7 54.2 76.0 80.8 70.0 66.7 59.5 4 J. Ayailatblity (2) Mftric 0.79 0.78 0.79 0.70 0.66 0.63 0.69 0.72 0.74 0.77 0.77 0.78 0.78 1 Brarxi 0.77 0.74 0.76 0.73 0.71 0.73 0.73 0.74 0.76 0.77 0.78 0.79 0.80 K. tttUlzatton of availability (O MFrtric 0.56 0.59 0.61 0.64 0.66 0.65 0.66 0.67 0.69 0.70 0.71 0.72 0.73 Brrar 0.57 0. 6 0.58 0.60 0.62 0.60 0.62 0.63 0.64 0.66 0.7V 0.74 0.79 L. t9*. of Imns to be retirei, of Aiid,: Freight: Peter(*) - - 1 3 1 - 12 15 20 12 2 2 2 Brnad(*) - I 1 2 1 - - - - - 5 5 5 M. ND. of locc to be Pwdhased: Broad N. P'aaerer tocatotivs, Meter 10.3 6.3 9.6 8.3 8.3 8.9 8.3 8.3 8.3 8.3 8.3 8.3 8.3 Brad 18.8 ZO.3 20.0 19.5 19.3 19.0 19.0 19.0 19.0 19.0 15.0 12.0 10.0 0. Otwtr lucomattve, of d itch: Service trains: Meter(**) 112 115 116 108 102 109 91 94 92 102 100 98 86 Bras(**) 58 54 54 56 52 45 51 51 50 49 44 39 32 > P. Total '&nler of diesel toe,wti ' Meter 272 272 271 268 267 267 242 227 207 2C0 198 196 194 Broad 98 95 95 95 94 94 94 94 94 94 89 84 79 1*) FreiWt ard m1tch 0, (*) Sewice mu witch S&Cls: IPPMA's Statiltis nia P11mntm DlartBaits and aloan esti-int. iw 1987 ERAZ MP. ' RAAMY RNAB rIA N PWlJCT Summay of FRASA's Electric lccmtite Rqlr 7-1993 ---- Actual F oreat 1981 1982 1983 1984 1985 1986 1987 1998 199 1990 1991 1992 1993 A. Total Freight Tmffic (tilIon twrkm) 13.0 13.6 12.3 12.2 12.3 12.0 13.4 14.6 16.1 17.0 17.2 17.4 17.8 6. Total electric freit traffic (billion tona) Metric 2.8 3.0 2.5 2.5 2.2 2.2 2.9 3.9 5.7 7.4 7.6 7.9 8.2 Broad 2.2 2.2 2.1 1.8 1.9 1.9 2.1 2.0 2.0 2.4 2.5 2.7 2.8 C. Awerage train load (tons) 1tetric 9D3 I,O04 962 962 880 880 906 975 1,056 1,156 1,169 1,179 1,206 Broald 917 880 840 818 826 826 828 845 870 907 924 940 959 D. Total traln-Ire electric (iUlion klm) Metric 3.1 3.0 2.6 2.6 2.5 2.5 3.2 4.0 5.4 6.4 6.5 6.7 6.8 Brod 2.4 2.5 2.5 2.2 2.3 2.3 2.5 2.4 2.3 2.7 2.7 2.9 2.9 E. &merage no. of locartt9m per train Metr1c 1.77 1.82 1.80 1.81 1.76 1.72 1.63 1.50 1.39 1.35 1.35 1.37 1.40 aral 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.0o 1.o0 1.00 1.00 1.00 1.0O F. Total loco-4= (mU1Ui kIm) tAtric 5.5 5.5 4.7 4.7 4.4 4.3 5.2 6.0 7.5 8.7 8.8 9.2 9.5 Broad 2.4 2.5 2.5 2.2 2.3 2.3 2.5 2.4 2.3 2.7 2.7 2.9 2.9 G. ND. of fredght 1ocawtie Metric 66 66 66 64 63 64 59 64 70 76 73 71 71 Srrd 34 38 42 40 40 44 43 41 40 42 44 48 52 H. Avera amnul tidleag ('eOU0 1 p.a.) Mrtric 83.3 83.3 71.2 73.4 69.8 67.2 88.1 93.8 107.1 114.5 120.5 129.6 133.8 Brr d 70.6 65.8 59.5 55.0 57.5 52.3 58.1 58.5 57.5 64.3 61.4 60.4 55.8 I. Prcsdurtlvlty (mdllton K, tonria p.a.) Mletrtc 42.4 45.5 37.9 39.1 34Aq 34.4 49.1 60.3 81.4 97.4 104.1 111.3 115.5 Brow 64.7 57.9 50.0 45.0 47.5 43.2 48.8 48.8 50.0 57.1 56.8 60.4 53.8 J. AmU*ilabiUty (2) Metrtc 69.8 70.7 69.0 65.4 67.0 66.0 70.6 74.2 77.8 81.6 82.7 83.5 84.7 Broad 75.6 73.6 67.9 68.4 69.4 70.0 73.0 76.0 79.0 82.1 83.2 84.5 85.0 K. UtU{tzation of availabillty (2) ttetric 79.0 79.0 77.0 77.0 74.0 7 79.0 79.0 79.0 '9.0 79.0 79.0 79.0 Brtxe 62.0 60.0 61.0 60.0 59.0 59.0 60.0 64.Q 68.0 72.0 74.0 76.0 79.0 L. No. of locos D be retired, of whidc: Freight: Meter - - - - - - 6 6 6 8 5 5 5 Brcilrt (*) 2 - - _ _ _ 6 6 7 8 2 2 2 MF. No. of 1cr to be ptrdwhed: Meter - - - - - 11 9 9 9 2 2 3 Broad 2 2 6 - - - 4 4 6 8 3 3 3 N. Pasaeter loomnottves Meter 8 9 7 9 9 9 15 16 12 8 8 7 6 Brmi 17 18 20 21 21 18 13 13 13 12 12 10 9 0. Otbwr locotivea, of kichd: Service trairn: Meter(**) 2 1 3 3 4 3 6 3 5 3 3 2.8 2.2 Bromad(**) 13 9 9 10 9 8 6 6 6 5 4 3.0 1.0 P. Total timber of electric tocamtives Meter 76 76 76 76 76 76 80 83 86 87 84 81 79 M r Broad 65 66 71 70 70 70 62 60 59 59 60 61 62 fD r (*) Freiht ard sitch 0 (**) Sevic ain witch S5ura: PRAS's Statistic and P1'1mg D qparu,s asn mission eatites. Pky 1987 FEPASA RAnM RMBnXrAnoN Pr PEPASA Ibliuig Stock, 1986 11tric Go - - - d! G lb. Years In Servic ND. Yeas in Servic ND. Year in teb NO. Ya in SerVice AP Nkweme 1. &s 225 8 952 26 56 8 1 36 1,642 17 1,671 45 2,022 33 2 47 255 39 430 55 12) 49 9ab-ibtal 4,200 430 2,626 120 6,826 550 2. G*dola 543 9 971 13 156 D0 I) 39 464 41 tdhb-lbtai 1,514 156 464 10 1,978 166 3. Taothetval 63 10 94 17 157 4. lbper 350 7 501 14 Sub-Tbtal 851 851 S. Cattle 68 27 68 6. Flat 959 24 277 42 258 38 105 37 1,217 112 7. Tank 232 10 144 9 973 13 17 40 1 33 Sub-Total 1,205 1 144 17 1,349 18 8. (ttemr 70 3S 22 55 92 iuL 8,860 934 3,586 274 12,446 1,2I8 Source: FF2ASA mby 1987 in'ASA RAZIMW RIMBIWVa7IG4 PUIaRM Smory of FMASA's Ftelit Wg Requite.1 , 1987-1993 )itual _Fo 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 A. ltal FreW Traffic (tillon tm) 7.1 7.4 6.9 6.9 7.1 70 8.1 8.9 9.8 10.3 10.4 10.7 11.0 .Aeam hmo lotd (toJn) Ibtrtc 42.7 42.8 43.9 44.1 44.9 45.2 45.5 45.7 45.9 46.1 46.3 46.7 47.0 Broad 38.7 43.1 43.6 43.9 45.0 42.3 43.5 44.0 44.5 45.4 45.6 45.8 46.6 C. No. of gm available M1trjc 8,392 8.036 7,882 8,126 8,083 8,066 8,687 8,699 8,707 8,710 8,736 8,874 9,034 Brad 3,530 3,495 3,439 3,507 3,292 3,288 3,435 3,610 3,780 3,958 3,969 3,982 3,990 D. 3alabUIlty (Z) Metric 89.3 85.9 85.2 88.3 89.7 91.2 90.6 91.2 91.8 92.3 92.8 93.4 94.0 Brosd 89.2 88.5 87.6 90.7 90.9 91.0 91.6 92.2 92.8 93.3 93.6 93.8 94.0 E. ltal Ioa m o Wk (Milllion) tbtric 132.1 136.4 121.9 125.2 123.0 117.2 138.9 147.7 157.3 166.8 168.2 171.5 172.9 Ba I 37.8 38.5 35.9 32.3 35.7 40.2 41.4 47.5 53.2 58.4 60.8 62.0 63.4 F. hera loed fator (1) Metric 59.2 58.5 60.1 60.0 55.0 63.0 70.0 70.0 70.0 70.0 70.0 71.0 71.0 Drawd 60.2 63.6 60.5 62.0 62.0 67.4 71.0 71.0 70.0 69.0 70.0 70.0 70.0 C. lT3WWMW4 (0111ot0) Metric 223.2 233.3 202.7 208.7 223.6 185.2 197.1 211.0 224.9 238.7 240.3 241.9 243.5 Brod 62.8 60.5 59.3 52.1 57.6 59, 57.8 66.9 76.0 85.0 86.8 88.6 90.5 1 R. Averep azulmiala () Metric 26.6 29.0 25.7 25.7 27.7 23.0 22.7 24.3 25.8 27.3 27.5 27.3 27.0 v Blroad 17.8 17.3 17.2 14.9 17.5 L6.1 16.8 18.5 20.1 21.5 21.9 22.3 22.7 1. Pma! >, Scirce: FEPASA and udeBm e8timut.. F'gure az1jea tD, ruzitlx differae . a, - Aprl 1987 REPASA RAUMtW 1EDUATMM, W t*.§ASA kmw Stt!-aMp s e (Aprfl 19B7, Cz$sUillS) 1980 _ 1982 1_33 19_ 4 195 th6 1987 1988 1989 1990 1991 1992 1993 REVENUES kt1fUilxry Vorecat Frex tht Passancer 214.7 220V. 221.3 151.9 145.9 136.1 125.8 115.5 79.2 8'.2 B7.4 91.7 96.3 101.I Suburban Other Sub-total 214.7 220.9 221.3 151.9 145.9 136.1 125.8 115.5 79.2 83.7 87.4 91.7 96.3' 101.1 Normalization -payeent received 277.4 78.4 313.9 190.3 87.3 8B.0 123.7 393.9 471.8 420.8 350.2 279.5 209.0 138.2 -outstand. for year 126.9 300.8 '437 22.1 57.0 6q.0 51.5 49.4 50.2 29.6 28.5 27.5 26.t 25.4 Total normalization 464.3 .79.2 57.6 212.4 144.3 157.Q 17'-.2 443.4 522.1 450.A 378.7 307.0 2'5.4 163.6 TOTAL OPERATING REVENUES 618.9 60n.n 578.9 364.; 290.2 293.0 01. 0 558.9 601.7 533.6 466.1 398.7 332.7 264.7 EXPENSES Salaries and waqes 418.7 471,1 47f.0 399.9 333.7 353.9 389.4 375.5 361.6 347.7 333.8 319.B 3Q5.9 292.2 Fuel 18.6 23.2 22.5 2'.1 25.1 31.7 43.5 40.5 26.4 19.8 18.7 19.8 21.0 22.2 l Electricity 3.7 6.0 6.0 5.5 6.4 B." 9.8 8.5 6.6 9.1 10.1 10.7 11.4 12.) Spares and materials 54.2 53.5 56.1 44.4 49.4 A4.0) 61.6 42.2 42.2 42.1 42.1 42.1 42.1 42.1 4 Other(incl.contractsl 37.5 49.4 79.5 56.5 58.4 84.3 84.] 78.6 72.2 65.9 59.5 53.3 47.0 40.8 Total Norkinq Expenses 532.7 603.3) 634.1 528.4 473.0 542.1 589.1 545.3 509.0 484.6 464.2 445.8 427.4 409.3 Depreciaiien 40.E 57.8 105.6 109.4 135.4 124.2 124.2 124.2 124.2 332.6 3;2.6 732.6 332.6 332.6 TOTAL OPERATIN6 EIPENSES 573.4 661.0 739.7 637.8 608.3 666.3 713.3 669.4 633.1 817.3 796.8 778.4 760.0 741.9 VORRIN8 INCWqE/ILOSS) 86.2 -3.; -55.1 -164.1 -182.7 -24Q.1 -288.2 13.6 92.3 49.0 1.9 -47.1 -95.7 -144.6 OPERATING INCONE:CLOSSI 45.6 -61.0 -160.7 -273.5 -318.2 -373.3 -412.3 -21l.5 -31.8 -283.7 -330.7 -7379.7 -428. 3 -477.2 Nlorhno Patio -with norealization 86.1 I00.5 109.5 145.0 163.0 185.0 195.7 97.6 84.6 90.8 99.6 111.8 12B.0 154.6 -without normalization 248.2 273.2 286.5 347.8 324.1 398.5 468.4 472.0 642.6 582.5 531.3 4B6.2 443.7 404.7 Operatinq Ratio -with eormalization 92.6 110.2 127.8 175.1 209.b 227.4 237.0 119.8 105.3 153.2 170.9 195.2 229.1 280.3 wsithout normalization 267.1 299.3 334.2 419.8 416.8 489.7 567.2 579.5 799-4 982.3 912.1 849.0 789.0 733.7 Normalization ast of Oc. Rev. 65.3 63.2 61.8 58.3 49.7 53.6 58.2 79.3 86.8 84.4 81.3 77.0 71.0 61.8 . 0 Soaze: EPAM dt n tiadm etimkti. Fgwes iubjesct tD uwzxIg diffex. AprJ 1987 BRAZE. FEPAW RAWI RJAB pJEL FEPASA him Se 44etrpoLit Tati (April 1987.7 C$ mili) 1980 1781 1982 19, I 1984 1985 1986 1987 1988 1989 199Q 1991 1992 I997 REVENUES htAt1 Prellaxy Forecst Freigcht Passanger Suburban 64.6 79.3 74.5 61.8 53.3 65.3 69.8 73.0 77.0 B.2 84.2 88.3 92.6 97.1 Other Sub-total 64.6 79.3 74.5 61.8 53.3 65.3 69.8 73.0 77.0 80.2 84.2 88.3 92.6 97.1 Normalization -payent received 73.8 I8.8 111.2 129.9 46.2 67.6 98.6 523.3 494.6 459.6 424.! 386.9 355.7 346.0 -outstand. for year 33.8 72.3 15.5 15.2 30.1 53.1 437.9 47.6 45.0 41.9 8.5 35.2 32.T 31.5 Total normalization 107.5 91.2 126.8 145.1 76.3 120.7 136.5 570.9 530.6 501.4 462. 5 422.1 388.0 - .4 TOTAL OPERATING REVEUES 172.1 170.5 201.2 206.9 129.6 186.0 206.2 643.8 616.5 581.5 546.7 510.4 480.6 475.c EXPENSES Salaries and waqes 185.0 2734.9 250.3 209.8 461.9 489.9 433.0 430.2 428.0 425.0 421.3 417.0 411.1 AQ.I Fuel 1.4 1.4 1.6 2.; 3.9 18.8 17.9 19.5 19.8 15.7 14.6 15.4 16.2 17.,1 Electricity 7.4 12.4 9.9 12.A 10.8 13.9 13.9 14.6 15.4 l6.0 16.8 17.6 18.6 lo., Sparesandmaterials 23.4 27.3 24.1 11.0 14.7 19.2 21.4 11.0 11.2 11.4 11.5 11.5 11.5 11.' n Otherlincl.contracts) 16.3 19.8 28.7 12.6 33.8 38.4 39.4 35.5 32.8 29.9 27.0 24.2 21.' Je.4 I Total Horking Expenses 233.5 295.8 314.6 247.8 525.1 580.3 524.b 510.9 507.2 497.9 4ql.2 485.6 49;.s 475.5 Depreciation 24.5 ;8.4 66.7 64.3 73.1 79.5 09.5 123.2 142.9 313.8 317.8 317.8 317.8 17.3 TOTAL OPESTTINS EXPENSES 258.0 334.2 381.3 312.6 598.3 679.8 624.2 634.1 650.1 811.7 809.0 803.4 7P8.4 797.' WOR)IN6 INCONE/ILOSSI -61.4 -125.3 -113.4 -40.9 -395.6 -394.3 - 18.4 132.9 109.3 83.6 55.5 24.9 0.0 1.; OPERATING INCOMEI(LOSSI -85.9 -163.7 -180.1 -105.7 -468.7 -493.8 -417.9 9.7 -33.5 -230. 2 -262. -293.0 -317.8 -317.5 Working Ratto -with normalization 135.7 173.5 156.4 119.8 405.2 312.0 254.4 79.4 82.3 85.6 89.9 95.1 100.0 In.1n -without normalization 361.6 373.0 422.5 400.7 984.9 889.0 752.1 700.2 659.0 621.2 583.7 549.8 518.8 489.6 Operating Ratio -with normalization 149.9 196.1 189.5 151.1 461.6 365.6 302.7 98.5 105.4 139.6 148.0 157.4 166.1 166.8 without normalization 39?.5 421.5 512.1 505.6 1t22.1 1041.5 894.7 869.1 844.7 1012.6 961.2 909.6 86 1. 816.8 ,-j Normalization as 1 of Op.Rev. 62.5 53.5 63.0 70.1 58.9 64.9 66.2 88.7 87.5 86.2 84.6 82.7 80.7 79.6 S&wn: IASA and aissm eataiutee. Flgur asubject tD m oundi% diffe . Apri 1987 0Y z I -< I rr^ V-1~V zUm- H~~~/ ANNEX 3 Page 1 of 3 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT FEPASA Costing, Tariffs and Marketing 1. The costing system used by FEPASA is conceptually sound. However, the system has been in use for some 15 years, and a systematic review to improve its precision, creditability and, particularly, its use for management purposes is necessary. The cost information is based on the financial accounting system. The aggregate financial information is sound, and, while errors in the expense data are unlikely to have a significant effect on the cost calculations, the physical production or output units which are used for allocations are more of a problem. This type of data is collected (with considerable administrative workload) for costing, industrial engineering and performance measurements, and not necessarily in a reliable and systematic manner. 2. FEPASA uses some 40C cost complexes basically covering five operational expense classes (viz. maintenance, transport/operation, train services, commercial services and administration). The cost complexes are allocated to operation directly where possible (e.g., commuter line maintenance) or on the basis of operating statistics. While individual traffic commodity and passenger costs are produced, line specific and origin-destination costs are not available. The operating costs are divided into direct, variable and fixed costs. Direct costs are defined as costs avoidable within a year; variable costs are defined as avoidable and variable over a period longer than a year and include all direct costs; fixed costs are the balance of operating costs not considered variable. The allocation to direct and variable and fixed costs is based on operational information and knowledge, but it is not supported by regular statistical analysis or engineering studies. As a result, the impact of operational changes is not reflected reliably and promptly, and there is an element of subjectivity in the cost allocations. Basically, for this reason, within the railways, the costing system's creditability is questioned, and, at the various management levels, the often too detailed and sometimes slow costing reports are not utilized in an optimum manner for operational directions, performance control and for marketing decisions. To enable the railways to have appropriate information in a timely manner improving cost control, tariff design and marketing, an action program (with technical assistance) has been included in the project (para. 4.08) with the objective of upgrading the costing system's precision, therefore improving its creditability and use at various management levels. 3. The technical assistance would attempt to upgrade the costing system by the end of 1988 to provide information for individual services and origin-destination commodity flows; to appropriately determine cost variability with traffic, operation and efficiency; to allocate common costs to individual services as appropriate; and t3 provide a reliable basis for -78- ANNEX 3 Page 2 of 3 cost forecasting. Particular emphasis would be on (a) improving the statistical information and increasing the use in costing of statistics generated for other purposes; and (b) refining the measures of cost variability with increasing use of engineering studies and using other appropriate measures such as regression analysis. The dissemination of cost and performance information would also be improved, particularly its format and speed to meet the need of FEPASA's senior management and that of the commercial, financial, operating and engineering branches to permit effective monitoring, evaluatiLn and corrective action. The upgraded costing system is expected to be introduced by the end of 1988. 4. FEPASA's tariff structure was introduced some 18 years ago and it has changed very little since then. The revenues are based upi.. published tariffs and special contract rates basically for large traffic volume customers. The products which are subject to published tariffs are separated into five groups, and, for each group, there are distinct tariffs based upon fixed charges plus variable charges per unit of distance. In addition, during the past years, a number of special tables (basically with lower variable charges) have been introduced for specific products such as petroleum derivatives and fertilizers. The tariffs and, to a large extent, the contract rates are controlled by an interministerial committee (CIP). Until 1983, tariff adjustments were authorized according to various price indicies, providing some scope for increases higher than the consumer price index (INPC). However, there was no agreed time frame for regular tariff adjustments, and the time lag between FEPASA's request and CIP's authorization often reduced the effectiveness of the tariff increases. Starting in January 1983, effective until February 1986 when the price freeze was introduced, quarterly tariff adjustments, equal to the variation of the INPC were authorized. 5. Since the tariff adjustments were aimed at offsetting the impact of the inflation, the railway's present tariff structure (and levels) are generally not in line either with the prevailing cost or the prevailing market conditions. Until the end of 1985, the freight tariffs recovered the cost of operation related to the services. The situation drastically changed in February 1986, with the price freeze imposed through the Cruzado Plan preventing FEPASA fromi matching its revenues with its increasing costs. As a result, during the first half of 1986, the railway's freight revenues were some 22% less than the freight-related operating costs; and the revenues generated by the 12 most important traffic commodities which represent about 78% of the total traffic, were about 19% less than their costs. While the tariffs of all the commodities were sufficient to recover the direct costs and, with the exception of fertilizer and cement, the variable costs, only alcohol, diesel oil and gasoline traffic, which, together, represent 30% of the total freight traffic, generated sufficient revenues to cover the average costs. With the exception of diesel oil and gasoline, truck charges are higher than that of the railway's (Table 1 of this Annex) giving at least a basis for future adjuistments (railway tariffs and/or the contract prices of some essential products such as fertilizer and wheat are closely controlled by the Government). There is a possibility to increase revenues, particularly in the case of contract customers where the discounts offered, depending on the market condliions, could be reduced, and in the case of - 79 - ANNEX 3 Page 3 of 3 commodities such as alcohol, bauxite, cement, phosphate, corn, pellets, sugar and wheat, where trucking charges are substantially higher than the railway's costs. 6. With technical assistance under the loan, the tariff structure of FEPASA, based on the upgraded costing system, would be reformulated to recover the full cost of the individual services, to eliminate unijustified internal cross-subsidization, and to take full advantage of the market opportunities. The individual tariffs would be cost-related and market-oriented and would ensure that, in the short-term, no freight would be carried at less than its avoidable cost, and, for traffic with long-term prospects, the railways would at least recover average costs. To this end, FEPASA, by the end of 1987, should adjust its tariffs and contract rates selectively to make up for the (8x) loss resulting from the February 1986 price freeze, and, for the major commodities, aim at recovering working costs plus depreciation and interest on rolling stock. The new tariffs would provide incentives to achieve FEPASA's corporate objectives, in particular operational rationalization and the phasing out of the non-remunerative services. 7. To take full advantage of the upgraded tariff structure and cost information system in order to optimize operations through selective marketing with a view to optimize profits, FEPASA's marketing would have to be strengthened. This would, inter alia, involve the establishment of organizational and professional capabilities in the company to undertake longer range market research, including systematic collection and evaluation of market information, develop marketing policies and strategies, to monitor and evaluate service standards in relation to market requirements, to seek out new and profitable transport business opportunities, to establish and maintain regular, close contact with existing (and potential new) customers, and complementary transport agencies (e.g. port) and continuously monitor the performance of competitive transport entities, services. To assist FEPASA in strengthening its marketing operation, technical assistance would be provided under the loan. During the course of this work, the necessary organizational changes would also be identified and assistance would be provided for their implementation. May 1987 - 80 - ANNEX 3 Table 1 BAZIL FEPASA RAILWA RF4MILITAflCt PR0JE= FtPASA's Costs, adeceiad Tariffs and Truwk Tariff Comparison (in Deember 1986 (Z$/tm-Iuk) Costs Tnick Lfrect Variable 1/ Tbtal 1/ Taiffs Peeme Pevenue Suga .07 .18 .31 .22 .21 .27 Fertilizer .07 .15 .27 .13 .12 .22 Alodaol .08 .16 .28 .26 .34 .30 Bawxdte .07 .14 .24 .19 .19 .60 Cemet .08 .19 .33 .21 .18 .40 phoepbte .06 .13 .23 .20 .14 .50 Gasoline .08 .16 .28 .20 .28 .18 Com .06 .15 .25 .21 .21 .55 Diesel .07 .14 .26 .23 .28 .16 Pellets .07 .17 .30 .19 .18 .-S 'oya .07 .15 .27 .19 .17 .47 Wheat .07 .16 .30 .20 .17 .55 1/ Iwludig &priation ci remel basis. Sor: EPASi ard mLssion estimtes -y 1987 - 81 - ANNEX 4 Page 1 of 6 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT FEPASA Freight Traffic Forecast A. Summary and Methodology 1. FEPASA developed a traffic forecast in coordination with a comprehensive transport study which was carried out by the State Secretariat for Transport, with assistance from consultants and from the Sao Paulo Institute of Technology, with a view to update the Transport Master Plan for the State of Sao Paulo. The transport study methodology was based upon a sophisticatpl consumption-production transport model in which transport costs are part of a production cost function wnich is used in a location model to distribute production on a lowest total production cost basis. Modal split is through an advanced multi-stage logit model which uses exponential generalized cost functions to distribute traffic between transport modes. The study was based upon a macroeconomic scenario for the State's economy, which is consistent with the objectives and policies for economic development defined in the New Republic's First National Development Plan, and in which the State GDP would grow at 8% p.a. until 1988 and at an average 7% p.a. during 1988-1990. Specific sectoral and commodity studies were carried out with the assistance of specialized experts, who analyzed the products' supply and demand and prepared the basic forecast data. Traffic was projected consistently with the investment and operations plans proposed by the various modal agencies and enterprises, and the latter were evaluated, in economic and financial terms, through the model. The sensitivity of the projected rail traffic to relative changes in road and rail tariffs was tested; it was found relatively low when rail tariffs are kept at least 25% below trucking rates on the average, but the diversion of rail traffic to road would become substantial i.e., above 5% of the total traffic and would increase rapidly when tariffs are set closer to trucking rates, unless service quality is at the same time significantly improved. 2. In preparing its forecast, FEPASA consolidated the information derived from the above-mentionned study, which was directed mostly toward medium to long-term forecasting and toward assessing the impact of modal policies and programs on the other modes, with the market and competition information which the company maintains to prepare its short-term business forecasts, and appropriate adjustments were made to reflect this more detailed information. A more conservative assumption regarding macroeconomic growth was also reflected in the final forecast, with GDP average growth rates reducing from 8% at present to 5% for the rest of the decade, 4% in the first half and 2% in the second half of the 1990s. With these assumptions, FEPASA's traffic was projected to increase at the average annual rates of 5.0% in tons and 5.8% in ton-km during 1986-1993, 2.8% in 1994-1995, 2.0% in 1996-2000 and it was assumed that it would stabilize at its year 2000 level thereafter. A summary of the traffic forecast by commodity is presented in Table 3.5. The thre. charts at the end of this Annex show the 1985 actual and the 1993 forecast gross-ton and net-ton traffic densities on the various - 82 - ANNEX 4 Page 2 of 6 sections of FEPASA's three corridors. The following is a summary of the basic commodity data which supported the forecast. B. Petroleum Products and Alcohol 3. There are four major oil refinery centers in the State of Sao Paulo, located at Paulinia (Campinas), Sao Jose dos Campos, Cubatao (Santos) and Santo Andre (Map IBRD 11571R1). The refineries are supplied with Brazilian and imported oil through pipelines. The transport and distribution of petroleum products is organized by PETROBRAS from the refineries to primary distribution centers, and bv the distribution companies under the coordination and supervision of the Petroleum National Council (CNP) from there on to secondary distribution centers. FEPASA basically transports the gasoline and diesel oil of the Paulinia refinery to the various distribution centers in the interior of the State of Sao Paulo, as well as further North to Brasilia and Goiania; some diesel oil produced in the States of Minas Gerais and Parana is also distributed by FEPASA to the Northern and Southern parts of the State of Sao Paulo. The Paulinia refinery also supplies fuel oil through FEPASA to the various cement factories in the State as well as to an aluminium plant close to Mairinque. 4. FEPASA's traffic of petroleum products increased at annual rates on the order of 10% during the second half of the 1970s, and it decreased also rapidly in the early 1980s as a result of both the economic recession and the policies and programs for conservation and for the substitution of alcohol for gasoline. With the economic recovery, the demand for diesel oil is expected to increase at 4.5% p.a. in the medium-term, and the demand for gasoline and fuel oil should remain at approximately the same levels. Average haul distances are expected to increase with the development of the Center- West regions. Overall, FEPASA's traffic of petroleum products would increase at about 3% p.a. in tons and 4% p.a. in ton-km, as an average, during 1986- 1993. 5. Alcohol, which is mostly used as automotive fuel either alone or mixed with gasoline, is produced mainly in the State of Sao Paulo and in North Parana from sugar cane. The transport and distribution of alcohol is coordinated by the National Petroleum Council. The alcohol is first transported from distilleries to major collecting and stock centers, or directly to mixing and distribution centers. The bulk of the alcohol produced in the State of Sao Paulo and destined to major stock centers is shipped by rail to the center of Paulinia and then by pipeline to the Sao Paulo metropolitan region, to Sao Jose dos Campos or to the port of Santos for shipping to other regions. Alcohol is also transported by rail on the long distances from the main producing areas in the State to the major distribution centers in Campo Grande (MS), Brasilia (DF), Belo Horizonte (MG) and Araucaria (PR). A substantial share of the direct, short-distance transport between distilleries and distribution centers is by truck. 6. The production of alcoIsol increased very rapidly during the last ten years as a result of the investments made under the Proalcool program. FEPASA's traffic of alcohol, which was nil in the mid-1975, increased at over 20% p.a. in the first half of the 1980s and exceeded 2.5 million tons and 740 million ton-km in 1985. The demand for automotive alcohol is expected to continue to increase, although at a lower rate, despite the recent decrease - 83 - ANNEX 4 Page 3 of 6 of the international prices of petroleum products, since over 95% of the Brazilian car production and almost 25% of the national fleet of private cars are alcohol powered. It was estimated that the demand in the region of influence of FEPASA would increase by an average 5% p.a. in the medium-term, and that FEPASA's traffic, taking into account the investments being made in new collecting centers, in particular at Aracatuba and President Prudente, would increase by an average 7% p.a. in ton-km. C. Mineral Products 7. Coal is mostly imported from abroad or from Southern Brazil via the port of Santos, and destined to the cement and some other industries in the region. It is transported mostly by FEPASA from the port to major regulating stockpiles at Sorocaba and Brigadeiro Tobias, and from there on to the 'iser plants in the State as well as up to Itau de Minas (MG) and Corumba (MT). There is also an increasing flow of coal directly transported by rail from the South to some of the cement plants in the State of Sao Paulo. In the recent past, both the demand and FEPASA's traffic have increased very rapidly, at annual rates on the order of 20% to 30%, because of the conversion of the cement plants from fuel oil to coal. With this conversion now basically completed, demand growth is expected to stabilize at about 2% p.a. and FEPASA's traffic should increase at about the same rate. 8. Bauxite is transported by FEPASA to supply an alumina-aluminium complex, located near Mairinque on the meter-gauge corridor, of a productior capacity of 400,000 tons of alumina and 125,000 tons of aluminium p.a. The main source of supply is a mine located at Bauxita, in the Western part of the Sao Paulo State. The company, however, aims at diversifying its supply with bauxite from Northern Brazil, shipped to the port of Santos and then, through FEPASA, to the plant and, in about two years, with bauxite mined in Minas Gerais and to be transported by RFFSA and FEPASA. The company's needs are about 1.1 million tons p.a.; FEPASA was able to ship only about .8 million tons in 1985. The forecast assumes that FEPASA would be able to meet the company's present demand by 1987, as a result of the proposed locomotive program, and that the traffic would increase to 1.2 million tons by 1990, consistently with the ongoing and planned expansion of the plant. 9. Limestone is mainly used as an input by the cement and the steel industries, and as a soil corrector in agriculture. FEPASA's main contract is to supply the COSIPA steel plant located in Cubatao, near Santos, with limestone from Salto de Pirapora, near Sorocaba; this traffic will grow with the production of the steel plant, i.e., at about 2.5% p.a. FEPASA has plans to participate more significantly in the transport of limestone from the central areas of the Sao Paulo State to the agricuitural regions of Mato Grosso do Sul to the West. Overall, limestone traffic would inccease at 3.6% p.a. in tons and at about 6% p.a. in ton-km over 1986-1993. 10. Phosphates are mined in the States of Minas Gerais and Goias and supplied to the fertilizer plants located in the Sao Paulo metropolitan region and in the Santos plain, generally through a main stockpile located in Paulinia. FEPASA's traffic of phosphates increased at the average rates of 6.2% and 4.3% in tons and ton-km respectively during the first half of the 1980s and it exceeded 1.5 million tons in 1985. It is expected to continue to increase, in the medium-term, in liue with demand growth, although at the slightly lower average rates of 5.8% and 3.4% respectively. - 84 - ANNEX 4 Page 4 or 6 11. Sulfur is imported through the port of Santos and also supplied to the fertilizer plants, including to soTme in Minas Gerais. FEPASA captured the main share of this traffic from the trucking industry during the late 1970s and the early 1980s. However, the alternative rail route to the plants in Minas Gerais, through the port of Vitoria and EFVM and RFFSA services, has recently started to compete successfully for this portion of the demand. Although the demand for sulfur is expected to increase at about 5% p.a., FEPASA's traffic in ton-km is expected to stabilize. D. Construction Materials 12. Cement is produced in the Southern part of the Sao Paulo State. FEPASA participates in the distribution of the production of two major plants located in Sorocaba and Apiai. This traffic has decreased from about 2.0 million tons by 1980 to about 1.5 million tons at present, as a result of the economic recession and of the completion of major projects such as the Itaipu dam. With the economic recovery, the demand for cement is expected to increase at between 3% and 5% p.a. on the average. On this basis, FEPASA's traffic would recuperate its 2.0 million ton, 1980 level by 1992. 13. Wood is m.inly used in the construction and furniture industries, with the exception of the cellulose and paper industry which do not usually generate substantial long-distance transport. The depletion of the State and neighboring regions' natural forests led to increased imports in the late 1970s and the early 1980s to substitute for local production, but the trend has now been reversed with the production of large reforestation projects. In the medium-term, demand is expected to increase at about 5% p.a. and FEPASA'S traffic would grow at an average rate of about 2% p.a. E. Agricultural Products and Inputs 14. Wheat is produced mostly in the States of Parana and Mato Grosso do Sul, in rotation with soya. Imports from abroad, however, are still substantial, and they actually increasee recently as a result of both consumption increases and poor yields due to adverse climatic conditions. FEPASA traff4c basically consists of tle wheat imports unloaded in Sa.ntos and of the main flows originating from Northern Parana and Mato Grosso do Sul and destined to the silos aid mills located in the metropolitan region of Sao Paulo. This traffic has been increasing at rates on the order of 15% p.a. during the 1970s, but it stabilized to about 1.1 million tons during the recession. It started co increase again to almost 1.4 million tons in 1985. Although the overall demand is expected to continue to increase more rapidly than GDP, FEPASA's traffic was conservatively projected to increase at annual rates if about 5% over the next seven years. 15. Corn is produced In many areas of Brazil, but the major surplus regions are North and West Parana, the sub-regions of Ribeirao Preto, Sorocaba and Sao Jose do Rio Preto in the Sao Paulo State, and the Southern part of Goias, which has developed very rapidly during the past few years. The main flows from these regions are toward the major processing centers in Sao Paulo and Ponta Grossa. The participation of the railway in the transport of corn has not been stable because of the commercialization mechanisms. In general, because of the lack of storage facilities in the producing areas, shipments are small, which makes it difficult for the railway to successfully - 85 - ANNEX 4 Page 5 of 6 compete with the trucking industry. However, when the grain's market prices are below the Government-established minimum price, a portion of the production is commercialized by the Commissao de Financiamento da Producao (CFP), which consolidates shipments and provides better opportunity for the railway to participate in that transport. With the agricultural priorities shifting from export crops to domestically-consumed products, the production of corn in the region is expected to increase again, at annual rates on the order of 4%. The newly developed regions in the Center-West and the Cerrados region, further away from the main processing and consumption areas, and with much larger farm holdings, represent a significant potential market, in which FEPASA could successfully compete, with appropriate intermodal transfer facilities and efficient unit train services between the main rail heads and processing centers. An action program and an investment component was included in the present project for that purpose. Consequently, FEPASA's corn traffic is expected to increase at annual rates of about 6% and to recuperate by 1993 the level reached in 1983. 16. Soya developed rapidly, over the past ten years, as the major cash crop in most of Southern and Southeastern Brazil and, more recently, in the Center West region. The major surplus sub-regions are North and West Parana, South of Sao Paulo, Mato Grosso do Sul, and the Cerrados, a region covering most of Minas Gerais, Southern Goias and West of Bahia. The bulk of soya beans is processed into oil and pellets, and into other protein food, generally in large plants mostly located in the vicinity of Sao Paulo and Ponta Grossa in Parana. Soya beans are sometimes exported directly, mostly through the ports of Paranagua and Rio Grande, depending on the condition of international markets and the situation of the Brazilian processing industry. Although FEPASA's traffic of soya beans increased at sustained annual rates of over 10% over the past ten years and reached .7 million tons in 1985, FEPASA's participation in that transport has remained relatively small, i.e., between 10% and 20% of the total demand. The main reason is the comparatively poor efficiency of the intermodal, railway-based, alternative to direct road transport, as a result of poor track condition, unavailable and unreliable motive power, and, more importantly, the lack of appropriate road-to-rail transfer facilities in the producing areas. FEPASA already made arrangements with some major traders and industrialists to transport significant volumes of soya beans from the Cerrados to processing centers in Sao Paulo. With the present project, which includes the construction, in partneship with shippers, of appropriate storage and transfer facilities at FEPASA's main rail heads in the West and the Northwest of the State of Sao Paulo, it was estimated that FEPASA's traffic of soya beans would increase to about 1.7 million tons by 1993. 17. Pellets are produced from soya, citrus products and cotton, and they are used for animal feed in Brazil or exported. The main processing centers are in the metropolitan region of Sao Paulo and Campinas; there are as well a number of industrial units in most part of the State, which are generally located along the railway lines. The railway's participation in the transport of pellets to Santos for export has been increasing and reached about 65% of the total in 1985. Its participation in the distribution cf the products for domestic consumption is much less, on the order of 25%. With a contract recently signed with a major trader, who is building specialized tenninal facilities in the port of Santos and in the interior, to transport an additional 250,000 tons of pellets annually to the port, FEPASA's total - 86- ANNEX 4 Page 6 of 6 traffic of pellets was estimated to reach about 2.0 million tons in 1987, and to increase gradually to 2.7 million tons and 1.26 billion ton-km by 1993. 18. Sugar is produced in most parts of the State of Sao Paulo, processed or refined in industrial units mostly located in the metropolitan region, in Limeira (Northwest of Campinas), as well as in Santa Catarina and Rio de Janeiro, consumed in most parts of the country and exported through the port of Santos. The railway transports the bulk of the export sugar to Santos, which represents about 600,000 tons on the average, and about 20% of the production of the State. FEPASA also transports between 150,000 and 200,000 tons of sugar to the refineries around Sao Paulo and Limeira, which represents about 10% to 15% of the corresponding demand, and an average of 300,000 tons to supply a refinery in Santa Catarina. The production of the State has been maintained at about 4.0 millPn tons in the recent years, with the exception of 1985 when it was reduced to 3.4 million tons to allow for an increased production of automotive alcohol. As a consequence, exports were drastically reduced and FEPASA's traffic of sugar decreased from over 1.4 million tons in 1984 to less than 1.0 million tons in 1985. The recent liberalization of sugar exports, however, is expected to result in an increase of exports from the State of Sao Paulo, where production costs are substantially lower than in the Northeast of Brazil. FEPASA's traffic, on this basis, was projected to increase gradually in the medium-term and to recover its 1983-1984 level by 1993. 19. Fertilizers are produced in the metropolitan region and in the industrial zones in the Santos plain, and are distributed to most parts of the Sao Paulo State and to the neighboring agricultural regions. It is estimated that the railway participates for about 30% in the total demand, which is estimated at over 2.0 million tons. Production and FEPASA's traffic increased at rates on the order of 20% p.a. during the 1970s, basically because of Government incentives to the use of fertilizers. In the early 1980s, the economic recession and the drastic reduction of the Government subsidies led production and consumption to stabilize and FEPASA's traffic to fall back, in 1983-1984, to its 1975 level. In 1985, however, traffic started to increase again rapidly as a result of both an increasing demand and the more agressive commercial strategy of FEPASA, With the proposed project, including the improvement of terminals upcountry, FEPASA is expected to continue to gradually increase its participation in the long-distance transport of fertilizers, in particular by making a better use of the return trips of its grain and pellets loaded unit trains; this traffic was pro.4ected to increase at average rates on the order of 6% p.a. May 1987 - 87 - BRAZIL FEPASA RAILWAY REHABILITATION PROJECT ANNEX 4 FEPASARailTraffic,1985 -1993 Chart I AraguarioSantos Corridor 198o 1993 Legend: Lend: t EZt -n Not Ton - Not Ton ., Gros Ton , Gross Ton In Thousand Tons In Thousand Tons Me_,etlrns ^s :6- 4vT. .555 *A5e,__ os- R MA wsp,~~~~~~~~~~~~~~~~~~~CS S;usl t AVAXAPS wewlUCS 01 CAIOAS S'pa CAJAFi AUT ?SAfAI::tA t, 5T&la *ftL4 PSSEO A -i'.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 it tt iI !C-~~~~ [L -e t 4 ~ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - SR _ BRAZIL ANNEX 4 FEPASA RAILWAY REHABILITATION PROJECT Chart 2 FEPASA Rail Traffic,1985 - 1993 Broad Gauge Corridor 1985 193 PAhORAVA #"&ASEM MSVV,A M~~~~~~~~~~~~~~~~~~~CACENA ,IT Pt =SA St* fE 00 144 ~~~I I ! - Pl*cIe*~ACLl $Moon , IL8;4A6St z - @ q/1er~ ~~~ t9t PL^ g it ^ LoWd: Lsewnd: XNot TonNoTn Gros Ton Grow Ton In Thousnd Tons In Thosnd Tons . L - 89 - BRAZIL ANNEX 4 FEPASA RAILWAY REHABILITATION PROJECT CArtE 3 FEPASA Rail Traffic,19865 1993 Chart I Meter Gauge Corridor 198651" 19E3 S.~~~~~~~~~~~~~~~~~~~~~~~~~~PC jf X_ ,* AN Logmd.. _LDUd *;1. Wj> I - " No To ~7- No T o V 1R G ro n T on -L N 4 G to T o nt t ;.'2 F.,|,~~~~~. M _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U 51 54. ,. Ag Legend: Legend: r - NetTon ,= 'NetTon ZZlGrowi Ton i:=J Grouw Ton In Thousand Tons In Thousand Tons World Baonk30901:3 -4~~~ H En I z ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l: 0 ~~~~~~~~~~~~~~~~~~ - 91 - ANNEX 5 Page 1 of 2 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT FEPASA Operating Performance 1. Railway operating performance is affected by many factors. When analyzing FEPASA's operating statistics, it should be taken into consideration that FEPASA's main lines are laid in a difficult mountainous terrain; train size and speed restrictions, necessary recomposition of trains and the need of helper locomotives in some sections, have an important impact upon performance. Furthermore, the region was affected in 1982 to 1984 by unusually heavy rains which caused considerable damage to the railway infrastructure, imposing speed restrictions and had an adverse effect upon performance. Other important extarnal factors were the general economic situation and the Government's austerity program, which, with the associated fund shortages and imnort restrictions, led FEPASA to reduce maintenance standards, particularly for locomotives, and to defer essential track renewals and infrastructure works. Nevertheless, FEPASA, during recent years, managed to introduce some improvements in its operations, i.e., a new transport plan, improved coordination with clients, more efficient utilization of its locomotive and rolling stock fleet, and was able to transport an average of 20.0 million tons p.a. during the period 1980-1986, which represented an increase of almost 100% as compared to 1975. 2. In spite of the substantive improvements in railway operations that were achieved by FEPASA since the decade of the '70s, its operating performance remained fairly constant since the early 1980s and at a satisfactory level when compared to ether railways in the developing countries. In terms of operational efficiency, labor productivity has improved considerably, as a result of the drastic reductions in staff. FEPASA handled 380,000 net ton-km per employee in 1985 as compared with 112,000 in 1971. Passenger services were reduced from 12.2 to 8.4 million train-km (including metropolitan trains), and freight train-km decreased from 14 to 10 million during the same period. With regard to locomotive performance, total locomotive-km remained constant at about 38 million during the period 1980-1986. The availability of diesel locomotives, on the average, decreased from 79% in 1980 to 68% in 1986 and that of electric locomotives from 71% to 69% during the same period. The utilization of diesel locomotives improved from 56% to 65%, but overall, locomotive productivity decreased from about 55 million gross ton-km p.a. in 1980 to about 49 million in 1986. Average wagon load increased from 42 to 45 tons per wagon, and the percentage of loaded to total wagon-km Improved from 59.7 to 63.1 during the same years. The availability of wagons, however, declined slightly from 91% in 1980 to 90% in 1986, and their productivity decreased from 1,748 to 1,593 net ton-km per wagon day in use; their average turnaround time remained at about nine days, showing no improvement in the control of wagons at terminals. - 92 - ANNEX 5 Page 2 of 2 3. FEPASA management realizes that the planning and control of both operation and maintenance need to be improved to achieve the action; program's objectives, at the same time as the proposed investments are implemented. FEPASA has already undertaken preparatory work for the development of an on-line operations control system and a locomotlve and rolling stock maintenance management system. Technical assistance would he provided under the project to develop and implement the systems (Annex 7). These improvements, together with the planned installation of a modern and more effective telecommunication system, the rationalization of workshops, the locomotive and track rehabilitation programs, the introduction of a new transport plan which will aim at increasing the number of through and block (classified) trains, the modernization of yards and terminals and the improved coordination with RFFSA and the port of Santos are expected to result in substantial improvements in FEPASA's operating performance. It is planned that during 1987-1993, the locomotive availability will increase from 70% to 80%, locomotive utilization from 65% to 76% and locomotive productivity from 64 million gross ton-km to 87 million. In addition, through an efficient control of the trains, improved transfer facilities, and the increased use of the unit trains, FEPASA should reduce the current 9.0 days wagon turnaround time to about 6.7 days in 1993. For that purpose, FEPASA's strategy would be to cater primarily to long haul bulk traffic, which can be handled by point-to-point block trains made of permanently assigned wagons, or by complete trains made up in a collecting yard to a single destination or vice versa and to ban train reformations en route or to limit them to attaching/detaching train segments, which would be modular. These modules are dictated by the hauling capacity of the locomotives, i.e., 750 tons, 1,250 tons or 3,000 tons, and depending on the characteristics of the line-sections, one or several locomotives are used. Such operating plans for specific traffic have been developed and recently implemented; they have already led to substantial productivity gains and improvements in service quality. FEPASA would now gradually extend these plans to other traffic, with appropriate technical assistance, as part of the operations and maintenance action program (Annex 7). May 1987 - 93 - ANNEX 6 Page 1 of 7 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT The Rehabilitation Program A. Permanent Way Works 1. General. Main traffic lines are laid mostly with 45-50 kg/m rail (2,900 km) and 55-57-68 kg/m rail (660 km) on heavy density traffic lines, while secondary and branch lines have light rail of various types of less than 40 kg/m. Sleepers are mainly impregnated timber (about 89% of total track), but concrete sleepers nave been used on main line relaying for some years. Ballast is of reasonable quality and quantity on relaid track, but is inadequate elsewhere. Rails suffer damage due to poor ballast support and also from wear on hill sections where steep gradients and sharp curves prevail. FEPASA faces three main problems related to track infra/superstructure: high operating costs, capacity limitations due to steep gradients and curvatures on its lines and, most important, deferred maintenance. Because of the mountainous terrain, alignments in many sections are poor and need continuous maintenance. In addition, the condition of the track infrastructure has deteriorated further because of the heavy rains during 1982-1984, and urgent works are needed, particularly for stabilizing cuts and embankments and improving drainage systems. The tracks are in fair to poor condition, imposing an increasing tnumber of speed restrictions, thus affecting normal train operations; rehabiiitation and track upgrading are crucial in the three main corridors to allow for coping with expected increasing traffic. 2. Infrastructure rehabilitation works. Based upon the results of the track infrastructure condition survey conducted in 1985 for FEPASA's entire network, an evaluation module has been developed and investment priorities defined. Engineering designs have been completed, and bidding procedures for civil works in the three corridors have been scheduled to meet the seven-year targets of the project (Annex 12). These works would comprise earthworks to stabilize cuts and embankments (1.0 million m3 in the Araguari-Santos, 0.7 million m3 in the meter-gauge and 0.4 million m3 in the broad-gauge corridors); improvements of drainage systems consisting of construction of culverts, ditches, and drain channels, distributed on a total of about 70 line-km; the construction of retaining structures (some 9,000 m3), mainly in the Araguari-Santos corridor; and the construction and extension of about 6.5 km of track bed for sidings (at Silva Mendes and Corrego Fundo in the Araguari-Santos corridor and Santa Ernestina and Uchoa in the broad-gauge corridor) to meet operational requirements for longer freight trains at crossing points and to allow for more frequent services. Works are particularly urgent on the Palestina-iale Pertil and Canguera-Evang. de Souza-Acarau sections in the Araguari-Santos corridor and the Potucatu-Apuas-Sao Manuel and Pindorama-Catanduva sections in the meter- and broad-gauge corridors respectively where, because of heavy rains and soil deficient conditions, the weak embankments and cuts require reinforcement and rehabilitation. The proposed infrastructure works amount to US$11.3 million - 94 - ANNEX 6 Page 2 of 7 for the Araguari-Santos, US$3.8 million for the meter-gauge and US$2.8 million for the broad-gauge corridors including contingencies, which together represent about 7% of the total cost of the project (Tables 4.3, 4.4 and 4.5 of the report). 3. Superstructure rehabilitation works. The railway has undertaken a program of selective track maintenance renewal, using heavier rails with welded joints (in some sections, with elastic fastenings), supported on concrete or treated-timber sleepers and new stone ballast; the objective is to provide an improved standard of track for sections where important increases of traffic are taking place and, also, where heavier locomotives and freight cars are in use. Secondary lines and yards are renovated with rails released from the main routes. In addition, the maintenance of the track, especially on the renovated and improved sections, is being improved steadily by a mechanization program, started under previous projects, which calls for increasing use of track machinery. However, during recent years, this program, together with the general maintenance of the track, had to be scaled down because of financial constrainits. It should be noted that freight traffic volume increased almost 100% in the last ten years, and track maintenance expenditures in 1975 represented about 20% of FEPASA's revenues as compared to only 4% in 1980 and 9% in 1985. The rail renewal prcgram did not take place; only 86 km of rails were procured during the last five years, which represents only 0.83% of FEPASA's rail track. In addition, the targets set for the sleeper renewal program were not met; only 1.8 million timber sleepers were replaced from 1980 to 1985 as compared to 3.3 million sleepers required under the program. A significant effort will be needed in the short term to reduce the backlog of track maintenance. In particular, the planning, programing and monitoring methods and procedures will need to be strengthened. A specific action plan has been included for this purpose in the project (para. 4.09 of the text). 4. FEPASA has prepared detailed proposals for selective track renewal to be initiated during the second half of 1987, and to be completed in 1992-1993, using and installing new rails, fastenings, sleepers, and ballast in selected sections of the three corridors where total or partial rehabilitation is needed, focusing on those sections whose present conditions would not provide reliability and safety for the projected traffic. These proposals are aimed at the rehabilitation of some 580 km of main line in the Araguari-Santos corridor, 494 km in the meter-gauge and 916 km in the broad-gauge corridors, at an estimated cost of US$50.2 million, US$21.2 million and US$22.7 million respectively, including contingencies; together they represent 33% of the total project cost. FEPASA's specifications for track rehabilitation remain generally as in the previous project and are summarized as follows: (a) rails are standardized in selected sections to 45-50-57 and 68 kg/m, to be obtained according to international specifications, and including a proportion of rails with higher manganese steel, such as is commonly used in other similar railways, to give less wear and longer life on sharply curved tracks (rate of wear can be 50% of that on normal rail steel with only a relative increase in price); (b) the rails are welded by the flash butt process at a fixed depot into longer lengths before laying and are then joined again 4n the track using the alumino-thermit process; (c) concrete sleepers are locally produced, pre- or post-tensioned, reinforced concrete and are placed at 1,600 per km using elastic fastenings; - 95 - ANNEX 6 Page 3 of 7 (d) timber sleepers are of selected wood and impregnated; and (e) stone ballast is provided at about 1,500 m3 per km. Recovered rails are cropped to remove end defects and then welded into longer lengths and placed in secondary lines or in sidings and yards where ballast is provided at 1,000 m3 per km. A summary of the condition of the track in the three corridors, before and after the project and the rehabilitation program for the track are presented in Tables 1 and 2 of this Annex. B. Yards and Intermodal Terminals 5. The analysis of the operationL of the railway and the preparation of the new transport plan, carried out early this year, indicates that, as traffic levels increased, capacity constraints developed in some of FEPASA's traffic yards and that congestion is affecting operations. The layout of these yards is inadequate, in most cases, to meet daily operations and forecast traffic; many track lines are in serious disrepair and require rehabilitation. In addition, several track lines need to be reallocated to speed up loading and unloading operations or extended to facilitate the formation of larger trains. The program for rehabilitation and extension of yard track in the three corridors is of high priority since utilization of the 4ncreased line capacity in FEPASA's program would be difficult if marshaling yard capacity were not increased. FEPASA has used a general methodology to examine the capacities of existing yards and assess the long-term requirements for other extension and rehabilitation; main factors considered were: (a) present and future "normal" and "peik" average number of cars being or to be handled, reception, classification, formation and dispatch; (b) the effect of traffic concentration periods through the day, arising from train timings and from local industrial working hours; (c) the average standing time per car to cover inspection, recording novement and normal operating delays; and (d) the number of tracks required in the yard to allow for adequate distribution of cars according to the various destinations, separations and groups of cars generated or to be generated. 6. This project component includes the rehabilitation and extension of some 28 km of yard track in the Araguari-Santos corridor (Ituveraba, Orlandia, Sao Joaquim da Barra, Evangelina, Julio Pontes, Replan-Paulinia, Samarita, Paratinga and Paratinga Corredor), 13 km in the meter-gauge corridor (Brigadeiro Tobias, Nova Itapeva and Bauru) and q km in the broad-gauge corridor (Araraquara, Rincao and Triagem/Bauru). It also includes minor investments in some stations and yards to provide or rehabilitate utility systems, such as electricity, illumination, water and sewerage. This component envisages the expenditures of about US$15.5 million, including contingencies, during the seven years of the project. 7. Transfer facility works comprise the upgrading of existing facilities at Panorama and the construction of three grain silos of static capacities ranging from 6,000 tons to 17,000 tons to improve transshipments of grains and grain products upcountry ir. order to enable FEPASA to nperate unit-through-trains between these facilities and processing centers and/or the port of Santos; they would also help FEPASA and grain producers to improve overall coordination and programing of transport, especially during peak seasons. In the meter-gauge corridor, one silo would be built at Presidente Epitacio (6,000 tons) two in the broad-gauge corridor, one at - 96 - ANNEX 6 Page 4 of 7 Santa Fe do Sul (16,000 tons) and the other at Colombia (17,000 tons). They would be vertical silos (gravity discharge) of a modular design consisting of 2,000-ton modules including the necessary cleaning and drying equipment, loading and unloading equipment, and weighing and ancillary equipment. Accesses to these terminals would be improved and/or constructed. The cost of these components is estimated at about US$0.9 million in the meter-gauge corridor and US$5.0 million in the broad-gauge corridor, including contingencies. The investments in yards and intermodal terminals together amount to US$21.4 million and represent 8% of the project cost. C. Telecommunications Systems 8. The existing telecommunications system is worked mostly through bare open-wire lines with some supplemental channels rented from the -ational telephone and telegraph company. The open-wire lines are unreliable and fault-prone under adverse weather conditions. They are subject to vandalism and theft, requiring continuous repairs and the reinstallation of wires in the sections where they are stolen. The rental charges foL the channels from the national network are high (about US$1.0 million per year), and the rents are payable even for the periods when these channels are faulty. The bott,eneck sections need more reliable telecommunications channels for better operations and for the safety circuits. 9. The proposed telecommunications system for FEPASA provides for V4F, UHF, SHF (microwave), on a total of about 1,067 line-km in the three corridors and fiber optical cable routes to convey the voice and data channels on about 246 km. VHF radio would be used principally for communicati-on between the dispatcher and locomotive drivers; UHF radio is to be used for low to medium channel density routes and spur routes; SHF radio and optical cable arf designed for high channel density routes. For the high channel density routes in the Sao Paulo city area (Campinas-Mairinque- Sorocaba and Sao Paulo-Mairinque), fiber optical cables are to be used since SHF radio links are not recommended because frequency spectrum is heavily congested in this area; it is estimated that FEPASA would absorb 60 to 80% of the capacity to be installed and that TELESP (the state telephone company) would absorb the remainder. Arrangements are being sought between the two companies for the cost sharing and use of these routes. The telecommunications system would provide channels for: (a) omnibus sections control circuits linking the traffic controller with every station; (b) circuits for dispatcher-train operational communications; (c) circuits for CTC signaling; (d) point-to-point voice circuits between neighboring stations; (e) railway maintenance circuits; (f) administrative trunk circuits and point-to-point channels; (g) data transmission circuits for the various management informatics systems (TREM, SISMA and SRH) currently being developed; and (h) telecontrol and telecommand circuits for substations. The replacement of the existing old and faulty telephone exchanges by 29 new automatic telephone exchanges and two transit exchanges (Campinas and Sao Paulo) is also envisaged. 10. For implementation purposes, the proposed telecommunications system has been divided into three phases, the first and second to be implemented under the project and the third beyond 1993. Phase 1 would provide for optical cable and VHF in the Campinas-Mairinque-Sao Paulo and - 97 - ANNEX 6 Page 5 of I Mairinque-Sorocaba section. Phase 2 would provide for UHF (120 channels) and VHF in the Riberao Preto-Campinas; Araraquara-Itirapina-Bauru, Sorocaba-Ipero-Botucatu, and Jundiai-Sao Paulo sections and UHF (60 channels) and VHF between Mairinque and Santos; it would also provide for UHF (24 channels) and VHF to the spur line to Replan., The details of the design are shown on Chart IBRD-30913:1. The proposed works contemplated in the project have been estimated to cost about US$43.0 million including contingencies, which represents about 15% of the total cost of the project. D. Track Plant Equipment Machinery and Materials. 11. During the late 1970s, FEPASA started a mechanization program for track maintenance, after concluding that its labor-intensive practices were ineffective in meeting the increasing maintenance requirements of rising traffic. Manual packing of track ballast under heavy rails and concrete sleepers to carry increased locomotive and freight car axle loads was not effeetive in preserving line and level. However, FEPASA did not fully implement this program, mainly because of fund constraints which did not permit the completion of purchases for necessary equipment and related spare parts for its normal functioning. Nevertheless, FEPASA was able to start reorganizing the structure of its track labor force and rationalize its maintenance practices. To date, FEPASA has 24 regional maintenance units with 115 working gang groups totaling about 2,400 men, representing 13% of the total work force of FEPASA and 0.46 men/km, which is in line with modern standards for railways similar to FEPASA. Each unit has the responsibility for periodic routine maintenance of about 200 km of track, including the cyclical work performed annually with the heavy mechanized equipment. Major rehabilitation or new track works are carried out by private contractors. The standards of maintenance can be assessed regularly on the graphs produced by a track condition recording unit already in use on the system. 12. FEPASA has two Permanent Way workshops strategically located at Sorocaba and Rio Claro and provide maintenance support to track equipment; some plant equipment is old and obsolete with high operating costs and needs to be replaced and supplemented. Also, the rail welding plants (Riberao Preto and Ipero) and the sleeper treatment plant (Bauru) need additional equipment to cope with the increasing demand for welded rails and impregnated sleepers for the rehabilitation program. Table 3 gives a description of the track plant equipment and machinery to be purchased and installed; contracts for some of the major new equipment would specify that the suppliers, in addition to providing packages of spare parts, would also assist with the appropriate training of operators and mechanics. This component also calls for the provision of 22,000 tons of rails, 200 rail switches and 250 sets of rail switch points and frogs to take care of the deferred maintenance on sections outside of the three corridors, where rails would be replaced mostly in sharp curves and where derailments are frequent. The cost of track plant equipment, track machinery and spare parts for the rehabilitation and maintenance of existing heavy track machinery has been estimated at US$8.4 million and rails and switches at US$15.2 million, including contingencies; together they represent about 8% of the total project cost. - 98 - ANNEX 6 Page 6 of 7 E. The Motive Power, Rolling Stock and Workshop Components 13. When FEPASA was created in 1971 from the merger of five separate railways, it inherited dispair rolling stock and antiquated repair and maintenance facilitiet scattered over their respective territories. Since then, FEPASA, with the help of consultants at different stages, started a process to rationalize the organizaLtion and execution of the maintenance tasks. However, this has been a slow and lengthy process with technical, financial, social and political constraints. The railway operates four main workshops located at Campinas (for metric-gauge diesel locomotives), Sorocaba (for metric-gauge electric locomotives and wagons), Jundiai (for broad-gauge diesel and electric locomotives) and Rio Claro (for broad-gauge wagons), where general overhauls and major repairs take place. Ten smaller sheds at Mainrinque, Riberao Preto, Botucatu, Assi3, Itapetininga, Aguai, Santos, Campinas, Bauru and Rincao, take care of the intermediate and minor repairs of the locomotive fleet; routinary services at nine staging and fueling locomotive posts; minor repairs and routine maintenarce of wagons are carried out in 22 ancillary sheds locatad along the network. The workshops are generally well organized; FEPASA has graduall, been providing them with modern equipment (mostly financed from the previous Bank loan, but limited due to budgetary constraints); hence, there is still old or obsolete equipment that needs to be replaced. FEPASA has made progress in centralizing the repairs of components and manufacture of various items which are replaced when revisions and overhauls take place; in some instances, these repairs are contracted to the local industry. However, it is felt that there is still a need for improvements since the scheduled maintenance of the locorAotive fleet is too frequent and carried out in too many places, affecting productivity and costs; thus a rationalization of the maintenance facilities, workshop methods, procedures and organization is imperative. The project includes an action program aimed at the gradual consolidation of these facilities and at the developing of new maintenance strategies (para. 4.09 and Annex 7). It also provides for investments in equipment and minor rehabilitation and/or improvements in the workshop buildings (para. 14). 14. During the first part of 1986, FEPASA set up a task force to recommend a Master Plan for the repair and maintenance of its locomotive and rolling stock; consultant services were hired to assist in the study. FEPASA has already started to adopt the recommmendations of an outline Master Plan prepared by the task force, which calls for: (a) placing the entire responsibility of maintenance and repair works including the planning, scheduling and implementation of works, with the General Superintendency for the maintenance of rolling stock within the Transportation Department (these responsibilities were previously shared with the Technical Department); (b) implementing a rehabilitation program, with the help of private industry, which consists of the general overhaul (two years overdue) of 136 locomotives 2000 HP (series 3800 and 7800), and the rehabilitation of five heavily-damaged locomotives. The overhaul of the first 51 locomotives and the rehabilitation of the five locomotives are being contracted to the local industry and is scheduled to start in mid-1987. Spare parts for the rehabilitation of 57 locomotives will be purchased under the prolect. There are - 99 - ANNEX 6 Page 7 of 7 with trucks and traction motors in good condition, but their diesel engines need to be replaced, thus increasing their life expectancy up to 15 years. These locomotives are suitable for working on the difficult Aguai-Bauxita branch line which has several sharp curves; works are scheduled to take place during i988-1990. In addition, there is a backlog of 122 heavy electric rotating machines (generators and traction motors) waiting for an overhaul or major repair which is beyond the capabilities of FEPASA's workshops. It is planned to contract the local industry for this purpose and to start works in 1987; (c) defining and adopting a maintenance philosophy, 'in particular the scheduling of preventive maintenance works for locomotives and wagons; (d) rationalizing of task assignments to the various facilities, with a view to reducing their number (it has been established that the number of ancillary shops would be reduced from 22 to 7); and (e) implementing an !nvestment program during 1987-1990 consisting of limited civil engineering works in various facilities and renewal or complementation of equipment and tools (Table 4) to improve productivity in the workshops. These investments are included in the project. The Master Plan is consistent with the traffic forecast since it takes into account the number of locomotives and wagons which FEPASA needs in order to cope with predicted traffic growth; it is also consistent with che operational performance targets set. 15. The estimated cost of the locomotive rehabilitation programs and investments in workshops (paras. 14 (b) and 14 (e) above) amounts to US$38.3 million and to US$9.8 million respectively, including contingencies, which together represent about 17% of the total cost of the project. The purchase of 230 new tank cars for the petroleum derivatives traffic has been estimated to cost US$15.6 million, including contingencies. May 1987 aZM AWS ANUW mwIaLMr" NO Srcr~~~~~~~~~tflx C lr tdq t lLAh t Uv%/ ut - _ 02d a__ 1k t Tz- -- T~- -- -'-,. s ' T .-c. k * I. Utri-4~r1a64ta 45 .q 5 45 40 mod if) Pir v 951 20 22 45 45 2) Sltie iW ad w 1,46 34 1 3 2 t*wrldmrAtb$ 129 1 4 45 5 0 g so ftv f v U Im a, 22 In 50 1) tlPc I Go e 1.4W 31 a) 2 3. _ ltowp 1I4 9 5 32 40 Ujtd 40 Pir U I0 Is 2n 1P 45 10 VW 4 - G1 w 1,1/T P 3) 4 4. f4b ,t4-Gkt ftD 1;1 1I 5 45M 40 9240j 40 Atr WC IIOD 21 27 47 So) ion 70tite tID 1le C 1,93 46 21 1 . tbin- do tCai& 4t 7S 5 40 40 URWd e0 Fdr U I.4e an 15 75 45 tnn Rlatd 03 %1t U 1,.sn3 z5 2D A 4. 1ta4ptU*u 9 we 4 45 ID Ri4d 40 tsd W 1 ,57 25 25 9 S7 1) Iluttle lr rand U 1.W 46 25 2 7. Fa1w Vt95A Z0 we 4 45 n) RigWd 4n tkud v 1.sn 25 I) IQ 57 11O rtttt v (lA I 1,4W 4S 21 2 8.bit. S-_1tat 4 A we 3 30/40 7n tttp1ttic 640 (d W t.33) 25 25 4 SOt.s 30 Eltc 3n Qual u 1.4W F ZS 2 0. S1ttft arjto (C5ce) IA t so 70 ttd 60 4 v 11 0 20 IS va 3) 57 itftl SI Ebt v Im4 ID 3) 2 In. PRiut1,ft?* 19 weS 5 45 3 0 wd 70 ari v 1,3sn 2D 20 19 57 tn7 VIntlt 1) rood v Ii) 35 25 %b-T4*Ai 624 so II. br,_-tpr 72 14 3 5O eo t' tU c 70 Fair t 1.1131 2n 27 33 50 15 EinSi 113) C IGvn c9 251 1I 12. t Wau-.CaLizto 92 14 3 S0 70 Uamtlc 70 FPdr U 1,25D 2n 2Z 42 50 - ELii t rAl 6d C I,m s 3) 1 I 13. tatitnw4ada 11 t14 t 5 SO 70 gd AO Mar, U 1I2nn) 2n 37 Y*9 n) - md4 - 0r , v 1,4W 43 2 4 0 4. %atotG_h-'Aodlia 67 4 5 10 70 Rgid W60 Ftr Y l.-D a, 34 6t7 50 - Rd - f v 1,n s0 3) 4 0 15. ft. "It4a-1t*m 9s S 37 32 RtiId 40 PAIr U 1.350 a, 3) 79 sn 1nn EUL'ttlc WI 13 U 1.4Nm 3) rn 2 16. tbi Jr.-%u 114 4 s 37/45 5 O gid W0 Ftd3Vr V .) 2a 23 114 45 25 Umtinrc 1111 tt U 1V 2' 210 3 Sh-14(TO 539 494 t-a'42.4'1Vhms 44 8 t 55 in tlntke SD Pair i. 1,450 25 42 44 57 Io itlct 70 tS`r 1,e4 se 7) 2 IS. Qmin4ioC ao 89 8 3 57 OD Eltir m Fdr v 1 ,410 25 35 Re 57 10 Erntc tIm 0.40 C I ,Un 67 .S I 19. Itic.m .AW t6S a 3 55/57 30 trnttc on C7. 1 I3 Z5 _5 35 165 57 is tte _ 13.4 U- 1.4W 45 'S 2 2D. Apki, J. NoPto 32n a 5 4* 7e Eznt1C In Sn Fkl0 U 1.110 25 27 2nn 45 - V.,ttc VT - OVA U 1.(4 11 n 4 RIgi4 83 Rgd AtK 21. S J o Pret*- Ft 3 l 9 221 a 5 45 6n RIt in Fair U l,50 25 24 221 45 - RWd - r-O U 1.4W 37 ZS 4 22. r*,-bwtr 19A 5 S a 40/55 40 PUKt1e 4es Fair U 1 ,1 25 27 IS" 55/4' - mt4c AM - 0t U 1.6n 4 2S 4 Rigd 6! 4014n3 RR4e X h-Tal 916 916 TOM 2.079 1390 I/ om: _trte (I 13h). S.ftd (1IDw) '1/5.0.1 21 Ci_of et * bi.2.w Thu of *iamwt d S or 3/ h11. ttMr.0 A - 1.5 p3/ _ttaly daOM e I I.S )'3. ,1 lm Ra. S11_ S _r/ t _ C.C. *idl 4t :: W.bu/to td; ~owoe; 0.C.-Cd utim T e.7 0 (34o.ta V,tlc I .2 10/57 2 nA.8 a1 l.d 913t0te 1,W WnSO 3 0.9 Ftit t* Utie t1,6C.W 45 4 1.0 PAtt Rigd Md 1.4 45 5 1.1 f25r MD RIi 12S 45 l 6 1.1 tit tt Tiid t."I 37 Source: FFPASA and uidsstm estinetes. Apr i31987 - 101 - ANNEX 6 Table 2 DRAZUL 1PASA RAILWAY BEHUIXtTI E PllE Track Rehabilitatin PraW (1987-1993) (Tra) ) Corridor Sectiae 1987 1988 1989 1990 1991 1992 1993 Total Arywuar ntos Aauari-Uberlwia - - 11 34 - _ _ 45 Uberland.a-4berab1 - - 26 77 26 - 129 Evangelina-Passs '0 74 74 26 - - - 184 Rib.Preto-Casa Branca - 6 35 46 - - - 87 Pocos de (CIda-Agu - - - 60 15 - - 75 Replan-PauUT - - 9 - - - 9 Paulinia-Hoa Vista - - 10 - - - 10 Saimrtaltuario (Samos) - - 18 - - - - 18 Paratiu-arP e r _ 19 - - 19 Sub-Total 14 80 138 211 111 26 - 580 Meter-Gouge Sorocaba-Ipero 13 20 - - - - - 33 Ipr-Eu. Calixto - - 74 18 - - 92 1tatnp-Uiz Pinto - - - - 109 - - 109 Salto Grarde-Candido Mt - - - - - 67 - 67 FLg. IHnrmmn-Itapew - 63 16 - - - - 79 uibiao Jr.-u _ - - 57 57 - - 114 Sub-Total 13 83 16 131 184 67 - 494 BtaxM-(we ARwai-Cawins - 7 37 - - - - 44 Caiwn-RiCo Cr - - 15 44 29 - - 88 Itirspina-BlNu - 24 58 58 25 - - 165 kar Jara-6.J. Rio Preto - - 70 70 60 - - 200 SJ Rio Preto-fta.Fe do Sul - - 33 78 77 33 - 221 Araraquara-Barreto - - - 71 69 58 - 198 &ub-'rotal - 31 213 321 260 91 - 916 TAL 27 194 367 663 555 184 - 1,990 Source: FEPASA and mtessim estiates lMay 1987 - 102 - .AZII, ANNEX 6 Table 3 FEPASA RAU4M RDiABUXWICN PKJ= Track Plots, Woi s and Roling Stodt Ccpment rradc Plant ku±mat and M!A y Item q!qtity Estimated Cost US$(000) 1. Tradc Plant FWpwit 1.1 SIeepr Iapregaticm Plant 1.1.1 Forklift 3 140.4 &iblbal 140.4 1.2 Radl W V1d Plat 1.2.1 Elctric rail shapirg osc6dne 5 9.7 1.2.2 Air coamreseo 2 60.5 1.2.3 Ultrasonic rail fail datector 2 22.5 SArIlbtal 92.7 1.3 Permimt Way W*sbtvopa 1.3.1 UWirsal lathe 5 99.1 1.3.2 Radial drillir =irne 1 16.9 1.3.3 Eaectrohydraulic sow 1 3.5 1.3.4 Drills 5 20.2 1.3.5 Filing planer 2 28.2 1.3.6 Fe¢ filitg planr 2 224.5 1.3.7 High presre wshis wzit 2 4.9 1.3.8 MHcdwcal saw 2 7.1 1.3.9 UIiversal drill 1 58.0 1.3.10 Rectifier for w4irw 3 4.5 Sub-Total 466.9 Total Tradt Plan EquiP,Mt 700.0 2. 1akMchnr 2.1 Rail drillng gscine 49 100.9 2.2 Rai g8iber 16 35.9 2.3 Rail cutirg mscti 20 41.2 2.4 Ran lubrlcators 178 433.0 2.5 Sct sprle drivl imt 7 14.4 2.6 Sleeper drilling uait 16 32.9 2.7 Tmxut grinder 10 22.5 2.8 Hydraulic stretchirg emit 8 59.9 2.9 Portable taing set 2 12.7 2.10 Track jacks 60 67.4 2.11 Portable electric gaurator 7 35.4 2.12 Porable electric weldi1g set 17 238.6 2.13 Motorized insjectim1 cars 9 480.0 2.14 Mtorized ng cms for equ4uant 2 161.0 2.15 Trolleys 6 73.0 2.16 Motorized car for weldirg 1 61.2 2.17 Tawing, alig and lewlirg undt 5 3,150.0 2.18 BaU.ast reulator 5 1,125.0 Total Track Mldirary 6,145.0 Total Tradk Plant, Equipit ard lizhrY 6,845.0 Source: FEPASA and mission estimates May 1987 - 103 - ANNEX 6 AL lable 4 FEPASA RAIU& R1anxrATMtG Pg)JECI Page 1 of 2 Tulck Plaits, WorLsop and RoUing Stodc fm t WDzkshop Equijent and Tools Locatimn Item (Qatt Estmted Cost Capinas I. Loootive wesos: PeraDlel latle - 1.X0013.000 mm 7 246.7 UOnversal udllg 1 37-7 Ra;ial drill I 2B.5 Valve rectifier 1 20.0 Vertical jack plax* 1 28.3 Vertical rectifier I 26.b histcmtic uidrcurter 1 26.0 Siels for 5.5 ton, 330 x 100 x 220 cm 3(0m 66.0 Support bae, 200 x 500 x 20 an 8 20.0 Wshi.-g lubricatirg nadiu for beasrgxs 1 19.7 Uowrnor testbW tench 1 52.1 Foxklft 1.5-2.5r 5 139,4 Mehanical testers idsc, 20,0 Electronic testers nac. 25.0 Derrick, dieeel engine, 8T 1 40.0 Misaleellansmsi eqidpxent and tools 1 472.0 Sub-Total 1,268.0 Sorocabs Untiwersal lathe E-4$A, S-30 2 78.4 Radial Drill R--6W 1 41.U Forklift C-300 2 30.4 MiseeUlaresas eupiant 106.2 Sib-Total 2.56.0 Jundai Parallel latte, T-1, T-2, T-3 4 184.4 Universal mdillng F-30 ! 33.3 Radial drill FR-50 2 65.5 Hydraulic press 1 29.5 Electric oven I 11.5 leaning and painting cabin 1 9.8 Airless paint unit 2 7.1 emtic washir" nit, 500 2 19.6 Portable trausfomer for testing 1 13.3 Miscalaeils equdpmet 53.0 Sub-Totel 427.0 2. Electric Rotatini Mhcines Sorocaba Cafmtator lathe 1 15.8 Autoatic o¢.aWr ondercutter 1 127.1 Ce.erator set 0 + 110 v.c.v. 2 26.3 Bendirg polieration furnaoe 1 41.6 Aruture tabIg device 1 24.3 Armture W1snr tnit 30 + 3,000 1 113.6 CauztAtor ladt M0I 5OO/26 1 75.9 lod testing bench 1 150.0 Genraror grpv for emantic tests 1 33.6 Electric dryirg en 3 50.9 Paintitg cabin 3 117.5 Washirg cabin 1 9.0 Hot coiling protection press 1 59.8 Coiling insulating cline 1 12.1 Vertical tydraulic press 1 20.0 Supportirg rectifiar 1 366.1 laft for aristures 1l0 II 650 1 73.7 Latc for asin lid E45A 1 62.4 tniversal milling schine 1 136.1 Radial drill 1 41.0 Autoastic idca undercutter 1 170.5 Forklift 2 42.7 Inastruents, testers udAc. 40.8 siscellaza.s eqtuipnt 114.2 SubrTotal 2,012.0 3. Locomtivve Shed Mairingue, Rinco Electric aitter 8 67.5 Air dedifier 2 7.0 Electric weldig set 4 6.3 Torqw wrench (75-150-600 ft/lb) 6 12.0 Forklift 1.ST 2 27.4 Set of tools 30.0 Cnntrol arl anaftreant equiptent 20.0 %iscelDa*ous eqdvnt 115.8 Sub-Total 286.0 - 104 - ANNEX 6 Table 4 Page 2 of 2 WAZIL W)ASA RAIlWAY RR2IALXWICtN PIEIT Track Plants. lbrksmop rx Rolling Stock Ccxsnt iWn pAller unit 5 12.7 Mscellasnrem equipmz san tools 85.8 bTeotal 1,729 Rio Claro Hfdrsulic press for vulcanization 1 120.3 &xbber blealer MBL-300 1 37.2 Fo*klIft 1 38.7 Painting and drying cabin bhilt-up 1 95.0 Washing cabin 1 32.9 Portable s edamst mit 4 19.8 Universal diling mdiz 1 40.4 Univermal rectifier 1 61.4 FrictiQl press 1 12.6 Elevator platform 1 31.0 Miscelsmu eqixment ad toDIs 115.7 Sub-'rotal 605.0 7. Ixts kecillary Rs smrita c s eqim 46 209.7 Pamliia Wscellaneaus equipment 57 Z52.3 Ararsquars Miscellanus eqipmernt 54 228.0 Itstpstiniro Miscllareus equipment 34 148.5 Botucatu M?scellanrm equiment 34 148.5 S9b-Total 987.0 Total Rollin Stock w&tkshe Total Ibrkshe,o Pt and Tools 8,237.0 SCLa: PEPASA ald msston estleseS ?'ay 1987 - 105 - ANNEX 6 Chart BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Telecommunicotion Systems Design t Al AGUARI COLOMBIA UBERLANDIA It t I tI t PASSAG Mv --- ---- - ----- r1BEIRAO PRETO rI ___.-_I !____4 ITAU 1T1~~~~~~~~~~3 ,'2~~~~~~ j __rs_-* GUAXUPE It T3 S FE DO SUL , JALE¢S 72 t1 --- ___!_ P CAUDAS ---------- _ ------------------------------------- 4 1ARARAQ;UARA T P FERREIRA --------- SAPUCAi 13 t1T3 t I REPLAN PANORAMA SADAMAMINA ' BAlRU T3 4 2 ------------- --------, JUNDIAi tl--- TIRAPINA RVAQAP rCAI IPANAS tj '.? PIRACICAIA j rC i I MAIRINQUE P EPITACiO N ! D ?lNtDOR , t5 I '* --------- r------ ------- -------- _. , . r. . SAO PAULO t 7 ,4cv t zSOIOCA8A 4ALTINO *|'2 '21 ~NJljuRU8ATUBA F DA CiJNHA ,EV DE SOUZA NOIF, r ,~~~~~~~~~~ ~ ~ ~~~~------ AP A; l _ PEREOUE NOTE 1 4P -*E~u TARARE t1 t2 T_ Toe.mple'er!ea on phase o"e - To be , rnenteT Ocn praose two A!NAiALZI-HO A - …SAMARRA … ----- b-o oe miplemenltea o" prase t-fee t Jjlf f24 channels) + VmO Q2 jHF to0 cionnelsJ . vm- SANtOS T3 Jrlf t120 cnonnelsi * VHF 4 Microwove S VhF TS li:.er OpDical cable - V4F ---* unUde' ongOing Elec'ficoalo" P-o:ac' Sou0ce TEPASA non k4ss,o' Z3C'OBEI? 1986 iYord Bonk-30913 I -.4III". I ¢n C~~~~~/ z H_ - 107 - ANNEX 7 Page I of 8 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT The Technical Assistance Program Introduction 1. The technical assistance program was designed to help FEPASA and the Government to implement the action program. Consultants and/or specialized institutions would be financed under the project to assist in: (a) preparing medium-term plans for the metropolitan train and for the long- distance passenger services, and FEPASA's corporate plan; (b) upgrading FEPASA's cost-accounting and information system, developing a cost-related, market-based tariff structure and appropriate marketing systems; (c) consolidating the organization of - and developing the OIS/MIS for - operations and maintenance; and (d) establishing effective personnel management systems. The scope and timing of these technical assistance components, and the related resources requirements are defined hereinafter and in Table 4.2. A. Normalization and Planning Action Program (i) Preparation of a Metropolitan Train Plan 2. Background. The socially oriented metropolitan train operation is being separated from FEPASA's other businesses in order to enable FEPASA to operate the latter on a commercial basis. The State Government is expected to excercise a more direct control over the operation, development and financing of the metropolitan train. A new normalization system will be established under the action program to clearly define, on an annual basis, as part of the budget process, FEPASA's and the Government's respective operational and financial, short-term responsibilities. There is a need, however, to define a medium-term strategy and plan for the operation, development and financing of the system. The operation of the other passenger train services in the metropolitan region of Sao Paulo, which were previously in RFFSA, was recently separated into a new company, CBTU, which is under the jurisdiction of the Federal Ministry of Transport; the preparation of the plan would therefore need to also address the question of the coordination of the operation and development of the two systems. 3. Objective. To prepare a pluriannual plan for the metropolitan train system, defining in particular: appropriate strategies and actien programs for the efficient operation of the system, and for an effective operational and development planning coordination with the other metropolitan transport systems, particularly CBTU's cuburban train services; and an appropriate pluriannual investment program. 4. Scope. The work would include the following main tasks: (a) a re:iew of the demand for metropolitan train transport in the area of influence of FEPASA's system, based upon existing quantitative data and upon a survey and an analysis of passenger behavior regarding service quality and prices; (b) the definition of a cost-recovery policy for the system, aiming - 108 - ANNEX 7 Page 2 of 8 at minimizing State subsidies, and the preparation, on this basis, of a traffic forecast; (c) a diagnostic of FEPASA's operating efftciency and organizationi for the metropolitan train, including of the coordination of Its services and plans with the other systems, particularly CBTIJ, and the definition of a strategy and action programs for cost savings and improved efficiency, and for effective operational and development p]anning coordination with CBTU; (d) a review, on the basis of the above, of FEPASA's investment requirements and priorities for the metropolitan train; and (e) the definition of appropriate operating and financial plans and targets, and of the respective responsibilities of the State and FEPASA, for the operation of the metropolitan train over the period of the plan. 5. Timing and Cost. The consultants would start the work in July 1987, and would submit a draft final report by the end of 1987. The final report, integrating the comments of FEPASA, the State Government and the Bank, would be completed by mid-1988. Consultant requirements are estimated at about 30 man-months; the total base cost is estimated at about TJS$150,000 equivalent. (ii) Preparation of a Long-Distance Passenger Service Plan 6. Background. During the past two decades, with the development of the network of paved trunk highways, the railways have been losing significant shares of the long-distance passenger transport business to private cars and to the road transport industry. With a traffic reduced from 14 million passengers in 1975 to about five million at present, the railway's unit costs have increased to a point where it cannot, in general, sucessfully compete with the bus industry, except on some specific services; and with tariffs controlled by the Government, FEPASA's annual deficits on these services have been increasing, requiring additional Government subsidies. FEPASA has, in the past, implemented some rationalization programs, reducing service frequencies and personnel, The State Government, however, has constantly prevented the railway from undertaking all the service reductions which would have been required from the commercial and economic viewpoints, in order to provide affordable transport services to the low-income rural population. Because of the insufficient normalization payments made by the Government, FEPASA has not been in the position to make the necessary maintenance or renewals of its fleets, which have now high degrees of immobilization and obsolescence. With the new normalization system to be established under the action program, FEPASA's and the Government's respective short-term responsibilities for the operation and financing of these services are expected Lo be better defined as part of the annual budget preparation. There is a need, however, to define the strategies and action programs for thc further rationalization and the efficient operation of the remaining passenger services. 7. Objective. To prepare a pluriannual plan for FEPASA's long-distance passenger services, which could be developed into a pluriannual contract between FEPASA and the State Government, defining in particular medium-term strategies and action programs for the rationalization, the efficient operation and the adequate financing of the remaining services. 8. Scope. The preparation of the plan would involve the following main tasks: (a) a review of the passenger transport demand in the area of influence of FEPASA, analysing in particular the users' behavior regarding - 109 - ANNEX 7 Page 3 of 8 service quality and prices, current trends and forecasts; (b) a review of the comparative efficiency of the private car and the bus, rail and air tra;uLport industries in meeting the various segments of the market, and the identification of the specific market segments in which FEPASA could compete successfully, and those which should be left to the competition; (c) the definition of a strategy and prog;ams for the gradual rationalization of FEPASA's long-distance passenger services, including service reduction .'nd adjustment programs consistent with the market characteristics, and of the appropriate organization for the operation of these services; (d) the definition of those services, if any, which the State Government would require FEPASA to operate at tariffs below costs until the adjustment to market conditions is completed, including the quantities and quality of such services over the pluriannual period of the plan and their justification, as well as FEPASA's expected efficiency in providing them; (e) the definition of the related maintenance and investment requirements; and (f) the definition of appropriate financing plan and mechanisms, defining the adequate tariffs, and identifying alternative sources, such as local communities, to minimize Government subsidies in the form cf normalization payments. 9. Timing and Cost. The consultants would start the work in July 1987, and would submit a draft final report by the end of 1987. The final report, integrating the comments of FEPASA, the State Government and the Bank, would be completed by mid-1988. Consultant requirements are estimated at about 30 man-months; the total base cost is estimated at about US$150,000 equivalent. (iii) Preparation of FEPASA's Corporate Plan 10. Background. The action program to which the project would provide support will considerably change the policy and institutional framework within which the company operates. With the ongoing separation of the metropolitan train operation and the possible reorganization of the long- distance passenger services, which will be studied and defined as part of the preparation of the above plan, FEPASA wiil move toward a busiress center structure. In order to implement the financial -ehabilitation and the commercial operation objectives, the company might also need to move toward a market-driven organization, with the freight business further organized into a line of business structure. With the bulk of the freight traffic moved through a relatively small number of repetitive movements, the regional organization should be reviewed and possibly consolidated. There is, therefore, a need to review and consolidate FEPASA's corporate and business structure consistently with the objectives and measures of the action program. There is also a need to consolidate and to integrate the planning works of the various functional departments, consistently with the policy and institutional framework which will result from the action program, including from the above-mentionned plans for the metropolitan train and the long- distance passenger services, and with the corporate and business structure. 11. Objectives. To-d-evelop FEPASA's corporate plan, including appropriate business plans, based upon the policy and institutional action programs supported by the project, and, through this task, contribute to consolidate strategic planning in the company. 12. Scope. The work would include the following main task: (a) a review and the consolidation of FEPASA's corporate and business structure, - 110 - ANNEX 7 Page 4 of 8 based upon corporate objectives; (b) the preparation of business plans, including the determination of appropriate operational and financial targets, for each component of the business structure, and, in the case of the meKropolitan train and tite long-distance passenger services, consistently with the above-mentionned plans; (c) a review and consolidation of the business operating plans into an operations plan with appropriate action programs and targets for cost-savings and operational efficiency improvements, assigned to the specific organizational units; (d) a review and consolidation of the various investment projects or proposals, based upon appropriate financial and economic evaluations and an assessment of their relevance to corporate objectives; and (e) an updating, through the consolidation of the separate revenue and cost projections, of the company's financial plan. The various organizational units will directly participate in the works. The Consultants will assist with organizing, coordinating and monitoring the werk of the units, providing methodological support for the various tasks, reviewing the corporate and business structure and recommending for an appropriate organization, and with technical assistance in some specific areas. 13. Timing and Cost. The consultants would start the work in July 1987, and would submit a draft final report by mid-1988. The final report, integrating the comments of FEPASA, the State Government and the Bank, would be completed by the end of September 1988. Consultant requirements are estimated at about 60 man-months; the total base cost is estimated at about US$300,000 equivalent. B. Tariff, Marketing and Cost-Control Action Program (i) Upgrading of FEPASA's Cost-Accounting and Information System 14. Background. The costing system of FEPASA, while conceptually sound, has problems regarding the collection and utilization of the physical production or output units, the base for cost allocation. These types of data are not collected in a reliable and systematic manner, and have an adverse impact on the precision, creditability and the use of the system for management purposes. 15. Objective. To provide a costing system responding to the needs of FEPASA as a commercially oriented provider of railway services, which, in particular, would produce and disseminate information for business decision making such as investment appraisals, operational decisions, tariff assessments, marketing decisions and would provide a basis tor management control and for the normalization system. 16. Scope. The work would be implementation oriented and would include the following main tasks: (a) the definition of cost concepts (such as short/medium/long term variable and avoidable, joint/common/specific, working/operating/capital) to be used in the various applications; (b) a review and the upgrading of the cost categories according to future needs and uses; (c) the definition of cost variability with different levels of production, methods of operation and utilization of different assets; (d) a review and the upgrading of the various financial and physical data sources and method of data collections; and (e) the development of a (cost) reporting system appropriate for the need of management at various levels. ANNEX 7 Page 5 of 8 17. Timing and Cost. The consultants would start the work by July 1987 and complete it by December 1988. Consultants requirements are estimated at about 48 man-months, and the base cost is estimated at about IJS$336,000 equivalent, (ii) Development and Implementation of Tariff and Marketing Systems 18. Background. FEPASA's tariff structure during the last 18 years, apart from adjustments to offset the impact of inflation, has changed very little. Tariffs today have only incidental relationships both to the marketing and to the cost con.I%itions of the enterprise. Furthermore, as the tariffs (and, to a large extent, the revenues) have been subject to the Government's control, the company's operation became less and less market-oriented, lacking the objective of profit maximization. 19. Objective. To ensure the commercial viability of FEPASA's operations and to maximize net revenues through developing appropriate marketing and tariff strategies. 20. Scope. The work would include the following main tasks: (a) the development of commercial objectives and the preparation of complementary marketing strategies to support corporate objectives; (b) the development of an upgraded tariff structure and tariff levels in support of the corporate and commercial objectives; (c) a review and the upgrading of the procedure for tariff performance monitoring and revisions; (d) the development of an appropriate base for market and customer behavior research; (e) the development of a service quality monitoring system; (f) the development of demand elasticities, taking into account cross mode elasticities; and (g) the development of a commercial performance control system. 21. Timing and Cost. The program will be implemented between November 1987 and December 1988. Consultants requirements are estimated at about 36 man-months, and the base cost is estimated at about US$252,000 equivalent. C, Operations and Maintenance Management Action Program (i) Design and Implementation of the OIS and Rolling Stock Maintenance MIS 22. Background. FEPASA employs two data systems, for operating and for revenue accounting, based upon a central mainframe computer system, and data input is through separate communications networks of microcomputers and teletype terminals, or is directly keystroked at the company's headquaters. Locomotive and wagon data processed on the mainframe computer are at least 24 hours behind real time and therefore cannot permit an effective operations control. FEPASA has recently undertaken the development of a real-time OIS, aiming in particular to improve locomotive and wagon control, including the control of wagon interchanges with RFFSA and the Santos port and demurrage at terminals, and to provide support to the commercial and marketing departments and improved information and services to clients. FEPASA also recently started to reorganize rolling stock maintenance by placing both repair and preventing maintenance activities under a General Superintendent for Maintenance, who reports to the Transportation Director. The reorganization should now be consolidated, and an appropriate MIS should be developed and implemented to strengthen the planning and control of maintenance. - 112 - ANNEX 7 Page 6 of 8 23. Objectives. To consolidate the organization of operations and maintenance and to develop and implement an OTS and a locomotive and wagon maintenance MIS, aiming particularly at: increasing the utilization of rail assets and terminal productivity through the appropriate control of the locomotive and wagon fleets and of their maintenance; at improving service quality and information to clients; and at rationalizing and computerizing administrative tasks. 24. Scope. The work would include the following main tasks: (a) the preparation of a master plan, including a conceptual design and feasibility study, for the development and implementation of the OIS/MIS and related organizational improvements; (b) the development of a synchronized, operational data base, which integrates all the necessary data for the various system components; (c) the purchase and customization or development, and the implementation, in phases, of the systems' components, including for: train consisting, movement reporting and advance work orders for crews, interchange control; yard management; distribution of empty wagons; computerized billing and invoicing, and demurrage control; control of the preventive and heavy maintenance of locomotives and wagons; purchasing, material management and inventory control; and traffic, revenue and cost reporting; and (d) a review and the consolidation of the locomotive and wagon maintenance and repair plan, including the revision of maintenance cycles in line with verified actual requirements, and the further consolidation of maintenance and repair activities and facilities. 25. Timing and Cost. The program would be developed in phases; consultants would be hired by December 1987 to help carry out items (a) and id) first, and the development of the data base and the various system components would be phased over the 1988-1990 period. Consultant requirements are estimated at about 132 man-months, and the base cost is 'stimated at about US$924,000 equivalent. (ii) Design and Implementation of the Track Maintenance MIS 26. Background. FEPASA's present system for planning and control of track maintenance is based upon a essentially manual collection and processing of data. The lack of adequate, updated information regarding track condition, materials inventories, budget implementation status, equipment condition and utilization, and performance and productivity of maintenance crews does not allow for the appropriate assessment of maintenance priorities, based upon economic criteria, adequate planning, programming, costing and budgeting of maintenance tasks, or for an effective monitoring and evaluation. Also, the track maintenance standards need to be revised and better adapted to the present traffic structure, with passenger services becoming marginal. 27. ObJective. To develop and implement a track maintenance MIS aiming at the appropriate planning, budgeting and control of track maintenance. 28. Scope. The work would be implementation oriented, and it would include the following main tasks: (a) the definition of a master plan, including a conceptual plan and a feasibility study, for the development and implementation of the system; (b) a review of the track maintenance standards in effect, and the definition of appropriate, recommended standards; (c) the -113 - ANNEX 7 Page 7 'f 8 design and development of the track maintenance data base; (d) the design of the data collection system; and (e) the design and implementation of the various system's components, including: pluriannual planning and programming of maintenance activities; work planning and control; equipment maintenance control; purchasing, material management and inventory control; and technical and economic statistics for analytical purpose. 29. Timing and Cost. The prcgram will be developed over two years, from the beginning of 1988. Consultant! requirements are estimated at about 42 man- moiths, and the base cost is estimated at about US$294,000 equivalent. D. Personnel Management and Training Action Program (i) Strengthening of Personnel Management Systems 30. Background. FEPASA's personnel policies need to be reviewed and based upon a more objective assessment of the company's human resource requirements, in order to contribute to the financial rehabilitation and market-driven operation objectives. The existing personnel management systems do not provide the necessary information for the adequate dimensionning of the various organizational units, or for appropriate recruitment, selection, training and promotion policies. The essential personnel management tools such as job descriptions, promotion and career plans, performance and potential evaluation, and monitoring, cost control and evaluation of training first need to be established or improved. The personnel policies should be revised, and FEPASA's institutional training program should be restructured accordingly. 41. Objective. To consolidate FEPASA's personnel management system and policies through establishing or improving the essential personnel management tools and through reformulating recruitment, selection, training and promotion policies consistently with corporate objectives. 32. Scope. The work, which would be implementation-oriented and closely coordinated with the training program, would include the following main tasks: (a) the definition and implementation of procedures for appropriate organizational dimensionning and monitoring; (b) the definition of functions and responsibilities, including job descriptions and operational manuals; (c) the definition of career plans and access plans, specifying the minimum requirements for supervisory and management positions; (d) the definition and implementation of procedures and criteria for performance and potential evaluation; (e) a review and the upgrading, based upon access plans and the performance and potential evaluation systems, of recruitment and selection methods; (f) the appropriate development of the personnel data base and information system; and (g) the preparation of a pluriannual plan for the restructuring and reformulation of FEPASA's institutional training program. 33. Timing and Cost. The program would be developed ove; the two year period starting in December 1987 and ending in December 1989. Consultants requirements are estimated at about 120 man-months, and the base cost at about TJS$600,000 equivalent. - 114 - ANNEX 7 Page 8 of 8 (ii) Training Program 34. The technical assistance requirements for the planning, design, implementation and monitoring of the training program are described in Annex 8. May 1987 - 115 - ANNEX 8 Page 1 of 3 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT The Training Program A. Background 1. The responsibility for training in FEPASA is in the Training and Human Resources Department of the Human Resources General Superintendency. The department is organized into three divisions as follows: (a) the technical training division provides railway-specific technical training to about 300 apprentices each year through 11 training centers located in the interior of the State of Sao Paulo; (b) the operational training division identifies training needs for both operational and administrative staff, and provides training to about 5,000 to 7,000 persons each year, mostly through theoretical and practical programs, which are conducted in the regional training centers or on the job; (c) the management development division identifies training needs for the management and supervisory personnel, which consist of about 120 superintendents and managers, 350 division and section chiefs, and 400 line supervisors, and provides training to about 250 persons each year. overall, the programs make up about 20,000 hours of theoretical training and 24,000 hours of practical training. The total cost for 1986 was estimated at about US$2 million equivalent. 2. The above institutional training programs are designed to provide trainees with the basic, theoretical and practical knowledge required in the position. However, it does not generally provide the necessary know-how for an effective performance of the staff in the position. The training program needs to be gradually reformulated and directed toward the specific needs of the various organizational units and the specific jobs, in order to support and consolidate the policy, institutional and organizational changes which would be implemented under the action program. The reformulation of FEPASA's institutional training should therefore be based upon, and closely coordinated with - and, to some extent, integrated to - the implementation of the organizational changes and the development of the operations and management systems, including the personnel management systems. It will require an effective participation of the management of the operational departments in the preparation and implementation of the specific training programs. The training component of the present project would constitute the first phase of this reformulation. - 116 - ANNEX 8 Page 2 of 3 B. Objective and organization 3. The training component of the project has been designed to support the implementation and the gradual consolidation of the policy and organizational reforms and of the operations and management systems included in the action program, in particular the separation of the metropolitan train operation from the other businesses, the strengthening of marketing and cost- control, the reorganization of - and the development of the OIS/MIS for - operations and maintenance, and the development of the personnel management systems. 4. Specific training programs will be organized for the organizational units which are responsible for carrying out the above- mentionned action programs. Some of these programs will be existing, reformulated programs, and others will he newly-defined programs. The management personnel in each operational unit will directly participate in the organization of their respective units, in the identification of the unit's training needs, and in the preparation, implementation and monitoring- evaluation of the specific training programs for their subordinates. The organization and training programs will be implemented in steps, through the various hierarchical levels, from the superintendents to the operational and administrative staff. The training and human resources department will, with the assistance of specialized consultants, provide the necessary methodological support to the operational units, and the training of instructors. Technical assistance from specialized experts will be provided for the detailed design of specific technical and management training courses. Courses and seminars will be provided by training specialists and specialized institutions in Brazil or abroad. C. Description 5. The training program would consist of four training components: (a) the organization and methods program, designed to provide about 470 managers, from directors to division and section chiefs, with the basic tools and methods to analyse and reform the organization of their respective units and the work methods and procedures, to prepare the units' organization documents, including organization manuals and job descriptions, and to monitor the organizational development; the program would include seminars to familiarize managers with the basic tools and methods and consultant assistance to help them implement their organization tasks and the related training of their subordinates; (b) the operational training program, designed to provide about 10,000 operational and administrative staff with the specific methods and procedures (knowledge and know-how) required for an effective performance in their job; it will be implemented through the training of instructors from both the training and the operational departments, the preparation of specific program components and operational manuals for the various organizational units, and their diffusion through the departments' hierarchy; - 117 - ANNEX 8 Page 3 of 3 (c) the management training program, designed to provide about 470 managers, from directors to division and section chiefs, and about 800 operations and administration supervisory staff with basic management skills, particularly aimed at work productivity improvements, and skills specific to the functional areas, such as marketing, operations and maintenance; the program would be implemented in two phases: first, a series of seminars would aim at providing managers with the basic skills required for managing in the consolidated organization, and, in the second phase, seminars and consultant assistance would be directed toward the design and implementation of alternative, more effective work methods and procedures in the specific areas; and (d) the systems-specific training programs, designed to disseminate, among the relevant management personnel and operational and administrative staff, the procedures to implement and/or operate the operations information and control system (OIS), the maintenance management information systems (MIS), and the personnel management systems; the design and implementation of these programs would be integrated with the action programs for the development and implementation of the respective systems. 6. Consultants would be engaged by FEPASA to: (a) assist in the planning, design and programming of the training program, including provide methodological support for the design and implementatior of the various programs; (b) provide basic skill training to instructors; and (c) develop and assist in implementing an appropriate monitoring and evaluation system for the training program. FEPASA would also contract technical assistance for the detailed design of specific training courses, which would require specialized expertise. The implementation of the specific courses and seminars would be contracted to training specialists and/or specialized institutions in Brazil and abroad. D. Time-Schedule and Costs 7. The training program would be developed and implemented over the three-year period starting in December 1987 and ending in December 1990. Consultant and technical assistance requirements are estimated at about 60 and 50 man-months respectively. The total base cost of the training program is estimated at about US$2.3 million equivalent. Quantity and cost estimates, including the annual programming, are shown in Table 4.2. May 1987 -4 4 -4J z H - 119 - ANNEX 9 Page 1 of 4 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Economic Evaluation of FEPASA's Investment Program A. Introduction 1. FEPASA's Investment Program consists of: (a) the Rehabilitation Program, which is the investment component of the project; (b) the ongoing Electrification Project, which is described in Annex 11; and (c) the ongoing Metropolitan Train Modernization Project. 2. The Rehabilitation Program and the Electrification Project were first evaluated together since both would contribute in part to the same objectives (Section C). The Metropolitan Program was evaluated separately since the system and the program's objectives are quite distinct (Section D). The project and the project components were then evaluated separately (Annex 10). A separate evaluation was also carried out for the Electrification Project and its main components (Annex 11). B. Objectives of the Investment Program 3. The main objective of the Rehabilitation Program is to compensate for a number of years of deferred maintenance and, hence, to reduce operating costs, rather than to compensate for lack of replacement investment as in the case of the Electrification Project. The improved operating efficiency which would result from the proposals of the program would avoid the need for more costly investment in new traction and rolling stock to meet the projected level of demand. 4. A specific objective of the Rehabilitation Program is to increase substantially the utilization of traction and rolling stock. Commercial train speeds in the Araguari-Santos eorridor (ASC) are expected to increase from some 25 km/hr with present track conditions and diesel traction to about 44 km/hr with improved track and electric traction. The commercial speed increases are expected to be from 46 km/hr to 48 km/hr in the broad-gauge corridor (BGC) and from 33 km/hr to 37 km/hr in the meter-gauge corridor (MGC). The proposed investment in improved signaling and communications has the same objective of improved ttaction and rolling stock utilization. Increases are also expected in the availability of existing diesel and electric locomotives, and a further improvement is expected from the replacement of old diesel locomotives with new electric locomotives. The availability of existing electric locomotives is 66% and 69% on the average for the meter-gauge and broad-gauge, and that of diesel locomotive is 66% and 71% respectively. These figures are expected to increase to 77% and 75% (both gauges) for the electric and diesel locomotives respectively, with new electric locomotives having an availability of 90%. 5. Another specific objective of the Rehabilitation Program is to increase the participation of rail-based intermodal transport in the transport of soya, wheat and other grains from the new producing areas in the state of Mato Grosso do Sul. This objective is to be achieved by providing -120 - ANNEX 9 Page 2 of 4 new intermodal transfer facilities (road/rail and river/rail) at the principal rail heads of the network and by improving operations at the interface with the port of Santos. 6. The preceding specific objectives, as well as rhe more general ones of reducing operating costs and recuperating transport capacity, were to be achieved by the mixture of the proposed investments and actions. Although some of the investments were aimed at achieving specific objectives, all of them would contribute, to a greater or lesser extent, to achieving each objective. 7. The electrification of parts of the FEPASA network was completed over 40 years ago. The fixed installations and electric traction are inadequate for current operating conditions and have insufficient capacity for the projected demand. The objective of the Electrification Project is, therefore, to reduce operating costs and recover previous transport capacity, and to provide additional capacity, particularly in the Araguari-Santos corridor. 8. The Metropolitan Train Project was designed to increase FEPASA's participation in metropolitan transport in Sao Paulo and to increase the available capacity, both of track and traction and rolling stock, so that FEPASA would be able to satisfy the projected increased market share of an increasing market. The total cost of the investments is estimated at US$74 million. C. Evaluation of the Rehabilitation Program and Electrification Project 9. The evaluation of the Rehabilitation Program and Electrification Project was undertaken by comparing the cost of transporting the projected rail traffic in the "with" investment case and the cost of transporting part of this same demand by road and part by rail, at a higher unit cost than in the "with" investment case. 10. The traffic projections for the evaluation were based on FEPASA's projections by product for each year for the period up to 1993 (Annex 4). The projections assumed that there were no constra;'.nts on rail capacity and that the proposed investments of the Electrification Project and Rehabilitation Program had been carried out. The average growth rate for the period 1987 to 1993 was assumed to be 5.4%, for 1994-1995, 2.8%, and 2% for the period 1996 to 2000. Thereafter, it was assumed that demand would remain at the level projected for the year 2000. 11. The capacity of the rail network in the "without" investment case was assessed on a corridor basis. For each of the three corridors, capacity was assumed to be 5% greater than the highest traffic level achieved in the period 1980 to 1985. This is an optimistic assumption of capacity since, without investment, it is probable that the capacity of the system would slowly decline. It was assumed that each link of the network in the "with" investment case would have sufficient capacity to transport the projected demand. 12. FEPASA carried out an assignment of the 1985 and the projected 1988 and 1995 traffic flows to the rail network. For this assignment, a network - 121 - ANNEX 9 Page 3 of 4 of 57 links was assumed, 26 for the Araguari-Santos Corridor and branches, 17 for the re-; of the meter-gauge network and 14 for the broad-gauge network. 13. Although no specific road network was developed for the evaluation, FEPASA t'ndertook a comparison of road and rail distances for a sample of 25 origin-to-destination flows. The average road distance was found to be 82.5% of the average rail distance. On the basis of this work, equivalent road distances were calculated for each rail origin-to-destination flow. 14. The equivalent road distances were multiplied by the estimated road vehicle operating cost to estimate the equivalent costs of road transport for freight assumed to transfer to road from rail transport in the "without" investment case. Road vehicle operating costs were derived from the latest available published information on the operating costs of different types of vehicles (Revista Transporte Moderno, May 1986). The typical road vehicle for the traffic was assumed to be a three-axle semi-trailer with a payload capacity of 25 tons. An additional cost of US cents 0.4 per ton/km was added to represent the marginal road infrastructure costs for this traffic. The total road transport operating cost, including this estimate of infrastructure cost, was US cents 3.684 per ton-km. 15. For freight assumed to transfer from rail to road transport in the "without" investment case, an initial transfer cost of US$1.5 per ton was assumed. For rail traffic in the "without" investment case, the same cost was assumed, but, in the "with" investment case, the cost was assumed to reduce to US$1.2 per ton. 16. Average rail working costs in the "without" investment case were derived from the latest data available from the FEPASA traffic costing system, which, in turn, is derived from the financial accounts. Long term average costs of US cents 1.725 per ton-km were assumed for train operations and US cents 2.005 per ton-km for locomotive and wagon capital costs (based on an opportunity cost rf eapital of 12%). Average rail working costs in the "with" investment case were derivea from the financial projections made for this project appraisal (Anniex Ž), The resulting long term average working costs were US cents 1,4i9 pe toa-km and locomotive and wagon capital costs at US cents 1312 per ton-km, both for the period after 1989. 17. The economic internal rate of return (ERR) for the overall Investment Program (i.e. the Rehabilitation Program and the Electrification Project), taking into account the sunk costs of the Electrification Project, was estimated at 13%, and the net present value of the net benefits, using a 12% discount rate, was estimated at about US$50 million equivalent; excluding the sunk costs of the Electrification Project, the estimated ERR of the program would be above 20% (Table 1). D. Evaluation of the Metropolitan Train Modernization Project 18. The Metropolitan Project includes the rehabilitation of some old electric multiple units, extensions to the Southern Line, new stations and modal interchange facilities on the present Eastern Line, a new workshop, improved signaling systems and some minor investments. The total cost of these investments is estimated at US$74 million; the remaining investments, - 122 - ANNEX 9 Page 4 of 4 to be implemented over the period 1987 So 1989, would total about US$52 million equivalent. 19. The main benefits of the proposed investments will be to increase demand for transport on the system and to increase capacity to cater to this increase and the projected growth in present demand, rather than to reduce operating costs. 20. The evaluation has therefore been based on a comparison of the costs of rail transport with those of the principal alternative mode, urban bus. The average bus cost, which was derived from the accounts of two urban bus companies and some incomplete statistics on average load factors, was estimated at US cents 4.0 per passenger-km. Metropolitan railway costs, which were derived from FEPASA's operations costing system, was estimated at US cents 1.5 per passenger-km. The average rate of growth of passengers transported in the period 1982 to 1985 was 9% per year. This growth was achieved in a period of economic depression with the population of the metropolitan area increasing more slowly than projected. In the preceding two years the rate of growth of passengers transported was much higher, but this period followed very closely on the major change in metropolitan services in 1980. The projected growth for the period up to 1992 is a continuation of the 9% anaual growth of the period 1982 to 1985, reducing to 6% for the period up to the year 2000 and to 3% for the following period. 21. The estimated ERR of the Metropolitan Project was estimated at 21% under the base assumptions. With a 20%-lower-than-expected traffic, the estimated ERR would be reduced to 16%; if, in addition, investment costs were 20% higher, the estimated ERR would still be acceptable, i,e. about 12% (Table 2). May 1987 - 123 - ANNEX 9 Table 1 BRAZIL FErASA RAILWAY REHABILITATION PROJECT Economic Evaluation of FEPASA's Investment Program Rail Traffic Transport Costs Transfer Costs Net Invest. (billion ton-km) (US$ million) (US$ million) Benefit Year (US$ m.) with prj without with prj wlthout with prj without (US$M.) 1986 206.9 -206.9 1987 137.1 8.03 7.88 329.6 328.0 36.2 35.5 -139.4 1988 154.9 8.87 7.88 327.0 353.6 38.4 34.1 -132.7 1989 61.4 9.80 7.88 319.6 381.8 33.1 33.3 1.0 1990 44.4 10.15 7.88 314.9 392.5 34.5 33.4 32.2 1991 29.2 10.43 7.88 310.6 401.0 35.4 33.4 59.2 1992 22.8 10.72 7.88 307.1 409.8 36.3 33.4 76.9 1993 4.2 11.02 7.88 304.6 418.9 37.2 33.3 106.2 1994 11.32 7.88 312.9 428.0 38.3 33.3 110.2 1995 11.64 7.88 321.7 437.8 39.4 33.3 110.0 1996 11.87 7.88 328.1 444.7 40.1 33.3 109.8 1997 12.11 7.88 334.7 452.0 41.8 34.0 109.5 1998 12.35 7.88 341.4 459.3 42.6 34.0 109.4 1999 12.60 7.88 348.3 466.9 43.4 34.0 109.2 2000 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2001 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2002 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2003 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2004 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2005 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2006 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2007 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2008 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2009 12.85 7.88 355.2 474.5 43.4 33.3 109.2 2010 12.85 7.88 355.2 474.5 43.4 33.3 109.2 ERR NPV(12%,US$m.) - Including sunk costs of electrification project: 13% 51 - excluding sunk costs of electrification project: 22% 264 Source: FEPASA and Mission est.mates May 1987 - 124 - IAZIL ANNEX 9 Table 2 FEPASA RAILVAY NE481LITATI0N PROJECT Econonic Evaluatlon of Metropolitan Train Modernizatlon Project Annusl Annual Annual Annual Pass-Wn After Irpact of Increase Equivalent Annual Annual Not Not Net Net No. of StatIon NOw Line In Losst of Bus Cost Cost Annual Benefit 8eneftit Benefit Benefit Year Pasts-4ln I pro". Stations Extensions Pa8s-ian Pas-lan Saving Ssving Invest. I/ 2/ 3/ 4/ (PPAs-an) (P*ss-ia) (Pass-bIn) (Pass-ln) (Pes-in) (Pass-in) (CZ$ n) (USS n) CUSS n) IUSS mn) (US n) IUSS m) ZUSS in) 1966 1,665 1,748 1,818 1,873 208 190 97.0 7.0 19.40 -12.39 -13.79 -16.27 -17.67 1987 1,815 1,906 1,982 2,04t 226 207 105.7 7.6 18.60 -10.96 -12.49 -14.68 -16.21 1988 1,978 2,077 2,160 2,225 247 225 115.3 8.3 18.00 -9.67 -11.34 -13.27 -14.94 1989 2,156 2,264 2,355 2,425 269 246 125.6 9.1 17.70 -8.62 -10.44 -12.16 -13.98 1990 2,3 2,468 2,567 2,644 293 268 136.9 9.9 9.89 7,92 9.89 7.92 1991 2,562 2,690 2,797 2,881 320 292 149.3 10.8 10.79 8.63 10.79 8.63 1992 2,716 2,851 2,965 3,054 339 309 158,2 11.4 11.43 9.15 11.43 9.15 1993 2,878 3,M22 3,43 3,238 359 328 167.7 12.1 12.12 9.69 12.12 9.69 1994 3,051 3,204 3,332 3,432 381 348 177.8 12.8 12.85 10.28 12.85 10.28 1995 3,234 3,396 3,532 3,638 404 369 188.5 13.6 13.62 10.89 13.62 10.89 1996 3,428 3,600 3,744 3,856 428 391 199.8 14.4 14.43 It.55 14.43 11.55 1997 3.634 3,816 3,968 4,087 453 414 211.7 15.3 15.30 12.24 15.30 12.24 1998 3,862 4,045 4,206 4,333 481 439 224.4 16.2 16.22 12.97 16.22 12.97 1999 4,083 4,287 4,459 4,593 509 465 237.9 17.2 17.19 13.75 17.19 13.75 2000 4,328 4,545 4,726 4,868 540 493 252,2 18.2 18.22 14.58 18.22 14.56 2001 4,545 4,772 4,963 5,112 567 518 264.8 !9.1 19.13 15.31 19.13 1S.31 2002 4,772 5,010 5,211 5,367 595 544 278.0 20.1 20.09 16.07 20.09 16.07 2003 5,010 S,261 5,471 5,635 625 571 291.9 21.1 21.09 16.88 21.09 16.88 2004 5,261 5,524 5,745 5,917 656 599 306.5 22.1 22.1S 17.72 22.15 17.72 2W05 5,524 5,p00 6,032 6,213 689 629 321.9 23.3 23.26 18.60 23.26 18.60 ErS 212 163 172 126 1/ Base cae 2/ Oemnd reduced by 20t 3/ Investant costs Inereaeed by 20t 4/ Cases 2 and 3 eunined May 1987 -125- ANNEX 1O Page 1 of 7 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Economic Evaluation of the Project and Project Components A. Introduction 1. The project or, more precisely, the Rehabilitation Program, i.e., excluding the technical assistance and the training components, was evaluated overall, and the following project components were also evaluated separately: a. track infrastructure program b. track superstructure program c. track maintenance equipment program d. workshop program e. marshaling yard program f. intermodal terminal program. g. locomotive repair and re-engining program; and h. telecommunications program. 2. The economic evaluation of the project overall (i.e., FEPASA's Rehabilitation Program) was based upon rail operating cost savings as well as overall transport cost savings related to traffic which would transfer to road transport if the project were not implemented, following the same methodology as described in Annex 9 for the evaluation of the overall investment program. Since project components are highly interdependent and since, ih particular, it is not possible to attribute system capacity increases to particular investments, the economic evaluations of the individual project components were based upon estimates of cost-savings on the rail transport operation only. B. Economic Evaluation of the Project 3. The project is defined in Chapter 4 and, in more detail, in Annex 6 of the report. The total base cost of the proposed investments is US$223 million. 4. The method of evaluation was similar to that used for the evaluation of the overall investment plan. For the evaluation of the project, the electrification project was included in the specification of the "without" investment case. This resulted in a change in the capacity and average cost estimate for the "without" investment case. 5. The electrification project in itself will lead to an increase in system capacity and a reduction in working costs as compared to the present system. An analysis of the impact of the electrification project on a corridor basis indicated an overall capacity increase of some 30%. This increase was applied in the evaluation to the capacity estimate of 7,880 million ton-km used in the evaluation of the overall investment plan. 6. Estimates of the impact of the electrification proposals on long term average working costs were derived from the input data for the - 126 - ANNEX 10 Page 2 of 7 specification of the "with" investment case from the previous evaluation. The resulting long term average cost was US cents 3.141 for the "without" case, the long term average for the "with" case being the same as in the previous evaluation, i.e., US cents 2.811 per ton-km. 7. The internal rate of return on the project was estimated at about 21%, and the net present value at a discount rate of 12% was estimated at about US$110 million (Table 1). With the transport demand reduced by 20% or investment costs increased by 20%, the project's estimated ERR would be reduced to 17% or 18% respectively; with both the above assumptions combined, the project would still have an attractive estimated ERR of 14%. C. Economic Evaluation of the Project Components (i) Track Infrastructure Program 8. The objective of investment in track infrastructure is to avoid the costs associated with derailments attributable to the poor condition of track infrastructure. The costs associated with such derailments are the recovery costs of damaged traction and rolling stock, the repair of damaged track components, the loss of productive output from the damaged vehicles and costs due to the consequence of line blockage until the damaged vehicles can be removed and the track reinstated. 9. Derailments due to the poor condition of track infrastructure are rare events in a statistical sense, but the cost of each "event" is high. It is not possible to project historic data regarding the frequency of derailments due to poor track infrastructure conditions on a line-by-line basis. Instead, it is necessary to predict the probability of the occurrence of the rare event and, hence, to predict the probability of a particular rate of return on investments being achieved. 10. There are two stages in the determination of the benefit of investment in a part'cular link. First, it is necessary to calculate the cost of each derailment, a cost which will be dependent on the volume of traffic since this determines the cost of interruptions to traffic. Second, it is necessary to specify the probability function for the rare event and, hence, the probability of achieving a particular rate of return on investment. 11. Using this method, the probability of achieving an internal rate of return of at least 12% was estimated at greater than 50% on all the links for which an investment in track infrastructure was proposed. On 87% of the links, the probability of an internal rate of return was greater than 75% (Table 2). (ii) Track Superstructure Program 12. The evaluation of track superstructure proposals was undertaken for each link for which a project was proposed. There were ten links in the export corridor with a total length of 580 km, six links in the meter-gauge corridor with a total length of 494 km and six links in the broad-gauge corridor with a total length of 916 km. Most of the links for which a project is proposed have suffered from the consequences of insufficient - 127 - ANNEX 10 Page 3 of 7 maintenance, particularly over the past six years. The benefits of inves.ing to remedy the consequences of such insufficient maintenance are: (a) reduced traction and rolling stock maintenance costs; (b) increased train operating speeds, resulting in reduced train crew costs and reduced needs for locomotive and wagon investment; and (c) reduced routine track maintenance costs. 13. The benefits of these three types have been estimated for each link for which a project is proposed. For each link, train operating speeds have been estimated for the "with" and "without" investment case. Both cases assumed that all other components of the Investment Program had been implemented. The unit costs per hour of train operation were calculated (including train crew costs and locomotive and wagon capital costs) and applied to the time savings on each link to derive the estimate of train operating cost savings. 14. Twenty percent of locomotive maintenance costs and 40% of wagon maintenance costs were assumed to be influenced by the condition of track superstructure. Both were assumed to reduce by 10% after the track had been rehabilitated. 15. Routine preventive track maintenance costs were estimated for 14 track categories. Categories were defined by their physical characteristics, which, in turn, were a function of train speeds, axle loads and total gross tons. Investment in track superstructure would change the track category for the particular links for which projects were proposed. A certain amount of optimization of investments was poesible by testing the internal rate of return on investment for different changes of track category. Since train operating speeds were assumed to be a function of track category, the time- related benefits were also related to the proposed change in track category. 16. The evaluation was carried out for the proposed track superstructure investment as a whole, for the investment in each corridor and the investment in each link. The economic rete of return fot the entire track superstructure program was estimated at about 16%; the economic rate of return of the program components on each of the corridors was estimated at about 15% for the Araguari-Santos corridor, 20% for the meter-gauge corridor and 16% for the broad-gauge corridor respectively. Each individual link also showed a rate of return in excess of 12% (Tables 3 to 7). (iii) Track Maintenance Equipment Program 17. FEPASA has prepared a Track Maintenance Plan which indicates the desirable frequency of geometric correction of track superstructure. FEPASA proposes to replace existing track maintenance machinery and to acquire new units to undertake this task. The benefits of the proposed investment have been measured as the difference in the cost of manual track correction compared to that by mechanized methods. 18. Different frequencies of geometric correction are proposed for lines with different densities of traffic. The proposed frequency is once - 128 - ANNEX 10 Page 4 of 7 every three years for lines with less than 3.5 million gross tons and once every two years for other lines. The rate of return on track machines required for low density lines will therefore be different to that for machines on high density lines. In practice, all machines will be used on both types of line. The economic rate of return of the proposed investment in track machinery was estimated at about 30.0%. (iv) Workshop Program 19. The project includes a total investment of US$8.6 million for the rehabilitation of traction and rolling stock workshops and the purchase of mechanical engineering equipment. Also included is machinery to allow FEPASA to undertake the necessary rehabilitation work on 60% of the traction motors each year. 20. In the evaluation of these proposals, it was assumed that the benefit of the proposals would be evident in the increased availability of locomotives. It was assumed that, without investment, the availability of locomotives (defined as the percent of annual hours that a locomotive is available for service) would decline by 0.2% per year to a minimum of 55%. With investment, availability was assumed to increase by 0.5% per year to a maximum of 82%. Although the Operating Plan of FEPASA is based upon an availability of 85% for diesel locomotives, this cannot be achieved by investment in workshops alone. Investment in locomotive rehabilitation will also be necessary: 82% is the maximum availability which can he achieved without this additional investment. 21. The present availability of locomotives is constrained by the lack of spare parts. In calculating the impact of workshops investment, it was assumed in both the "with" and "without" investment cases that the problem of spare parts supply had been resolved. The benefit of investment was measured by the avoidance of the need to purchase additional new electric locomotives to transport the projected demand. The economic internal rate of return on workshops investment was estimated at about 28%. (v) Marshaling Yard Program 22. Some of the present marshaling yards have insufficient nominal capacity for the projected number of wagons which will use them. The consequence of lack of investment in additional capacity would be increased congestion, resulting in reduced wagon rotation, delays to train operations and, finally, a limit on system capacity. 23. The evaluation of the proposed investments was made taking these benefits into account. The economic rate of return of the marshaling yard program was estimated at about 16%. (vi) Intermodal Terminal Program 24. It is proposed that four intermodal transfer facilities be constructed at FEPASA's main railheads in the interior, i.e., Presidente Epitacio, Panorama, Santa Fe do Sul and Colombia. The facilities would allow grain transported by road and river from the State of Mato Grosso do Sul to transfer to rail for the part of its journey within the State of Sao Paulo. - 129 - ANNEX 10 Page 5 of 7 The average rail trip length would range between 450 km (from Colombia) and 735 km (from Santa Fe do Sul). In addition to the reduced transport costs, there would be benefits of reduced delay to road vehicles waiting to unload and rail wagons being loaded. 25. The proposed projects include the cost of storage capacity for between 6,000 tons (Presidente Epitacio) and 18,000 (Colombia). This is in excess of that required for the operation of a road to rail transfer of gUains. The costs attributable to the rail transport system in the evaluation therefore excluded the costs of storage capacity above that required for the operation of the transport system. The transport system was assumed to require two days storage capacity, assuming 90 day transporting period. 26. The internal rates of return for the four terminal proposals were estimated at about 16% (Presidente Epitacio), 20% (Panorama), 31% (Santa Fe do Sul) and 43% (Colombia). These reaults indicate a relationship between the rate of return and the distance of road transport avoided and the volume of grains to be transported. The basic data, and the sensitivity of the rates of return to lower benefits, higher costs and a combination of both, are shown in the following table. EVALUATION OF INLAND SILO INVESTMENTS _=_______________________________________________________- - - - - - - - - - - - - - - - - Pres. Santa Fe Epitacio Panorama do Sul Colombia Total Silo Capacity (tons) 6,000 16O000 16,000 18,000 Transfer Capacity (tons) 5,300 3,500 8,000 9,000 Demand (tons) 241,400 161,000 365,000 413,600 Average Road Distance (km) 550 680 735 450 Average Road Delay (hrs) 50 36 60 36 Average Wagon Delay (hrs) 30 80 30 50 Road Transport Cost (US$ per ton km) 0.024 0.024 0.024 0.024 Rail Transport Cost (US$ per ton km) 0.018 0.019 0.018 0.018 Transfer Cost (US cents ton) 4.0 4.0 4.0 4.0 Investment Cost (US$ m) 3.6 2.8 5.0 5.5 Internal Rates of Return Base case 16% 20% 31% 43% Benefits -20% 12% 16% 23% 31% Costs +20% 13% 16% 24% 33% -/+ Costs & Benefits 9% 12% 18% 25% …-------_______---------------------------------------------.._------__------ - 130 - ANNEX 1 0 Page 6 of 7 (vii) Locomotive Repair and Re-engining 27. The project includes provision for the general overhaul of 136 2,000-HP diesel locomotives which will be between 13 and 14 years old in 1990. The volume of work is beyond the capacity of the railway's own workshops and it is proposed that 50 locomotives be overhauled by the private industry at an estimated cost of US$21 million equivalent. 28. It is also proposed to re-engine 15 1,200-HP diesel locomotives which are used to haul bauxite trains on the tightly curved Aguai-Bauxita line. The locomotives will be 33 years old in 1990, but they have already been extensively refurbished with i.ew cabling. The bogies and traction motors are in good condition and have an expected remaining life of 15 to 20 years. The diesel motors, however, need to be replaced. An estimated cost is US$300,000 equivalent per locomotive. The alternatives to investment are either new locomotives or road transport. 29. The two proposals have been evaluated separately. The benefits of reconstructing the 50 Class 3,800/7,800 2,100-HP locomotives have been estimated on the basis of avoiding higher road transport costs, since the alternative of buying new locomotives was considered inferior in all respects to reconstructing existing locomotives and therefore invalid as a basis for evaluation of the proposal. The costs of road transport were assumed to be the same as in the other evaluations, that is US$0.0368 per ton-km. The cost of rail transport was assumed to decrease as in the evaluation of the overall investment program. 30. The benefits of re-engining the 15 Class 3,200 1,200-HP locomotives was estimated on the basis of avoiding increased engine maintenance costs. The maintenance costs were estimated on the basis of materials and labor costs separately. Materials costs were assumed to be 2.5% of the value of the engine for a not re-engined locomotive and 1.5% of the value for a re-engined locomotive. Labor costs were based on 5 men per locomotive for a not re-engined locomotive and 3 men for a re-engined locomotive. The rates for existing locomotives were based on FEPASA's present rates, and for re-engined locomotives on experience of other railway operators. 31. The internal rates of return were estimated at 15% and 17% respectively for the two projects. The variation of the rates of return with benefits reduced by 20%, costs increased by 20% and a combination of both factors is shown in Table 8. (viii) Telecommunications Program 32. The telecommunications investments, which are described in Annex 6, Section C, have an estimated base cost of US$35 million equivalent. They will be made in phases, as indicated in Tables 4.2 to 4.4 of the text. 33. The benefits to be derived from the proposed investments are: (a) savings on maintenance materials, essentially replacement wires, estimated at about US$1.7 million p.a.. and reductions of maintenance personnel, estimated to about 66 employees, equivalent to annual cost savings of about US$800,000 equivalent; (b) savings on public network bills, estimated to about US$1.2 million equivalent p.a. for both voice and data - 131 - ANNEX 10 Page 7 of 7 communications; (c) reductions in the number of accidents due to communication problems, estimated at about 15% of the total number of permanent way collisions or about US$200,000 equivalent p.a.; (d) train crew time savings and motive power and rolling stock capital cost savings, estimated at about US$600,000 and US$3.3 million equivalent p.a. respectively, to be achieved through improved train control. 34. The estimated ERR of the proposed telecommunications investments would be 18% and the estimated net present value of the net benefits would be about US$10 million equivalent. If benefits were 20% lower, or the investment costs were 20% higher than the present estimates, the estimated ERR would be about 15%; under both assumptions combined, it would still be acceptable, at about 12%. EVALUATION OF TELECOMMUNICATION INVESTMENTS (US$ million) ---------------------------------------------------------------__---------- Cost Savings on Rolling Total Investment Telecum. Public Stock Net Year Cost Maintenance Network Accidents Capital Benefits 1988 1.4 -1.4 i989 3.9 -3.9 1990 1.3 -1.3 1991 8.5 0.8 0.4 1.2 -6.1 1992 17.0 0.8 0.4 1.2 -14.6 1993 2.9 0.8 0.4 1.2 -0.5 1994-2010 2.5 1.2 0.2 3.9 7.8 Estimated ERR: - base assumptions: 18% - benefits reduced 20%: 15% - costs increased and benefits reduced 20%: 12% May 1987 - 132- ANNEX 10 Table 1 BRAZ I L FEPASA RAILWAY REHABILITATION PROJECT Economic Evaluatlon of the Project Rail Traffic Transport Costs Transfer Costs Net Invest. (billion ton-km) CUSS million) (USS million) Benefit Year (US$ m.) with prJ without with prJ without with prj without (US$m.) …_ -------- - - ----- ------- -------- ------- -------- ------- ------- 1987 23.5 8.03 8.03 329.6 329.6 36.2 36.2 -23.5 1988 59.4 8.87 8.87 327.0 327.0 38.4 38.4 -59.4 1989 43.5 9.80 9.80 319.6 319.6 41.4 41.4 -43.5 1990 44.4 10.15 10.15 314.9 331.0 40.2 43.1 -25.4 1991 29.2 10.43 10.24 310.6 339.7 38.3 43.4 5.0 1992 22.8 10.72 10.24 307.1 348.5 36.3 43.3 25.6 1993 4.2 11.02 10.24 304.6 357.6 37.2 43.2 54.8 1994 11.32 10.24 312.9 366.8 38.3 43.3 58.9 1995 11.64 10.24 321.7 376.5 39.4 43.3 58.7 1996 11.87 10.24 328.1 383.5 40.1 43.2 58.5 1997 12.11 10.24 334.7 390.8 41.8 44.1 58.4 1998 12.35 10.24 341.4 398.1 42.6 44.2 58.3 1999 12.60 10.24 348.3 405.7 43.4 44.1 58.1 2000 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2001 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2002 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2003 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2004 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2005 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2006 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2007 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2008 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2009 12.85 10.24 355.2 413.3 43.4 43.3 57.9 2010 12.85 10.24 355.2 413.3 43.4 43.3 57.9 sensitivlty analysis ERR NPV(12%,US$m.) .base assumptions 21% 113 .demand reduced 20% 17% 59 .costs Increased 20% 18% 81 .both combined 14% 27 Source: FEPASA and Mission estimates May 1987 Wa U 9 31 U, 9 **l 9 ~~~~~~sevMT00U, U US pI'9w svaaa m314noS ma a U, a, * w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1~Z. 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U,1 .1 31III= ,1911*: W'Il 14 9 WI 3* II 14' 114 ISI SI in WI~Il1 VWI1 WU 999 * I UI I a atS tit =%a9 St Ittitll 314 91133 SmI 14 9 9 I 9) Ua at9I U, so oil149 I.ll U'S IsI U S I 1*) 1 I. WI It. m 1l91W1U11 1914 3 I 19)~~~~~~~~~~~~~ol U0 14 "4* So I 19. 14 1 Wl WilIlI'9 U e.,' 3 S It la9 Olt9, so4 I W Ol asWI1119l9 U'S S I 3* 14~~~~~~~~~~~~~~~~~~~l U 1'. Is to aI U!91' -1 A. .U :19S U U U, I 99 44 I 494 3 941' 1 .11 MI US .9 W)1941d9 9WW1 II slU.911 3194 UIIWI II 191491119 - *113M141 U I) 9114131 31~~~~~09 W -SS--S 4IIIU)11119.'I* 1111 9 III W Z ~~~~~~~~~~~IqwJ~~~~~~~~~~~~~~~~~ 1493*~~~~~~~~~~~~~ t l - - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~-0 FEPASA RkM.YAY IfM4V3LITA7IG4 PVI1.r B:OMIC EVIJATI0N OF 1RkA0 108R.XrATIII PRW.O#M A. N M-SAHM CWJD09 1. AW(SSWXANIIT 45 II 5 4 13410 67S 2245 23 232 NO2 10 3 CM 2m AX 3 (3 2726 2mm 2. LIA.XAAmHM 2I9 m 4 3(e) 34122 411 295 4=2 4381 533 la (a (3 (3 ZNx am ZX 753 1in 3. EWN3*qDIPASSI IN4 v 5 4 235 678 20 2981 322 3=2 13 1(3 4( 4( ZN 3 cm 571 22 4. R3D.PWIDjXM W*A 67 U 5 1 8592 234 OM5 91M 2084 21108 lox (3 £3 4(3 (3 (3 (3 ism8 1 S. ID E COLMS/A1R 75 M 5 4 SYS 67 66 SW7 8-741 7442 23m C3 CM (3 £KX SX (X 22 25K 6. WLM*VPAtLMA. 0 M/. 4 2 358 384 am2 an2 130229 is5 ON ON ( 3 c low Cs son 140 7. P413N4104 VZTA ) U.L. 4 2 ox5 8 3408 OM U2114 is9 (3 (3 (3 mm cm (S 427 2I S. PmaTO14s1av 4 MA. 3 . 5474D0 M O 692 77 S752 is8 icts cog cm as ( cm 44(3 13 9. SMWTAj51L32 is U 4 2 8347 34 7= am1 SW7 Wo 285 OX CX WMI CM CEg (3 2317 2 8D. PXUr)Q,WYtE 29 MA. 5 2 232 8558 1514 3619 9831 185 CS 25 MA 2m CM (3 11X3 in 21. 23OCMWWD 33 M 3 1 se 23 20M1 11t0 In54 1454 238 413 6(3 CX CS OX (3 733 25 22. VOWP.C5.CTO Ue U 3 1 4738 384 I=1 200S 2134 22134 20 OX (3 (3g ON ZN (3 $OM 22N 13. JWDWBALIU PS=I 1(3 U 5 4 an 678 so 670 70 so am (3 of (3 cm WM u m 215 14. SOLID Q8E1rJlMHO WtA 67 M 5 4 482 6WS 572 640 735 fi 215 (3 C3 (3 (3 (3 WM3232 is. 9Uj.DM/Z1% 79 M 5 2 sum5 132 641 7409 S"5 967 1us (3 SNX 33 (3 CE cm 1= 238 l6. 3.674 .iyAJ 114 U 6 4 I235 678 1724 1I5 2176 240 225 (3 (3 (3 5X UX ON 7W1 259 SA-10EX 494 8577 SN C. gV-t04W r-nr 17. jm&zkt)cx s 44 L 3 2 2)32 452 MD 154 2N 4147 238 (X ISX OX8 (g CS C(3 23 14X 15. CPMFTIAl/ID OARD 8 L 3 I 51 904 4247' 7325 122 100 144 (3 cog 171 ax3 S (3 484 2in 19. ZTBVDRTh5.R 16 L 3 2 2U6w 452 1467 US5 18 32W 285 cm 185 138 An 2 (3 1am 1to 2D. 'A1A VS.J.55 PAM1 230 L 5 4 114 O7M 123 2)4 2113 338 25X CEV CO SW8 238 X (3 42711 23 21. S.J.J0 P5IDQ/STA.FE DO 8.1. 221 L 5 4 7212 as6 23 on 112 113 (3 (3 238 3m 15X 185 264 15 927 ANOAORBOE 10 L. 5 4 4445 675- 853 UN8 114 214 45M (S (X (3 39 385 3XX 943 373 $Sa-WF/. 916 WV74 UK 1704. 199 23840 17% SM..E: FEWASA wWd Mission estiut Lby 1987 REFASO RALAY F8AR-TATD4 PRDJET rF PRkI CSS SOVP - 19813 M arsJ =M gSAV4S( NI*F.M. 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PARAITION SA/SMCRI 4 kVL d 3 2 1.9D Mg9 SOO 46.4 44 28 26 38 29ES 1406 338D 40SD 9S2 449 27 2SS gm2 9. SmWWRTAMESUMRD 28 M d 4 2 1.2D 1370 I60M 4S.3 70 61 1C 3D I2S 23G9 26d0 3632 2234 381 2D 3S3 6421 10.I. PARJ%lN"#/FEREz 29 M d 6 2 1.C0D 1136 130 47.t SS 39 2D 3S 69D ISS 2281 2DS 9e4 224 12 247 3E04 20.2. PF^llNOM/PBEUEJ 19 L d 2 1.CD On 2S9 4S.0 47 27 2D 3S 173 I68 17E4 aJ83 7SS 347 10 3132 471 II. JUN11)/bCNAG 123 M d 6 4 1.CD 86D 8SD 43.4 87 70 9D 29 0 232 232 269 97 29 2 31 418 SUB.-1Dm- 76 393SD 1304 307 196 282D wo S. MEE-KG aOfM L 12. SDCRCC8^/PEE 33 M * 3 1 2.66 7CD 87D 43.2 46 37 27 30 1254 232 3690 678 9D7 SOD 19 259 7309 1 13. 1100MG".C^A-1)( 92 M . 3 2 1.74 70D GMD 46.S 40 43 28 44 723 1E79 2ec2 4n3 721 289 12 20D 699 14. rTATINV/UUI PINT10 UV M* 6 4 1.6S 133 seD 44.1 49 32 37 43 421 08 1267 417 lCl 30 a 2D 674 16. SOLID GWFr"D rA 67 M * 6 4 1.56 230 SW 44.3 48 40 34 4D 325 05 8 386 ss 27 S is S 3D t6. EM.KO[L/rT*%0A 79 V d 6 2 1.2D 710 OM 43.7 97 6B 2D as UD 203 223 390 I 423 17 388 am 17. IUAD JRt M 114 M d 6 3 1.42 UW DW 44.6 78 32 23 27 405 127 253 S7 2E4 70 14 48 g SUS1sXAL 498 2S73 3419 73 923 2136 C. BRN-KMCIU 18. lwvaxNPvS 44 L * 3 2 1.00 sgm SO D S.O 61 34 42 S5 213 140S 341 2n 453 142 13 164 29 19. C*PBW/m G" 8B L * 3 1 1.0 90D 9DD 44.3 40 37 3S 47 2416 347 -C* 47a 26 S S 27 362 43 2D. II DP04U IGS L * 3 2 l.OD 9tlD 900 44.0 Sll 2S 38 46 IS9 1274 26B7 177S ass 218 lS 131 2424 21. VERA 0W$NZ4IM 1SS L d 3 4 1.10 218D, 122SD 4 .6 44 3 3 a 48 40 Z27 287 lOQ S1 12 1 11 1X5 22. AFRk4L* R^/.J.RID rtiu 20D L d S 4 1.12 109 120D 44.6 71D 65 27 aB 72 GM6 2238 732 354 82 8 7A 2254 23. S.J.RIlD PRMIW/S.FE 0 SUL 22 L d 6 4 1.12 WMS 22nD 43.2 94 89 24 37 20 156 lSS UR so to 2 17 292 24. AWJVAPVMA3%VFETtOS 1SB L d S 4 1.26 lOO 9eo 43.9 89 SO 27 40 4D SB9 an 4S0 21S 66 4 47 lil SM-UM;C8 W07 MM3 2EeS 732 71 83Q 14404 lTALx 23Z 2E0 9009 S"C 338 4SE4 9MMe Source: FEPASA and Mlss;on Estbiwt4m I D sumL FWPSA WWAY :r^auATI PR:rE 7fkNOPATI C06Si 5SiV - 1Sg) TRJ fPT C0n SAVD w=41 AV.NB.tF AV.Alt 1Rtk= AV.AN BfTY 7Rd+C D8E DD WT & WS GM CA7EWR 1S0 1N;FM ER10w6 1 RE7LW AV.S (OO 70S)cPIBL MkCWIIE ammat/L" IW~~1 lRACIU D W P/l W UP DOM (TO) UP DOM FI IDOW wUrAL L= Y. FE uA A. EWR caRMO 1. AF 1 OfAMJI 4S m d 6 3 I.SD 8D EED 46.1 80 3 22 28 2&t? 1OV* 127 MO 282 96 9 1 2243 2. UEER*LkNDtElRABOk 129 m d 4 2 1.00 86D SED 46.2 09 4S 22 29 1099 1828 28B7 2134 733 246 22 142 Ja76 3. EVA*4VLlV*PA6D5S 194 M d 6 4 2.OD 38D 3SD 48.0 84 a2 20 28 27 1767 1784 4667 aoD bll 16 2m amq 4. RIB.PREFQ/CMS BR"A 87 M * S I 1.9D 1446 144S 43.9 41 31 27 4S 1894 4308 =2D GMS 1984 375 27 2S4 am2 S. P06DE CALDWSAQJ^ 76 M d 6 4 1.8D 281 3SW b-1.8 92 90 lS 26 174 asi 8S6 41CD 674 449 a 307 6414 8 .1. REF*PE^PELINA 9 M d 4 2 1.70 140D 1446 44.a 37 3D 2S 43 1604 2608 3110 22SS llS3 249 13 152 ame 6 .2. RWLVPL"^bJlNl 9 L d 4 2 1.70 140D 244S 43.7 BB 30 2S 45 1490 2229 372B 28B4 1S48 323 17 203 49e5 7.1. P4UX[NM^ VIM b5ST 1D L 4 2 1.70 144t 243S 44.4 2S 27 3D 4S l3fl 267S 40ae 28E3 874 19S iS 124 40e3 7.2. PAU N1430a VIST bD L * 4 2 1.D0 144S 1438 48.1 13 11 3D 4S 17W7 2E4 4312 298 8B7 lFS iS 13 4280 8. PA -*lYSiRlA%W 4 WVL d 3 2 1.9D ael ow 4S.4 44 28 26 38 2117 Sl 44 14 9 9 21 68 9. SNAWRIA^/S;IUNI is m d 4 2 2.2D 137t) 2SD6 4S.3 70 8l 16 30 I38 14J5 2%S1 3633 2375 42S 22 3Da n149 lD.1. PARUWAC/VRWRLE 19 M d S 2 1.CD 113 130D 47.7 63 39 2D JC GM8 20n 22Bl 2230 1CO 233 13 2S5 aweB 10.2. PMTlIMA/FRE E 1 L d 2 I.CD ael mS 48.0 47 27 20 as 278 7W 2 D7 WO 3J34 923 407 12 448 an2 II. JJRpl^/DNO*GU 123 m d t 4 1.0D SW BED 43.4 67 70 2D 29 0 237 237 29S so 3D 2 32 427 "U-=DAL 742 433119 1410? 42D4 221 3Ze e4so" S. MEJER-AUaE CORR]DOR Z 12. SMROtEF/PER 83 M * 3 1 l.8S X)D S70 43.2 4E 37 27 Ja ISR 2ees 4208 f7E lC8 42 2 3 3D3 aml 13. VPERO/ENG.C&LIXO S2 M o 3 1 1.74 7aD OMD 46.e 40 4a 2S 44 OMD 2Cb 2879 6214 7SB a2D 23 22 ams 14. rTAlWTDGY=FNT 10M lo * 6 4 1.6S 130D ssD 44.1 4a 32 37 43 4SC Ma 130D 402 212 3a 7 22 ano 16. SOLID GFNDW YIC*VO MITA ey M * 6 4 2.S6 23JO ssD 44.3 49 4D 34 40 JE2 7as Yo3 43D 10 30 e 21 6So la. ENOJS9SILOrrAPEA 79 M d C 2 1.2D 7bD saD 43.7 97 es 20 as 2sss 1294 2SM 4eas 2C90 6 2D 4eZ 7209 r.tLEo*DJRYEuR 114 M d e 3 1.42 IID 200 44.S 78 d2 2a 27 46Z 153S I=n 024 2?9 Ty 1S Ss Z34 SUBAWTAL 494 la"0 am6 23ss 8a UO2 24023 C. BROOD-GMUI C£RRIDa le. Jl0Zm/1OU"FINw 44 L * 3 2 2.OD SW 90D 61.0 e1 34 42 SO 22o7 14e2 J8a9 22S1 480 147 14 170 32MQ 19. CAUDDAN5WO CLARD es L e 3 1 .00 soM OM 44.3 40 ST as 47 27a 4179 OMe 6we 117 3Es a2 416 7sez 2D. rrvvam NSS L * 3 2 1.OD 90D SOD 44.0 60 25 a3 4S lr/ ItS 3168 UK 426 131 iS 14i 2 21. VEA O AZ /M 14S2 L d 0 4 1.20 1180 I=8 43.6 44 ao 3a 46 SD 2F 319 in1 el 14 2 13 2U 22. ASVVA .J.R7D PFIEM 20D L d 6 4 1.12 xm I 44AS ?0 BB n 38 9" rJ lOQ62 SOD 123 12 lZIce 3 23. S.JlRlO IWWDM5A.FE OD SUL 22 L d S 4 1.12 X011O 220 43.2 94 89 24 37 NB Wf SOD 6SW 284 So S 64 90S 24. AW WW Vo 190 L d S 4 1.2C WmO 9l 43.9 B9 ao 27 40 122 948 4 a30 370 9So 7 SD 2387 sLBrluL W8 22 32[n 913 87 #S6 17 1UEIL 2313 73749 21364 awe xi133 on Sourc: FBPS wd Missin Estifft4 ky 1SB7 r4o SPZL FEPASA RPAIMY RIUBXFlTI PRD.ESC 71D afMT}N? COET SAYVD - 1996 7RAD3N OPMT3NC MM~ SAVDM (LM/1"4 AVJ.NBcF AV. IR% 1J.LI AVAAGI EWTY 11PFIC 0G0I1Y OX0JDIG W7M A TA7M £MG CATE?wY LOCOS 1TM PER ID LWOA IF1r8 AV.~ (OXXD lUE CAPIrAL MADXT4040E affDORAIW IW *VCIRl 'AD W P/TRIN tP Wm4 (flJ6 IF DOM4 10 1 IF DOM4 1AL LOOM1 W. LOCO MG (I*W 1UTAL. A. E*0T CU08 1. APASWtAU/L8 Abr> 46 M d 5 3 1.8 SO 8D37 46.1 80 39 22 28 252 229B 1648 9 319 125 11 74 1513 2. LEERUIAtEERABaA 129 M d 4 2 1.80 8SOD SD 46.2 69 46 22 29 1254 2Z24 3488 2596 891 298 25 173 3984 3. EVA*EIBN4%PASSOS 184 M d E A 2.0D 3e0 38D 45.0 S4 92 20 29 33 2138 2171 6644 8S 822 18 332 7319 4. RIO.PRET)/CASA WCA 87 U e 6 1 1.80 1446 1446 43.9 41 31 27 46 2304 6241 7548 7624 2AI5 45B 32 309 103 6. P06 DE CALD^S/AGUAI 75 M d 6 4 I.W) 281 35D 61.8 92 OD 16 25 212 829 2040 49,B 698 646 10 374 4817 6.1. FEILAW/PDLUMI 9 M d 4 2 1.70 140D 1446 44.8 37 3D 26 4 1830 1964 3784 2795 1"JS 308 28 197 4724 6.2. RfELM4IPMLPaA 9 L d 4 2 1.70 140D 1446 43.7 38 30 25 46 1824 2712 463B 3R3 1883 301 21 247 0C41 7.1. P4AIHLA VITA 10 M * 4 2 1.70 1446 1438 44.4 25 27 30 45 I6 3268 4910 3471 20 238 2D 1 4944 7.2. PAAv'8GW V3STA 10 L * 4 2 1.70 1445 143B 46.1 13 U 30 46 215 3098 5246 3828 104 2 30 283 s 8. P 1ATDD RAZTA 4 U4L d 3 2 1.9D 619 s9o 46.4 44 28 25 38 2578 1913 441 6458 1272 698 23 341 744 9. S#*RTA/;1wft 18 M d 4 2 1.2D 170 1806 46.3 70 61 15 30 166 '174 3408 478 2891 517 27 478 so 10.1. PADwARA1P WE 19 M d S 2 1.00 1136 2) 47.7 6 39 2D 35 776 7M 2751 259 1217 283 25 312 4428 10.2. PARAThO/PE.L 19 L d 2 1.00 61s an 46.0 47 27 2D 36 33B 2163 2492 4643 1123 495 14 545 6730 11. J3VAMJCACA 123 U d 6 4 1.00 0SD 9S) 43.4 67 70 2D 29 0 28W 2S8 322 120 36 3 39 619 SWUETDT 741 52704 1713 5116 257 373 71 S. bETER-GoE CORRI 12. S(ROCA6VW8W 33 U * 3 1 1.86 7WD 87 43.2 46 37 27 39 192 3194 52DM 822 12S6 614 27 368 10416 ti 23. P /ENO.CA* XTM 62 U * 3 1 1.74 70D 67 46.6 40 43 28 44 973 229 36B 6344 971 389 18 270 799D - 14. ITATW^UfIZ PINTD 100 U * 6 4 1.66 1330 9SW 44.1 49 32 37 43 ES4 1138 1081 683 136 40 8 27 774 16. SUL1D GWVE/C*IDIDO hITA 67 U . 6 4 1.66 1330 a2D 44.3 48 4D 34 40 428 132G 523 129 37 7 26 721 28. ENDJ1 ILD/ITAPEVA 79 U d 6 2 1.20 710 am 43.7 97 68 2D 36 2697 1453 32D S=8 1942 813 24 652 8M 17. fWB JV4A 114 M d 6 3 1.42 12UD 1010 44.6 78 e2 23 27 250 1 2P 759 339 93 28 64 1273 aB-lVr& 494 229 4823 2887 101 1316 2994 C. tFO-GWE ClWl 18. ANWIM/CNODS 44 L * 3 2 l.00 OM 900 61.0 61 34 42 88 2512 MM(3 4117 2671 5EN lag 16 190 3481 19. Coppasp3 aAFS O 8 L . 3 1 1.,OD OM SO 44.3 40 37 36 47 3300 t84 8394 OM 1424 437 39 60S 9P 2D. IIWPD1N4tJ 165 L * 3 2 1.00 Sg gm 44.0 68 2 38 45 21SS 168 3864 2388 618 169 2D 177 32E91 21. VEUk Ol/WfDi 162 L d e 4 1.10 118D 12 43.5 44 35 33 45 73 325 3Ee 148 74 17 2 19 267 22. AWFV4JtUAI$.J.RIO PlD 2D L d 6 4 1,22 O I2D 44.6 70 68 27 38 1176 898 "S 1222 6n( 138 14 231 2123 23. S.J.RID PIEDJSTA.FE 00 S.L 221 L d 6 4 1.12 W0 120 43.2 94 89 24 37 236 483 71B 616 346 as a as 110 24. ARNVAtMAYWETUS 198 L d S 4 1.26 J5 D 9S0 43.9 809 4 27 40 153 1 13 7 1017 451 113 9 98 IJ87 S9J-IAL atss 14779 31 97 16 1182 21122 1TTAL 2313 8tl1 256 7898 463 6229 Source: FBfAS aid Missio Estiust-a hby 1987 0 x FEAR ULVAY tOOUMBlIATM4 PFWET 7AUN OPEW1ATM C1Si SAV1M - M I"W OI1T1C C(9Si SAYD4 (W)M AVJ.M. AV. WI AV.WQ BF1Y 7TPJFIC D8BITY (E)WUD WrIES A TAES) O A CA7BM LOCGS 1D PERi L3C LM FEIRJ AVSB (OD iDE6) CPPTrAL WJOBNTEWN CIXT/OVIW mm lId RKM70 Uc W P/Will Ip Dow4 (1DB) IP DOW U) W LP DM4 1UM. LOC # LDCWS #4 CEW IUIAL A. SW01W I. MAWWR.BIABB IA 45 Md d 5 3 1.60 BO OB 46.1 aD 58 22 29 278 1431 1709 I=5 36 12 12 82 167 2. UELAOL4U18l*8in Id d 4 2 1.90 GODGO 46.2 69 45 22 29 1I39 2465 351 2956 984 329 29 191 4X99 3. EV*433JHVPASSD 184 Md d 5 4 2.00 380 33D 46.0 84 62 30 28 36 230D 2396 617 ON8 688 2 367 531 4. RIB.PWE1/CPSA SWCA 8? Md . 5 1 1.60 1445 1445 43.9 41 31 27 46 2544 57M 8331 83( 2965 MO 38 342 11564 S. DOCE COMD.IPAa 75 Md d 5 4 1.60 281 56 1.8 92 OD 15 25 234 915 1149 553 77 6OM 11 41.3 7308 6.1. FIWIAjPP&DIKA 9 Id d 4 2 1.70 140D 1445 44.6 37 30 25 48 02 2157 4178 3(8 1I8 336 19 217 521 6.2. FLMAJPALM.L A 9 L d 4 2 1.70 1400 1445 43.7 38 30 25 46 2014 2994 608 3874 2079 421 23 273 667 7.1. P4.L2MApMV1SA 10 Md . 4 2 1.70 1445 1435 44.4 25 27 30 45 182 3688 5421 3833 1174 293 22 167 5458 7.2. PAUNB4WHDA VISTA 10 L . 4 2 1.70 1445 1438 48.1 23 11 30 46 2374 3419 579 4=) 1164 246 22 174 5815 8. P.tRATN0~/SmAWRTA 4 IdVI d 3 2 1.90 619 690 46.4 44 29 25 38 294 2122 4958 5so1 1404 682 25 377 8438 9. sAMMtITAAES1LMRI 18 U d 4 2 1.3 137 1604 45.3 7t0 81 15 30 1I8 1I6 383 5293 319 5GM 30 629 9S" 10.1. Pm~ATh(G%'p6Ev. 19 Id d 5 2 1.00 1135 1S 47.7 88 39 20 35 857 228D 5307 2980 1344 313 17 344 4887 10.2. 'PARATMAREMBE 19 L. d 2 1.00 619 ON8 46.0 47 27 30 35 373 237 2751 6016 I24 647 16 601 7419 n1. .ANWfhM A in m d 5 4 1.0 89D 890 43.4 67 70 329 2 0 318 318 356 133 40 3 43 573 S.s-TUTM. 741 8818 18949 884 283 4119 97188 S. MWTE-&M. - -t 12. SMW0CW/1P 33 Md . 3 1 1.65 70 670 43.2 45 37 27 39 2136 352 S3 9(7 1430 587 30 407 X1SOD 13. VEF/ENQ.COLWVY if M . 3 1 1.74 700 GM0 45.6 40 43 29 44 2075 279 867 700D4 102 430 18 298 =0 14. rTATDGk4lAJ1 PSOM Us9 M a 5 4 1.55 2330 SW 44.1 49 32 37 43 611 1m 188 621 16D 45 9 XI 9am 15. SOLID QWDE/C*0lD0 WTrA 67 Id a S 4 1.65 133 90 44.3 48 40 34 40 473 981 1464 577 142 41 S 29 798 16. 8C~.94DfXTOVEVA 79 Id d 5 2 1.3 710 OM 43.7 9? 88 20 36 1074 1804 3478 6214 2145 677 27 821 OM9 17. ftBTM JR/MA 114 I d 6 3 1.42 1160 1010 44.6 78 62 23 27 SC1 166 2270 8m 374 USD 30 71 1403 9.D-ITWA. 494 2431 5314 1 112 14533 38 C. iNY-OzM CmRD Is. J.WIAIrjuDS 44 L * 3 2 1.00 SM WD 51.0 61. 34 42 88 2910 188 4379 2734 574 176 16 20 30 19. c1AS/RIm CAWI 88 L o 3 1 1.00 SW SOD 44.3 40 37 35 47 3664 6014 297 753 1572 483 43 557 1019 2D. rr1MPJR9R. 298 L. . 3 2 1.00 OM 9S0 44.0 88 29 38 45 2560 I37 4258 235 572 175 22 195 3889 21. VAOACDR/WA 162 L 4 6 4 1.10 1160 1.D 43.5 44 38 33 45 61 348 .629 163 ft 19 2 18 293 22. APJHI.%WS.J.R31) PWiE 2D L 8 5 4 1.12 IM 2WD 44.6 7t0 88 27 38 129 966 224 149 671 162 16 144 2W2 23. S.J.RMD PIE1U/1A.FE DO aL 221 L d 5 4 1.12 I= M2D 43.2 94 88 24 7 2 533G 793 87930 75 7 73 1216 24. AWNtAhW/BJVUS 198 L 4 5 4 '1.25 'LOU 950 43.9 88 68 27 40 UR 127 1443 112 488 1s 10 us5 188 SBG-Mf& 1078 1621 4as1 2w4 115 12297 23180 7UTt& 2313 9872 29813 871 510 687 14343 Source: FWAA and Mdission Eati uurat may 1987 m 4 01 - - 139 - BRAZIL ANNEX 10 Table 8 FEPASA RAILWAY REHABILITATION PROJECT Economic Evaluation of Locomotive Rehabilitation Works RECONSTRUCTION OF CLASS 3,800/7,800 LOCOMOTIVES -----------------------------------------------------__--------------------- Unit Cumulative Cost Annual Annual Locomotives Annual Extra Saving Cost Net Year Reconstructed Investment Ton km (ton km) Saving Benefit (US$ m) (US$ m) (US$ th) (US$ m) (US$ m) 1987 4.2 0.00 -4.20 1988 10 4.2 80 3.65 0.29 -3.91 1989 20 4.2 160 7.21 1.15 -3.05 1990 30 4.2 240 8.73 2.10 -2.10 1991 40 4.2 320 8.73 2.79 -1.41 1992-2008 50 400 8.73 3.49 3.49 Estimated ERR: - base case: 15% - benefits reduced 20%: 11% - costs increased 20%: 12% RE-ENGINING OF CLASS 3,200 LOCOMOTIVES Unit Cumulative Maint, Annual Annual Locomotives Annual Cost Cost Net Year Re-engined Investment Saving Saving Benefit (US$ m) (US$) (US$ m) (US$ m) 1987 0.00 0.00 1988 5 1.50 26,850 0.13 -1.37 1989 10 1.50 30,878 0.31 -1.19 1990 15 1.50 33,965 0.51 -0.99 1991 15 0.00 37,362 0.56 0.56 1992 15 41,098 0.62 0.62 1993 15 45,208 0.68 0.68 1994 15 49,729 0.75 0.75 1995 15 54,701 0.82 0.82 1996 15 60,172 0.90 0.90 1997 15 66,189 0.99 0.99 1998 15 72,808 1.09 1.09 1999-2004 15 80,088 1.20 1.20 Estimated ERR: - base case: 17% - benefits reduced 20%: 13% - costs increased 20%: 14% Source: FEPASA and Mission Estimates May 1987 *0 z r - IFq ILF- PM" - - 141 - ANNEX 11 Page 1 of 5 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Economic Evaluation of FEPASA's Electrification Project A, Project Origin, History and Status 1. In 1974-75, at the time of the Third Railway Project's (Loan 1171-BR) preparation-appraisal, FEPASA developed a comprehensive investment plan for the period 1975-79, which, inter-alia, included the strengthening of the existing power systems, the electrification of 365 km of the export corridor and the purchase of 54 (4,000 HP) electric locomotives (SAR No. 856-BR, Table 5). The third project included only those investments to be implemented in the course of 1976-77, i.e., with regard to electrification, catenary renewals on 296 km, three new substations and the electrification of a 67-km section of the corridor (SAR Table 6). In 1976, FEPASA signed a contract with a European consortium for the supply and financing of 56 (2,900 KW) locomotives and equipment for the (25 KV.AC) electrification of the entire Uberaba-Santos export corridor. Following the Bank's tecommendations, however, PEPASA renegotiated the contract in 1977-78 to undertake, instead, the rehabilitation and strengthening of the existing power systems and to acquire 23 locomotives; this reformulation was approved by the Bank in 1978 but never became effective with the changes of Government and FEPASA's management which took place in early 1979. 2. In 1979-80, a number of studies were carried out with a view to reformulate FEPASA's overall investment plan, which was much beyond the company's capabilities. These studies led, in particular, to the reformulation of the Third Project, which was approved by the Bank in October 1980, as well as to a second reformulation of the electrification contract, to again include the electrification of the Uberaba-Santos export corridor (this time in 3 KV DC) and increase to 60 the number of locomotives; this second addendum to the contract was signed in May 1980. A number of minor reformulations and alterations of the contract then took place in 1981-84. The number of locomotives to be purchased was increased to 80, after the significant traffic increases of 1979-80, but, because of a lack of counterpart funds, implementation has been constantly delayed. The resulting cost overruns led to the latest reformulation, which took place in June 1985, and resulted in the reduction of the export corridor electrification to the Ribeirao Preto-Samarita section (about 524 km against 700 km initially) and in revised (extended) implementation and locomotive delivery schedules. 3. The present status of the projeLt is thus as follows. The project includes three components: (a) rehabilitation and strengthening of 562 km of the electrified meter-gauge systems, for an estimated cost of about US$18.0 million, of which 37% was completed at the end of 1986; (b) rehabilitation and strengthening of 451 km of the electrified broad-gauge system, for an estimated cost of about US$25.0 million, of which also 37% was completed at the end of 1986; - 142 - ANNEX 11 Page 2 of 5 both of these components provide for the installation of new substations and the replacement of existing ones to increase train capacity, and for the replacement of existing diesel locomotives and some of the existing electric locomotives by new electric locomotives (not included in the preceding costs) on these sections. (c) electrification and signaling of the Ribeirao Preto-Samarita (meter and dual-gauge) section of the export corridor, including all necessary elements, i.e., substations, overhead network, CTC and telecommunications, ancillary works and locomotives, for an estimated cost of fixed installations of about US$274.6 million, of which about 38% was completed at the end of 1986. Overall, for the three components, 80 (2,540 KW) locomotives have been ordered, of which 70 would be meter-gauge and 10 broad-gauge, for a current estimated cost of US$158.7 million (about US$2.0 million per unit), of which 55% have been paid. 4. The current estimated total cost of the project is US$475 million; about US$207 million had been spent by the end of 1986. Table 1 shows the project cost estimate by component and the estimated disbursement schedules. B. Evaluation Methodology and Assumptions 5. The main justification for the rehabilitation and strengthening of the existing electrified systems is their insufficient train capacity, which requires that diesel-powered trains also be operated on these systems. The extension of the electrified system is for FEPASA's major (export) corridor, which has the highest traffic densities in the network and the best traffic-growth potential (1990 forecast traffic densities ranging from 10 to 12 million gross-tons). The investments (both strengthening and extension ones) would free the diesel locomotives presently utilized and avoid purchasing the additional ones required to cope with expected traffic increases. Operation and maintenance benefits would consist mainly of savings on energy and on locomotive maintenance, as well as on rolling stock capital and train crew costs as a result of higher speed. 6. The three components of the project have been evaluated separately, following the methodology described in "Railways and Energy," Liviu L. Alston, (WP No. 634), and on the basis of the agreed traffic forecast, which is being used for the design and evaluation of FEPASA's investments and operations plans. FEPASA's past and forecast traffic by commodity is shown in Annex 4; charts 1 to 3 show the 1985 and forecast 1993 (net and gross-ton) densities on the three subsystems. 7. Investments in fixed installations have been included in the evaluation at their revised contractual values and in accordance with the current contractual implementation schedule. In particular, new substations are costed at US$2.26 million each (US$1.42 million remaining cost), overhead and catenary at US$199,000 per km (US$82,000 remaining cost), and the additional work (including financial contingencies) at US$157,000 per km (US$96,000 remaining cost); the final average cost per km will therefore be about US$440,000 (which is significantly beyond the range for electrification costs quoted in "Railways and Energy"). - 143 - ANNEX 11 Page 3 of 5 8. The maintenance of fixed installations was estimated at 1% (per year) of the capital cost (excluding financial contingencies) for overhead equipment and catenary, at .45% for new substations, and at about US$20,000 equivalent for old substations. 9. The net locomotive investments were estimated on the basis of the power requirements (estimated link by link and by year in both "with" and "without" project cases) to meet the projected traffic (Tables 2 to 4). The specifications of the new electric locomotives have been defined to maintain the same train consists for operational compatibility throughout FEPASA's network, but they will operate at much higher speeds (operating speeds have been estimated link by link, also taking into account differential time for acceleration/deceleration). Overall, in 1985, there were 70 electric locomotives working on the broad-gauge and 76 on the meter-gauge systems; many of them are old, some dating from 1940-1943 (a few from 1927); their 1985 availability was about 70%. The plan is to retire 58 of them over 1986-1990; by 1990, a total of 64 would remain working on freight trains, of which 39 on the meter-gauge and 25 on the broad-gauge systems; their availability is expected to be about 75-77% by then. The availability of the new electric locomotives was assumed to be 90%, while that of the diesel fleet was estimated at 77%. Utilization of available locomotives is 55% on the meter-gauge and 41% on the broad-gauge systems and the ratios in traction are 79% and 88% of the utilization time respectively (Tables 2 to 4). The cost of alternative (1200 HP) diesel locomotives has been estimated at US$1.3 million, and the released diesel locomotives have been credited at about their depreciated value (US$300,000). 10. Locomotive maintenance costs were based on FEPASA's recent experience with existing diesel (US$.60 per loco-km) and electric (US$.41 per loco-km) locomotives and on an average US$.24 for the new electric locomotives. (consistent with Bank data). 11. Energy costs. Diesel locomotive consumption is 7.1 liter/1,Q00 gross ton-km (gtkm) and electric locomotive consumption is 28 kwh/1000 gtkm. FEPASA is presently paying 20.2 US cents per liter of gas oil (and transport-storage cost is about 1.5 US cent per liter) and US$16.4 per 1,000 kwh for electrical energy. CIF Santos price of gas-oil was about US$170 per ton in March 1986, with the barrel of oil at $13 to $14 as an average. The Bank's April 1, 1986 oil price forecast of US$17.9 per barrel for 1995 (1984 constant dollars) would correspond to a CIF Santos price of gas-oil of about (1986) US$200 per ton or US cents 17.0 per liter. A cost of US cents 20.0 per liter (to include local transport storage and distribution costs) was used as an average over the evaluation period in the base case, and 13% was added to account for lubrication costs. The long-run marginal cost (LRMC) of electricity for the highest voltage group of consumers was estimated at about $23.5 per 1,000 kwh in January 1986, and the average tariffs (for this consumer category) were about 20% below these costs. However, since the railway draws power at higher-than- average voltage and, in the case of freight operations, mostly outside power consumption peak periods, the LRMC for FEPASA should be lower than for the average consumer. Also, since the large investments recently made in hydroelectric schemes in South Brazil are expected to provide surplus generating capacity in the short and medium terms and additional capacity at reduced capital costs in the longer term, it is expected that the LRMC of power in Southern Brazil will continue to - 144 - ANNEX 11 Page 4 of 5 decrease. For these reasons, an LRMC of 2.0 US cents per kwh has been used in the base case. 12. Rolling stock capital cost-savings were estimated on the basis of wagon-day savings (calculated by link) resulting from higher train speeds, and on a wagon average price of US$60,000 and lifetime of 40 years. 13. Train crew cost-savings are based on calculated time savings and on an average crew cost of US$40.00 per day. C. Conclusions and Recommendations 14. Locomotive requirements, estimated on the basis of the agreed traffic forecast (and the operating plan), are significantly different from the locomotive purchase orders. First, a total of 63 new electric locomotives would suffice to handle the expected traffic up to 1990, as compared to 80 ordered firm; the additional 17 would be required only between 1991 and mid-1993 (unless the existing electric locomotives would need to be replaced more rapidly than currently planned). Secondly, out of the 63 locos needed by 1990, 38 should be meter-gauge and 25 should be broad-gauge (orders are for 70 meter-gauge and 10 broad-gauge). The electrification project overall will release 59 existing diesel locomotives by 1988-89 and spare FEPASA from having to purchase another 48 diesel locomotives up to 1990. 15. Locomotive specifications, which have been defined to maintain operational compatibility throughout FEPASA's network, and, in particular between diesel and electric traction, require them to haul the same trailing tons as present diesel locomotives, but at much higher speeds. These peculiar specifications (together with project delays and numerous reformulations), led to the very high price paid for these locomotives, as well as tQ their limited ability to take full advantage of their higher power through hauling heavier trains. This is critical on the broad-gauge system, where limitations to 900 trailing tons make the new traction particularly expensive. The costs and benefits of operating alternative (haavier) train consists on the broad-gauge network should be assessed with a view to identify feasible train consists and locomotive specifications, which would take better advantage of the new locomotives' higher power and, therefore, improve the cost effectiveness of the broad-gauge component of the project (and possibly of the new electrification component, which covers a dual-gauge section of the export corridor). 16. The strengthening of the meter-gauge system, including the purchase of five new electric (meter-gauge)locomotives up to 1990 (and of about 1.3 additional locomotives every year thereafter until 1995) is economically justified. Despite the past delays, and on the basis of the present contractual completion schedule, the project component, including sunk costs, would have an economic internal rate of return of about 11% in the base case, i.e., with a CIF Santos price of gas-oil at about US$200 per ton and an LRMC of energy at 2.0 US cents per kwh (Table 5). 17. The strengthening of the broad-gauge system, including the purchase of 16-17 new (broad-gauge) locomotives required up to 1990 (and of about 2.5 additional locomotives every year thereafter until 1995) as well as all sunk costs, would also be economically justified in its present form and - 145 - ANNEX 11 Page 5 of 5 completion schedule, although with a slightly lower return than the meter-gauge component, about 10% (Table 6). A major factor of these relatively lower returns is the 900 trailing ton limitation which, together with the high price paid for the new locomotives, makes the new traction particularly expensive. As mentioned, the technical and economic feasibility of operating heavier trains on the broad-gauge system should be assessed. If the costs of the required changes in the broad-gauge locomotive specifications and necessary track (crossing-loop) investments to operate longer trains were minimal, this might lead to substantially better returns. 18. The electrification of the Ribeirao Preto-Santos corridor, including the purchase of the 41 new electric locomotives (of which 33 meter-gauge and 8 broad-gauge) required up to 1990 (and of about 2.3 additional locomotives every year thereafter until 1995), and including all sunk costs, would yield only marginal returns. In financial terms, for FEPASA, the component would have an internal rate of return of about 8%, based on March 1986 gas-oil prices and power rates (Table 7). In economic terms, in the base case, it has a slightly lower rate of return of about 7.5%. The considerable delays, numerous reformulations and consequent excessive financial contingencies and cost overruns are obviously major factors. Another important factor is the low (present and forecast) international and domestic prices of gas-oil; with gas-oil prices similar to those which were prevailing in the late 1970s-early 1980s (when the project component was contracted), economic and financial internal rates of return would be about 10% (Table 7, sensitivity analysis). The rate of return of the incremental investment to complete the project component is, however, on the order of 40%. 19. The economic evaluation of the signaling component, which consists of the installation of a CTC system on the sections being electrified, for a total estimated cost of about US$40.5 million equivalent, was based upon an assessment of: cost-savings on train capital and crew costs resulting from reduced transit permission time (from 8 min to 1 min on the average), and from reduced crossing time (from 20 min to 3 ,nin on the average); cost- savings on signaling operation and maintenance, with station staff reduced from 20 at present to 3 with the new system; and reduced overall transport cost for traffic which, without the new system, would be diverted to competitive modes because of the limited capacity of the existing system. The ERR of the proposed investment was estimated, on this basis, at about 13% (Table 8). 20. It is recommended that the fixed installation works be completed as planned. The rate of return of the incremental investment needed to complete the electrification of the export corridor (about US$120 million) is satisfactory, and the overall rate of return, including all sunk costs, is only marginally below 10%. The alternatives of canceling the contracts or negotiating a longer implementation period will be less cost-effective than completing the implementation of the project as planned. The cancellation of the contracts would require compensation payments to the contractors, and no economic benefits would be derived from the sunk investments (about US$160 million). A longer implementation period would result in a lower net present value for the project; therefore, the current implementation period should be maintained. May 1987 - 146 - ANNEX 1 Table 1 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Flectrificatlon Project Cost Estimate 1/ (USS millon) Completed Completlon Program Component/item Total Cost as of end 1986 1987 1988 1989 Total (USSm) S A. Strengthening of meter-gauge system - Substations 18.0 6.7 37% 6.5 4.8 11.3 B. Strengthening of broad-gauge system - Substations 25.0 9.3 37% 6.3 9.4 15.7 C. Electrification & signallng of export corridor - Catenary 60.0 30.6 51% 16.6 10.0 2.8 29.4 - substations 50.0 19.6 39% 17.1 12.3 1.0 30.4 - complementary work 118.0 45.8 39% 32.5 26.5 13.2 72.2 - signaling and telecom. 46.6 8.5 10% 16.6 19.8 1.7 38.1 Sub-Total 274.6 104.5 38% 82.8 68.6 18.7 170.1 D. Locomotive purchases - 80 locomotives 158.2 86.4 55% 33.0 34.6 4.2 71.8 TOTAL 475.8 206.8 44% 128.6 117.4 22.9 268.9 1/ as of June 1986 Source: FEPASA May 1987 iPUSA MaLWJY fEHT8flAIA D Evalt'ton of FPASA's Elctrification Projcet Oeretion PamtW, 2190 tral I.tom train oparting apeads g ton traffic tonam toO-Du. o oo rlWqair sagan-d crwcby locoso wit with CamonentAink Ka up dom d;ml old e1. n_ *. UP down (milicon) (tho.) old ec die_w w. bect.w. diff. d;ff. diff. di_i elect. *elet. MW _ iSrngUIng liAdor4hyrW 27 GM0 6 27.6 37.6 42.0 432 13n 2.7 0.6 0.3 744 e1 14 0.2 3.5 4.3 2.AyrWrIckcrocab 34 7D 670 21.2 38.4 43.0 am am 33D 488 6.6 1.2 0.7 14 13 31 0.6 8.8 10.6 3.Sorcabew-pwo 36 7X 670 28.7 35.0 39.2 52 42S3 240 3S 3 4.8 1.3 0.8 28KD 132 32 0.6 5.8 7.7 4.1..o.t%p.tinin,p 57 7) 60 24.4 33.3 37.3 224I 21 ml 357 5.0 1.8 1.0 23a4 18 38 o.A 6.8 8.1 S.Ipsro-hiso J. 1N 7D 0 28.8 38.5 43.8 1308 3327 as 9e2 128 2.3 1.3 3081 246 68 0.9 16.7 2D.1 S.RAbiao J.Arkinho 175 133D 990 20.4 38.6 43.3 761 1477 3 365 5 0 0.9 0.6 31 98 23 0.8 10.6 12.0 7.0swihoe-xtis 99 233D SO) 28.1 86.6 39.9 so 11SD 178 184 2.2 0.6 0.3 1370 as 14 0.3 4.4 5.3 tota I8W 27.5 37.2 41.9 2149 286 3a.0 8.8 4.9 1202D 1W Z9 3.6 66.6 68.0 44 OW OM 49.5 53.0 65.7 2448 9s9 152 69 1.2 0.6 0.5 29 18 23 0.5 3.5 4.7 2.Cepinse ._wss 32 9OM 9O 38.1 40.9 42.9 am1 g7m 378 42D 2.9 3.0 2.3 18C a 83 1.6 6. n.8e 3&N.OdasaItirvplns go SOD 911D 41.9 44.9 47.1 5152 675 11W 2313 9.2 7.6 5.8 3im 216 234 4.8 23.4 38.8 4.Itirsplmn84uru ls OM S03 40.1 42.9 45.1 3313 8134 882 191 6.9 6.4 4.8 251 18) le 3.7 18.9 27.8 5.1tirepina4raWars 79 sO 1OM 43.1 46.2 48.6 £57 4638 S31 SOD 4.1 3.2 2.4 =3 03 211 2.0 10.0 18.5 .Ai -Rino 32 9lI O9M 37.8 40.5 42.4 381 2362 8y 97 0.7 0.7 0.5 332 30 19 0.4 1.6 2.7 total 451 41.6 44.6 4e.9 3222 360D 2.0 21.6 16.4 C3 613 647 12.8 63.0 20D.2 N_ Electrifbcet1an l.ib.Pr_i-Agus 174 1446 144S 28.2 45.3 3204 72 1734 12D 17.4 9.3 S31s3 2S 432 14.0 0.0 Q1.0 2Jmi4Pulmna 104133 1291 31.0 49.9 3i88 743a 1177 ss7 12.0 8.4 33Q47 28 12 20.1 0.0 3X. 3.1ualina-Gusian_ 118 1446 1438 28.0 46.3 2s85 am I 945 13.0 7.3 4281 28 34D 11.8 0.0 40.7 4.Q mm-Sweerite 128 610 619 8D.4 4B.2 40e 712 1494 2413 32.6 28.3 o 342 8s 12.7 0.0 48.6 total 524 29.2 46.4 5764 f48 7.7 41.2 1572 847 16 49.2 0.0 176.7 Lac wvlilability X waig ri x fact em_ c;oemuton uintm.nce cost 11123 100 64. 10.0 412.6 110104 2M 06.5 118.5 346.0 di_li loom 77! 10D 7.1 l/1Ctha o.es old 1.0 elect. loos 7SX 1 39 0.66 28 kw/1ta 0.41 ! old 1.6 elect. Io 77X 1W 28 1 28 lth/f1L00aa 0.41 I n_ electric ocos, ;1 1Q9 28 mbb//tl 0.24 t Lae u;tilization in: totsl traction 1. systmEX 7 1.0f systa 4LX E s I peak-N&nth fector 1.2 ag -ton/agon 65 i Source: EPA Ad Missicon Estimatie waby 198 n X ofL FEPAS RAU2LY F tRIf Pwr Evealti< of R EPA'e Electriflc.tien Project Op.ratien Po Wm" I3 --w ccm--p%wc trail .ton train am ratng sPosd go ton tfric tw4m loelo Mc. ,uqamrnt qae-dq aw.-y llow mi with" With CoanmptmInk Ka ti dam dil_l old41. nmel. 'P dam (elI I ion) (tShou.) old else d4i.eo l.ctw. di". diff. diff. disma elect. elect. lA. ~rli 27 67 670 27.6 87.6 42.0 72 SW 1t7 254 1.3 1.4 0.8 1762 145 a3 0.6 3.6 s.e 2.Mmyrirk-SoroEeb 34 X1D 6M 20.2 35.4 4B.0 341 542 422 a1 4.4 3.1 1.3 4143 B8 73 1.2 8.9 U.5 3.Sorc_e-Two 3S 1W 670 33.7 36.0 38.2 B334 5428 33 4ED 3.2 2.8 1.6 3W 275 as 1.0 6.9 9.3 4.2 r-Ita tinMoW 57 7W 6D o 24.4 a3.3 37.3 257 271 321 41 3.8 3.4 1.9 4131 884 78 1.1 S.3 10.3 5.1_treAblao J. is 1 6 2J.6 43.5 48.3 112 42 79S 1170 8.4 5.8 3.3 75 623 147 2.3 21.9 25.0 O.ublao J.-urniWo 175 1 91 29.4 33.6 43.3 1 low SW 4t 8.8 2.8 1.3 6152 245 so 1.4 10.7 15.3 7.urlinhos4ets t13 9GM 2.1 3W.5 80.9 71 15 224 we 1.5 1.3 0.7 211 139 3D 0.7 4.4 0.3 I t.t 562 27.5 37.2 41.9 2743 3n44 23.0 20-2 11.4 28680 2124 48S 8.3 a .1 so.01 _ ed t ning co 1..hmdi.i-C;;in 44 SW SW 49.6 53.0 55.7 a2m 1275 194 215 1.0 1.3 1.0 WA 37 47 0.9 3.1 6.0 2.Capi m..N.0ia_e 32 MD goD 33.1 4D.9 42.9 E6. 374 462 GM 2.6 5.0 8.8 2354 144 14D 2.8 6.0 15.0 S.N.0_!Itirep1wm so SW 90D 41.9 44.0 47.1 a575 6m0 I"E 21 3.1 13.6 10.3 0am a 414 S.2 2D.6 43.9 4.W&rmptIn-wu 1s SW 0DW 4D.1 42.9 46.1 4228 2378 123 i; 8.1 11.0 8.4 311 327 6.3 14.3 36.4 5.Itiu-vlraqmre 789 M SD 43.1 43.2 48.5 2364 Nu 678 753 3.6 6.6 4.4 21S 25 1.6 9.5 21.1 6-4rinr.4lnceo U 9D SW 57.6 4D.5 42.6 463 31 112 1N O.J 1.2 0.9 6 i 34 33 0.0 1.4 8.5 total 4E5 41.6 44.6 45.9 4212 46_ 21.0 37.9 23-. 176 k0W7 21u3 22.6 l.4 I2.9 ftw Electrifiestlen 1.Rb.Proto-Aami 174 1446 1445 23.2 4c.3 400 a3 2213 Im 22.2 11.6 gm2 554 Ri 13.9 0.0 WS.a 2.OW14Pamlins 104 3 1313 I2 31.0 49.9 495 948 11S 17 25.3 0.1 42178 176 417 12.8 0.0 4s.3 S.Faulne-Qmlnm 338 1446 1438 23.0 45.3 a29m 114 175 17 17.8 9.3 6435 24 4 14.8 0.0 52.0 4.G0mlrmrit, , 89 8219 3D0. 4 46.2 5177 9a2 aw1 39 41.5 28.3 49141 4_ 203 16.2 0.0 62.0 total 624 23.2 46.4 735? Sf5 WS. 62.6 2237 t 2003 5s1 62.7 0.0 22.5 L1o ea labi I ity X v-i9h x wct amt ouimupten u.,rtnt os ost 14222 211 43.0 154.7 62.6 2054 14V 4124 93.5 111.5 444.; diIem looe 77W lXD 7.1 I/lCUg - 0.0- old 1.0 elect. Iooe 75 2W0 28 1 39 kab/1D 0.41 ! old 1.e *lec. loan 775 lO 22 1 2 8 kab/Dg 0.41 t am electric loom Ex lOD 2Sl 0.24 I Low uttl I mbitn In: totl traetlen trakic I 1.0 syU_ si 75 W 5., I 1^N _lb 4X so0 I.11 I _ _ er ~~1. WI 1.23 Pak&-moth factor 1.2 I - _r vm-toaSpn 23 0 Sm; FPUA m is lsion Estmtm X hy 1587 IVL FHPASA FMJIiY WWAMIYATMR PF1.ECr Evalhtiao of MWAs Electritifatin Project Opwaton Pmrs, eI awo cuimuptien trol tLon trin opwrating spmd woe tono trff il ton-_w lealw low o ramirrino wn-dm a w-_ Iow mi witout, With Cdaponuntj.r*k Me up dow die_l old *1. n_ o1. U dow (millin) (thaw.) old o1ec dieo ol*.w. diff. di"f. dit". disl *lcct. *lc;t. Ahte gaip stwiomnlng I.A_do-Mmyrink 27 6R) M 27.6 37.6 42.0 786 61 1 2111 1.7 2.0 1.1 2R 0 47 0.7 8.2 8.1 2.Mmyvink-6orocea 34 72D 6 23.2 86.4 43.0 432 gm01 4IB m 4.1 4.5 2.6 S63 481 113 1.7 8.2 15.0 3.Swrocobo-Tero 5 7D 60 31.7 36.0 a9.2 a864 6F8M 339 491 3.0 3.8 2.2 42M 377 OD 1.4 5.4 20.9 4.1 Iro-XtWetlnirg 57 7D 8a0 24.4 33.3 37.3 3188 351 25i 518 3.1 4.6 2.8 am0 4m8 so 15. 5.4 11.4 6 .r hlao J. IN5 7D 6o 23.6 38.5 43.6 il 4 WS 1 7.7 6.5 4.7 112 1m 213 3.3 16.6 28.3 6.Abhio J.-rludnos 1i75 3a DW 28.4 36.6 43.8 I=5 s 664 515 3.1 3.4 1.9 7478 865 34 2.1 9.9 26.9 7.8urinihe-As 98 130 19D 23.1 35.5 a9.9 an 16 248 m1 1.4 1.9 1.0 4 19 41 1.0 4.1 7.S totl US 27.5 37.2 41.9 ato2 4mS 24.0 28.6 21.1 an 30a an 11.6 61.8 15.0 fred .tiq ln 1..mdla-Cwpnm 44 MD GM 49.6 58.0 s.7 3245 1409 214 38 0.e 1.9 1.4 252 63 87 1.3 2.3 6.7 '0 2.Copplian.Odesse 32 gm gmD 31.1 40.9 42.9 706 gm 533 mg 1.9 6.6 5.0 3W9 18 8 ; i3n 3. 4.4 18.6 3.N.Odsin-'Itirapim so gm gm 41.9 44.9 47.1 727 57 1I=? I6=2 S.9 18.2 13. 824 512 CE 11.0 2S.0 61.9 4.Itraptln-laru 165 gm gm 40.1 42.9 4S.1 4878 2964 I= I=8 4.4 14.6 11.1 6741 412 43 8.4 10.6 8.2 S.ItrsepimwAreqars, 79 OM OM 43.1 43.2 46.8 244 66am 749 632 2.6 7.9 6.0 3718 227 247 4.9 6.9 23.3 6.Areqir"Rln. 82 SW EWD 37.6 40.5 42.6 537 318 13 13. 0.4 1.5 1.2 72 44 42 0.8 1.0 3.6 totl 451 41.6 44.6 46.9 456 60D 16.0 VD.6 88.4 2308 1437 50 JD.0 40.3 141.4 taw Electrification l.R;b.Pt 174 1445 1445 28.2 45.8 4S 65 2448 18 24.8 13.1 77 20 am 2D.6 0.0 73.2 2.AJi alim 104 1313 1231 31.0 49.9 547 10468 16K) 1279 18.9 9.0 4617 119 420 14.2 0.0 20.1 3.Paalinm-Gaaim 116 144S 1438 3.0 45.3 am4 0 2*16 1334 19.5 10.3 EOD44 2217 4) 28.4 0.0 57.4 4.aiuw-Sewta 1r B 69 619 g 30.4 46.2 7m W17 210 3 45. . 2S.6 64233 42 1Ms 17.9 0.0 WS.6 total 24 29.2 48.4 8231 7?S 105.8 60.2 2300 11944 2m7S 69.3 0.0 249.2 Lao avbl l*11 it7 X _igh r6 x fact ael commption mln cost 1X 168 4D.0 115.9 112.7 3M4 16864 46 111.1 92.1 48.6 dimI l1os 77i 1C 7.1 I/1 JUW O.2D old 1.0 olet. loca 751W 24 1 28 l w 0.41 t old 1Al *1lc. loan 77x 1C 16 1 2B 11 0.41 t n ectric los, cS 3l 2 11 bb 0.24 ! L.a utillzatlon In: totsl trction traffic t 1.04 I s 70 3.5 ps.,ar 10 1.0s t 415 S 1.41 Pk-mnth factor 1.2 5 aWw v.-tonjAwn 5t Sourc: FEP4 =W Mission Estieste kby~~~~~~~~~~~~~~~~~~~~~~~~ _6 FEASA RUILJAY RIABD-XTAT31IN PROJEr Econonic Evaluation of FEPASA's Electrification Project Strentheing of M 1ter-(ugs Eloctrif led Systan Fixed Iwestunts Locootive owesta Not Maint_e Dnff. Enrw Conamptias Ener YWgo Crow-cky Not catary ( mrber of locco ) Total fixed without with cost svings savings Cash yew A other subsit. purchased freed avoided Investmn install. Ioros diesel olect. elect. savings (CO) (ODD) Flow I91 sow__ 193 esa) 68)0D 1984 sew 1998 3.4 4828 0 -4828 1987 4.8 a632 0 -8S32 19B8 2.5 2.6 2.1 -1253 -13 99 1.7 S6.4 80.5 338 8.1 0.4 1815 1999 1.2 2.1 -2881 -13 154 2.7 65.6 64.2 we 9.4 0.7 2MS 190D 1.2 2.1 -1681 -13 209 3.6 65.8 68.0 879 12.8 0.9 2SQ9 1591 1.3 2.3 -1808 -13 2e4 4.6 56.7 71.8 849 1B.2 1.2 3278 1952 1.3 2.3 -1808 -13 319 6.6 56.8 76.5 1019 19.8 1.4 3579 1993 1.3 2.3 -1808 -13 376 8.4 E6.9 79.3 1189 22.9 1.6 3881 1984 1.3 4.8 -OM6 -13 43D 7.4 68.0 83.0 1380 28.3 1.9 7434 1 1995 1.3 2.8 -2181 -13 485 8.3 98.1 88.8 153D 29.7 2.1 4841 .- 15SS 0.9 }.7 -23SD -13 as 9.0 65.2 88.6 1667 32.2 2.3 4226 o 199 0.9 1-.7 -I=9 -13 MSS 9.7 54.4 9D.6 1784 34.8 2.5 4449 198 0Q9 1.7 -132D -13 am8 10.4 63.6 92.3 1912 37.1 2.7 4873 18B9 0.9 1.7 -UM -13 648 11.1 62.7 94.2 2089 39.8 2.8 4898 2)00 0.9 1.7 -1I3= -13 a89 11.8 51.8 98.0 2188 42.0 3.0 5120 2CO1 0 -13 688 11.8 51.8 98.0 2188 42.0 3.0 3800 2S02 D0 -13 a8m 11.8 51.8 98.0 2188 42.0 3.0 3800 20m B0 -13 688 11.8 51.8 99.0 2168 42.0 3.0 380D 2C04 0 -13 688 11.8 51.8 98.0 21B8 42.0 3.0 3900 200S 0 -13 a8m 11.8 51.8 98.0 2168 42.0 3.0 3800 2DOB 0 -13 688 11.8 51.8 98.0 2188 42.0 3.0 38OD 20O7 0 -13 688 11.8 51.8 98.0 2288 42.0 3.0 380D 200 8 0 -13 688 11.8 51.8 98.0 2188 42.0 3.0 3900 2009 0 -13 688 11.8 61.8 98.0 2188 42.0 3.0 3BaD 20io -0.6 -18.0 -18748 -13 688 11.8 51.8 98.0 2168 42.0 3.0 2C648 sub-total 1990 4.9 2.5 8.3 2450D 1840D 28400 2000D 4C 199 11.4 17.7 220D 28.1 2S.0 sensitivity 0 1640D 2CCD 23SD D unit costs analysis a26(XD 11.CZ 10.7% 10.0 - 142D 891 30D 130D 24SO 11.3% 11.$% 10.89 11.3X E =00 11.9% 11.7% 11.4W F' ! 330D0 12.6% 12.4% 12.2% ( X4 Source: FEPASA and Mission Estirates May 1987 BRAZL FEPASA RA:LWAY RBBITATIOP4 PROJEBT Econrxnic Evaluation of FEPASA's Electrification Project StrenUhening of BroadSystuElectrified System Fixed Inveebtunts Lomtive Invest4nts Not Maintenance Diff. Energy Conswiptione Ene6 Wgon-ay Crv-day Not cateary ( urbe of locos ) Total fxedw without with c saviwngs savi ngs Cash yeer &other substat. purchased freed avoided nvestn insal 1. Ioo diesel elect. elect. savings (C00) (OxO) Flow 1983 16090 -18c90 1984 1860 -1806 ise 1go8 0 0 0 1987 4.4 8248 . 0 -6248 198 8.6 9872 0 -9372 1989 13.9 5.0 13.3 -8405 6.4 549 10.9 64.5 94.7 2188 8.5 0.5 9318 1990 2.5 3.3 -2083 8.4 647 12.8 63.0 100.2 2526 10.0 0.8 5467 1991 2.5 3.3 -20Q 8.4 746 14.7 81.5 105.7 289 11.5 0.7 g5m2 1992 2.5 3.3 -acQ8 8.4 843 18.7 e0.0 111.3 3245 23.1 0.8 8418 1993 2.5 3.3 -2028 8.4 942 18.8 58.4 118.8 3804 14.8 0.9 8s 1994 2.5 8.3 -8528 8.4 1040 20.8 58.9 122.4 3984 16.1 1.0 23sD 9ss 2.S 2.8 -1209 6.4 1138 22.5 s6.4 127.9 4324 17.8 1.1 e873 1996 1.9 2.8 -1869 8.4 1214 24.0 52.4 130.8 4597 18.8 1.1 7909 1997 1.9 2.6 -1869 6.4 1291 25.5 49.4 133.3 4871 20.0 1.2 82s6 1998 1.9 2.6 -1689 8.4 13S7 27.0 46.3 138.0 5145 21.2 1.3 8821 1999 1.9 2.6 -1669 6.4 1444 28.5 43.3 138.7 5418 22.3 1.4 s9D3 2C00 1.9 2.6 -1889 6.4 1530 3D.0 40.3 141.4 s56e 23.5 1.4 941S 2C1 0 6.4 1520 30.0 40.3 141.4 S582 23.5 1.4 7748 2002 0 6.4 I=) 30.0 40.3 141.4 5692 2S. 1.4 7748 2003 0 6.4 1520 30.0 40.3 141.4 G582 23.6 1.4 7748 2004 0 8.4 15D0 30.0 40.3 141.4 5892 23.5 1.4 7746 2005 0 8.4 120 3D.0 40.3 141.4 S582 23.5 1.4 7748 200S 0 8.4 1520 30.0 40.3 141.4 5892 23.5 1.4 7748 2CD7 0 8.4 1520 30.0 40.3 141.4 S592 23.5 1.4 7748 2COG 0 8.4 1530 30.0 40.3 141.4 5892 23.5 1.4 7748 2C09 0 8.4 1530 30.0 40.3 141.4 S592 23.5 1.4 7748 2300 -0.7 -42.0 -9.0 -26718 6.4 1530 30.0 40.3 141.4 G582 23.5 1.4 34482 sub-tota I 190D 16.4 6.0 18.6 24S 16400 18400 4OXD 1995 28.8 32.9 25XX= 38.4 45.9 sensitivity 0 1840D 23S0 unit costs analysis 228CO $0.S% 10.2X 9.9 1420 891 300 1300 24W0 10.9% 10.G% 10.4 10.9X% sonnn 11.7% MM.5 11.2% 33(XWD 12.8% 12.MM 12.3% Source: FEfPASA and Missio Esti W tr May 1987 E3RZL FEPASA RAUMAY RBiABrlTATZN PFOI£ECT Econanic Evaluation of FEASA's Electrification Project Electrification of Ribeirao-ereto Export Corridor Fixed Invesbmns Locomive Lnvestnmnts Not Maintenance Diff. Eer Conamptlons Enerw Won-day CJw-day Nt catenary ( nuuber of locos) Total fixed without wi th cost savings savings Cash year & other substat. purche feed avoided Zwesb,wn Mnstl 1. boor diesl elect. elect. savings (ODD) (000) Flow 1984 81=00 -81 1988 167 2.1 2362 0 -2982 1987 242 10.9 16478 0 -154i8 is88 99 7.0 15.8 20.0 8.3 70D 1743 43.8 0.0 157.2 8S13 148.8 7.5 8131 1989 28 23.4 31.0 12.4 -4571 1858 48.6 0.0 16W.9 8655 158.1 8.0 18is6 19D0 2.2 4.0 -340 -546 1987 49.2 0.0 178.7 9168 187.3 8.5 17W2 1991 2.3 4.2 -340B -48 2D78 a1.9 0.0 188.5 9658 178.6 8.9 18478 1992 2.3 4.2 -340D -548 218S 64.8 0.0 198.2 1019 185.8 9.4 19292 1993 2.3 4.2 -340B -548 2293 67.3 0.0 23S.0 10860 195.0 9.9 2Dt10 1994 2.3 5S.2 -69709 -548 240C 80.0 0.0 21S.7 11182 204.3 10.3 872i0 193S 2.3 2.8 -18 -54 2511 62.7 0 225.5 11683 213.t 10.8 19e19 1998 1.1 2.0 -1654 548 2SS4 84.0 0.0 230.2 11909 218.0 11.0 338 1997 1.1 2.0 -1864 -584 2817 65.3 0.0 235.0 22155 222.5 11.3 K)780 199S 1.1 2.0 -1854 -564 2695 e6.7 0.0 239.7 1240D 227.0 11.5 21178 1999 1.1 2.0 -1284 -548 2M 88.0 0.0 244.6 12848 231.6 11.7 21575 2COD 1.1 2.0 -1864 -48 2775 69.3 0 249.2 12892 236.0 11.9 21973 201 0 -548 2775 89.3 0.0 249.2 12892 238.0 11.9 219 2002 0 -548 2775 69.3 0.0 249.2 12892 238.0 11.9 23S39 2XD3 0 -54 2776 9.3 0.0 249.2 12892 238.0 11.9 2CQ19 2WC4 0 -546 2775 69.3 0.0 249.2 12992 238.0 11.9 2)319 2006 0 -548 2775 69.3 0.0 249.2 22892 238.0 11.9 2O19 200B 0 -548 2775 69.3 0.0 249.2 12892 238.0 11.9 2)319 2COD 0 -548 27T7 69.3 0.0 249.2 12892 238.0 11.9 2C319 2008 0 -564 2775 69.3 0.0 249.2 12892 238.0 11.9 22319 2CO9 0 -548 2775 9.3 0.0 249.2 12892 238.0 11.9 20319 2010 -1.3 -84.0 -21.0 -31570 -546 2775 69.3 0.0 249.2 12892 238.0 11.9 61889 sub-totaI l990 41.2 51.0 24.7 245=00 1640D 18400 400D 1256 52.8 46.6 2000D 8.2 56.8 wsnitlvity 0 16400 sroo 23SD un;t costs analysis 22C00D 7.8% 7.G5 7.2X 142D 891 300 13OD 24SCD 8.2X 7.9X 7.7X 8.Z5 280000 9.Ctf 8.7X 84X 33CCOD 10.C(K 9.7% 9.6X Source: FEPASA wd Mission Estl.wbes may 1987 -153 - ANNEX 11 Table 8 BRAZ I L FEPASA RAILWAY REHABILITATION PROJECT Economic Evaluation of Electrification Project - Signaling Component T r a f f I c C o s t - S a v I n g s Annual Invest. million average train system transfer Net Cost gross- daily capital operat. to road Benefits Year (US$m.) tons trains & oper. & maint. transpor (US$m.) 1986 2.3 -2.3 1987 16.6 -16.6 1988 17.5 -17.5 1989 1.7 -1.7 1990 8.1 21.6 4.0 0.5 0.2 4.7 1991 8.3 22.1 4.1 0.5 0.4 5.0 1992 8.5 22.7 4.2 0.5 0.6 5.3 1993 8.8 23.5 4.3 0.5 0.8 5.6 1994 9.0 24.0 4.4 0.5 1.0 5.9 1995 9.2 24.5 4.5 0.5 1.2 6.2 1996 9.4 25.1 4.6 0.5 1.4 6.5 1997 9.6 25.6 4.7 0.5 1.6 6.8 1998 9.8 26.1 4.8 0.5 1.8 7.1 1999 10.0 26.7 4.9 0.5 2.0 7.4 2000 10.0 26.7 4.9 0.5 2.0 7.4 2001 10.0 26.7 4.9 0.5 2.0 7.4 2002 10.0 26.7 4.9 0.5 2.0 7.4 2003 10.0 26.7 4.9 0.5 2.0 7.4 2004 10.0 26.7 4.9 0.5 2.0 7.4 2005 10.0 26.7 4.9 0.5 2.0 7.4 2006 10.0 26.7 4.9 0.5 2.0 7.4 2007 10.0 26.7 4.9 0.5 2.0 7.4 2008 10.0 26.7 4.9 0.5 2.0 7.4 2009 10.0 26.7 4.4 0.5 2.0 7.4 2010 10.0 26.7 4.9 0.5 2.0 7.4 2011 10.0 26.7 4.9 0.5 2.0 7.4 2012 10.0 26.7 4.9 0.5 2.0 7.4 2013 10.0 26.7 4.9 0.5 2.0 7.4 2014 10.0 26.7 4.9 0.5 2.0 7,4 2015 10.0 26.7 4.9 0.5 2.0 7.4 ERR 13% NPV(12%) 1.6 ________________________________________________________________________ Source: FEPASA and Mission estimates May 1987 t- 4 H3 ,-4 rz ~M0 - 155 - ANNEX 12 Page 1 of 4 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Project Implementation and Monitoring 1. The proposed project is scheduled to be implemented over a seven year period and monitored against a targeted time-schedule, starting June 1, 1987 and ending December 31, 1993 (World Bank Chart - 30913:2 of this Annex), and against the operational and financial performance targets shown in paragraphs 4.11 and 4.26 of the text. With regard to item A, permanent way works for the rehabilitation of track infra/superstructure, detailed engineering has been completed and bids are expected to be called in July 1987, and contracts for the first lots for infrastructure works would be awarded in November 1987. The procurement of materials required for track superstructure works has been divided into subgroups; the bidding process is scheduled to start in July 1987, and the first contracts are to be awarded before the end of 1987. Works in yards and intermodal facilities included in item B are expected to start in November 1987 and July 1988 respectively. Concerning item C, the telecommunication system component, bidders would be invited in August 1987, and the contract is expected to be awarded in February 1988. The procurement of track plant equipment and workshop machinery under items D and E would commence in November 1987 and be completed in 1990. Negotiations with local private industry for the rehabilitation of locomotives and the procurement of specialized wagons under item F is well-advanced; it is estimated that works and supply will start in July 1987. The development and implementation of the various programs under item G - Policy and Institutional Development Action Programs - would start in the second semester of 1987, as indicated in the Annexes 7 and 8. Table 1 shows the details of the Procurement Schedule for major contracts of items to be financed under the loan, and Chart - 30913:2 shows the Project Implementation Time-Schedule. 2. The project would be monitored through quarterly progress reports to be forwarded to the Bank not later than one month after the end of the each quarter, and through at least two semi-annual meetings between FEPASA's management and the Bank. FEPASA would submit quarterly progress reports in a format satisfactory to the Bank, to provide the following information. A. Civil and Mechanical Works (a) detailed computerized list of the main components, i.e., rehabilitation of permanent way infra/superstructure works, yard tracks, utility systems and buildings; installation of the telecommunication systems; construction or expansion of terminals, improvement of accesses to terminals, and rehabilitation of locomotives and motors, indicating contract information and status of implementation in physical and financial terms; - 156 - ANNEX 12 Page 2 of 4 (b) summary tables indicating progress versus targets, and expenditure and loan disbursement status; (c) brief description of problems encountered and corrective actions taken or proposed. B. Materials and Equipment (a) detailed computerized list of materials and equipment to be procured, i.e., rails, sleepers, fastenings, ballast, rail switches, telecommunication equipment, track machinery and plant equipment, workshop and cargo transfer equipment, wagons and computer hardware, indicating the several actions involved in the procurement process up to contract signature and delivery of goods and status of implementation in physical and financial terms. This list would also indicate the projected dates for each action against actual performance; (b) summary tables indicating progress versus targets and expenditure and loan disbursement status; (c) narrative summary highlighting problems encountered and actions taken or proposed. C. Technical Assistance (a) assessment of the progress made under each component of the technical assistance program against agreed schedules and targets; the identification of the problems encountered and recommendations for remedial actions; and (b) summary of consultants progress reports and contract information including expenditures and disbursements. D. Training of Personnel (a) a summary of the progress made under each component of the training program against agreed schedules and targets, the identification of the problems encountered, and recommendations for remedial actions; (b) updated timetables for training courses, seminars and other activities wi.:h an assessment of progress against set targets; and (c) summary of the consultants progress reports, and contract information including expenditures and disbursements. E. Traffic and Operational Performance (a) an assessment of traffic evolution by commodities and a summary of operating statistics; - 157 - ANNEX 12 Page 3 of 4 (b) narrative summary highlighting problems encountered and actions taken or proposed. F. Financial Matters (a) working ratio cumulative from beginning of year: - for total passenger business; - for freight business; (b) collection of accounts receivable (days); (c) normalization payments for freight and passenger services (including outstanding amount) cumulative from beginning of the year as a percentage of the relevant operating revenues. 3. In addition, each quarterly report should contain: (a) a summary table indicating, item by item, the appraisal estimates of costs versus expenditures and loan disbursements as at the end of the reporting period in accordance with the Project Accounts, and the balance of project loan in accordance with the respective loan categories; and (b) quarterly movements and the balance of the Revolving Fund Account and that of the Special Account; and (c) a summary of loan covenants and their status of compliance. 4. In order to monitor the progress of project objectives and provide for extensive dialogue between representatives of FEPASA and the Bank, at least two semi-annual meetings would be held: (a) at the first quarter of each year, the progress made during the previous year would be reviewed with regard to: - physical and financial status of PEPASA's railway rehabilitation project versus agreed targets, including all components financed under the project; - traffic and operations development; - financial performance; - review of the impact of institutional reforms, and the status of the action programs; (b) during the third quarter of each year, the primary focus would be upon the next year's program with a review of: - FEPASA's budget, rehabilitation program and investment plan, considering the level of overall investments and priorities of the various components; - evaluation criteria used for investment decisions; - status of loan covenants, - 158 - ANNEX 12 Page 4 of 4 5. In addition to the foregoing, FEPASA would forward to the Bank the following spe,lfic reports by the dates indicated below: (a) annual operating and investment budgets including financing plans - by November 10 of eLch year; (b) proposed normalization agreement to be included in the next year's budget - by September 30 of each year; (c) pluriannual plans for the metropolitan train and for the railway's long distance passenger services - by December 31, 1987; (d) corporate plan - by June 30, 1988; and (e) comparison of revenues working costs plus depreciation and interest on tolling stock by December 31, 1987. May 1987 AL BRAZL FEPASA RAILWAY 12ABUXrATCN PFXECr Pro,xirement SLile for Major Ccntracts 1/ CGtrac type of Nb. of Type cf Douanora Bid3Ptp. Cont± Delivery lIdtiation Component Value Cractract Cwacts lddig Rdy Invited Siture of Goo& Wodi A. Civil Works 1. I labilitation Peruent Wy Infrastructure Lot no. I Arguari-ngabeira; Arar4na-EntrxarE ento I ,800 Wodcs I t 6/89 7/89 12/89 1/90 lot no. 3 Evs,Ve1ina- 9. Egi*neering and Wotk Supervision 5,500 Services 1-40 Oth.r3/ 6/87 7/87 9/87 lO187 Z 1/ Of item to be finwrM uder the Bink lor. i2 Start cf deliver y 3/ Ban gidelires for mmultant'sa selection. Source: FE7ASA and adssion esties May 1987 ANNEqlX_12 Ft PASA RAiLWAY RiIIAMtIIAtUoN PROJtECt Chla r t PrOovlec mplementotton Schedtul . _9,91 . _ _ ___ .' ' .. . Pus !"h .i l - L- - - - - - - mX I - I zw_ I 1 X DLi- m- - - -- - m- mg >t.... Im l - m m m -IE I 9u*.9 I94 i9 1r 41 _I I1I - _ q'- i I 1 .11 | I _ III ! - (w....s._-^~~~~~~~ mm im *1 U m HLJ I - L1 --L- IIIIII!I I | i ffi 1~~~~- - t m mL - |m I~~~~~~~~~~~ m. Iu - m m j I - m - I m ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I I1~l I~~~~~~~~~~~* inj ... s|SL m 1I.| m1m l!,l < C UID* re OMsIACDwWIS ( ! +mim.im mHi m lf -0,1.,, -, . .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.1mI - 161 - ANNEX 11 BRAZIl. FEPASA RAILWAY REHABILITATION PROJECT Selected Documents and Data Available tn the Project Filb 1. Alde Memotre, FEPASA - Pre-appralsal Misston, March 198h. ?. Aide Memoire, FEPASA - APpra1sal Mission, September 22, 1986. 3. Decision Memorandum, Novemhor ?5, 1986. Consultants' Reports 4. Evaluation of FEPASA [nvestment Program, R. Carruthers, November 1985. 5. FEPASA CoRting System and Tariff Structure, R. Carruthiers, October 1985. 6. Notes on the Use and Conduct of Cost and Costing hy FEPASA and RFFSA, J. Heads and R. Lake (Canadian Transport Commission). 7. FEPASA Operations, S. Spencer, March 1986. 8. FEPASA Organization and Managemnent Systems, W. H. Thompson, March 1986. 9. FEPASA Operations and Workshop Programs, J.B. Bergouignan, October 1986. 10. FEPASA Personnel Management and Training, P. Lindemann, Octoher 19A6. Reports 11. Plano de Recuperacao e Modernizacao, 1985-1988, FEPASA, Outubro 1984. 12. Plano Pluriannual de Investimentos, 1986-1990, FEPASA, Outubro 1985. 13. Plano Pluriannual de Acao e Investimentos, 1986-1990, FEPASA, Fev. 1986. 14. Plano Diretor de Desenvolvimento dos Transportes do Estado de Sao Paulo, 1986-1990, versao preliminar, IESA, Julho 1986 (8 volumes). 15. Projecoes de Trafego, FEpASA, Mato 1986. 16. Orcamento Economico, FEPASA, Outubro 1985. 17. Contrato Programa PEPASA-Governo, Abril 1986. 18. Normalizacao Contabil, FEPASA, Outubro 1986. 19. Transporte de Passageiros de Longo Percurso, FEPASA, Setembro 1986. 20. Divizionalizacao do Trem Metropolitano, FEPASA/Directa, Dezembro 1985. 21. Administracao e Planejamento de Recursos Humanos, FEPASA, Setembro 1986. 22. Missao da FEPASA, Marco 1985. 23. Programa de Desenvolvimento de Gerentes e da Organizacao, FEPASA, 1985. 24. Relatorio das Atividades do DHD, 1985. 25. A Divida da FEPASA, FEPASA, Fev. 1986. 26. Plano de'Informatica, FEPASA, 1985. 27. Projeto Trem, FEPASA, Marco 1986. 2S. Plano de Modernizaeao do Trem Metropolitano, FEPASA, Novembro 1985. 29. Projeto de Eiectrificacao, FEPASA, Julho 1985. 30. Analise de Viabilidade Economica do Sistema de Telecom. Promon, 1986. 31. Ligacao Ferroviaria Campinas-Santos, FEPASA, 1985. 32. Plano de Vias e Sinalizacao, Santos-Uberaba, FEPASA, Novembro 1985. 33. Plano de Capacitacao, Conceituacao Operacional, FEPASA/ENEFER. Set. 1986. 34. Plano Diretor Ferroviario da Baixada Santista, FEPASA, Setembro 1986. 35. Plano Diretor das Instalacoes de Manutencao, Subsidios, Setembro 1986. 36. Proposta para a Elaboracao de Um Plano de Transportes, FEPASA, Abril 1985. 37. Informacoes de Gestao, FEPASA, Abril 1985. 38. Plano Estrategico, FEPASA, 1985. 39. Proposta de Saneamento Financeiro, FEPASA, Setembro 1986. 40. Fluxos de Transportes - Mercadorias, 1984. 41. Custos Fixos e Variaveis, Diretos e Totais, FEPASA, 1984. 42. Informativo de Indices e Precos, FEPASA, Abril 1985. 43. Plano de Investimentos, Itens a serem cofinanciados, FEPASA, Abril 1987. 44. Plano de Aeoes e Investimentos, Sistema Organizacional e de Monitoracao, FEPASA, Fev. 1987. FEPASA Publications 45. Relatorio Annual, FEPASA, 1983, 1984, 1985, 1986. 46. Anuario Estatistico, FEPASA, 1984. Other Documents 47. Decreto No. 26.772, de 18 de Fevreiro de 1987, sobre a Normalizacao Contabil. 48. Convenio FEPASA-Governo do Estado sobre divida com aval do Estado. 49. Protocolo de Intencoes Governo Federal - Governo do Estado sobre divida com aval da Uniao. 50. Definicoes de Politicas e Linhas de Atuacao do Governo do Estado no Setor de Transportes, Adriano Murgel Branco, Fev. 1987. May 1987 - 162 - CIIART 1 BRAZIL FEPASA RAILWAY REHABILITATION PROJECT Organization of the Ministry of Transport Transrom Nat1y~,1l tt;;n ;t _ Ofke dt Ahe | L CnilS LMinstr6 Stffl S~~~|herIJnAM4Il DNr RS1 __ ~~tce. ~~~~.*sisttryatTrnpar,nspornatont May 19S7 World Bcrnk-offoh fth Proutent UG"1nunllin I Se~~~~~~~~~~~~~cretal a svtoria Jntarel cYlb S~~~~~~~~~90,trlt c4operation I Ssaot to _SpeclolAlhns &t Te6vkgy _ Adrrgnstmt Pbann"]g Ssaetori b _ Ronr lal laftw- Ing& DdG IAdrrnOn0fve Secetotla lo feoro r r| sectetork:n 1r P0ne l } ~~~~~Rood Ttnprt WerIansportJ Rail Ttaesporn L D qxp l | Ssce Mrny of Ttonsport Way 1r987 World 80ank-26210 - 163 - BRAZIL CHART 2 lEPASA RAILWAY REHABILITATION PROJECT Organization of the Sao Paulo State Transport Secretariat SEcRETARY Transportatlon Council __~. _ . Public Ass stanceto Relations Munt cIpIaIltles 1 1 ~~~~~~~~~~~~1 m 8 - ~~Huan | Operatlons Seto |r 8 mj Trans port ftesources| AdmllsarttIon Planning I _ Implemen- Projects Policy Public tatton and and Transpor- Monitoring Planning tation AdminiStraton-1 C O M M I T T E E S |Fneo jPesonel| (Xlar {CI Coimnunicat ions| CDRPORATIONS AUTONOMOUS DEPARTMENTS JOERSAj |FEPASA ROADS DEPT. I AIR TRANSPORT. DEPT. I WATERWAYS DEPT. IL I I DER-SP D DAESP OH Source: Secretariat of Transport, Sao Paulo May 1987 - 164 - ERAZIL CHART 3 fEPASA 4AILWAY RENAEILITATICW PROJECT Orgpolt otlon of fEPASA PRESIOENT AGVISCAAY JNITCANE SENERAL SUIPERINTENDENCY AUQoIT Of RKETING TRMSPORTATION rECHNI CAL NtRCPOL I TAN TRA I N PLANNING fINANCE AMINI STRATION LEGAL AND | _ EPARTiNt N PARTmENT DEPARTW.ST _ PCARTNT S EPATIENT RTA Rt)ENT PATRI1DNIAL GENERAL SUPERINTEN- GENEPAL SUPERINTEN- GENERAL GENERAL SUPERINTEN- |GENERAL SUPERINTEN- GENERAL GENERAL OENCY - TRNSPOAT - DENCY - NAINlENANCE - SUPERINTENDENCY - DENCY - SYSTEMS AND DOENCY - EC004ICS SIJPERINTENGENCY - SUPERINTENDENCY EN6INEERING Of FIAED ASSETS zPEAATJONS ORGANilATICN A|M1 FINAtCES ODNTRACTS LEGAL SERVICES GENERAL GENERAL SUPERINTEN- | ENERAL GENERAL SUPERINTEN- GENERAL GENERAL GENERAL SUPERINTEN- SUPERINTENDENCY - SENCY - ELECtRIC A - SUPERIWTENOENCY - DENCT - PLANNING SUfERINTENDENCY SUPERINTENDENCY - DENCY - ADMINISTRA- TRIASPcAT ! ECH. ENGINEERING | | AI4TENWNCE AND suOGET CONTROL PURCKASE | TICN OF ASSETS GENERAL GENERAL |ENERAL SUPERINTEN- GENERAL SUPERINTENOENCY SUPERI4NTENOENCY DENCT - TECMNICAL- - SUPERINTENDENCY OW9ERCIAL CIVIL ENGINEEIN | ADMIJNISTRATION HUMAN RESOURCES GENERAL SUKRINtEN-1 DENCY - AAINTENANCE ANSI RTXLING STOCK 2ES I SNAL Source: FEPASA May 1987 MAP SECTION IBRD 20356 Caothber,, Soe _o_ ? . lloqui ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Corrr o Porna.boOT qtCli BPi3 RIA.Z I. - - * . SoblFoRTALEZA kc RAZ I ,.L.. Mucuripo J C) U T H, .t ........... )) cAM ER I CA Carajas0,. ...--ERSN CoO Msr;Mcu % g 69uott. / r~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~NATAL o .6ou m ,/ roCu U ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C 0 z,outo J OA6d rt A ,lan t/s BRAZIL $ o PESSOA Oceon RAILROADS Pe"fino ArovR RIFE J.iaze.ro PolmIro Borr.troa FEPASA MACEic - F RFFSA Forrnoso d Bomhm Proprio ... ...EFVM I , -I m. tr O AS bOO s rennrrxrrbr ARAC A J UL ' mra i"ona .s t -a- , -- - International boundaries for re cct,r.*c rr lbs\ -o o i ft Sdof- Fnnis Ctr tno TM bns .0d 0d rb. bw.' a Wn 1oo;u _obb lbs Fr T 0 raw*t 5bb lw SALVADOR bfbbllbF~~*c CAlOObAS ovnr bortr IV. or sub wwsnrib or actrrc, ob $.pbo-.nt,0 BRAS(LIA to Atul An,opIs GOANIA >~ Pros Monie$ Cloros do R, ioor aRoncdo, Pitapola no Goiondiro To Sonia Cru oAroguon o Gov Corumbo p -O clGov Porto Espwron%o I lom Voldonos Ubrb e o Drstgo , GCroonF. St. F6 do Sul Colomb,o Frna * Franco ,..Nv TonLogoos Gogn. Ea Crobngo g) t Pr anorama \ AroFo*0b a Ponio Nowo VITdRIA -o2o - _oroqiora de 20 EPoodes ldos o na do Cu.ona0.0 Apucrn i Coio OtrAnhoso A PARAGUAY Cianoro 0 i rp 5Ap5°. S ,R Goarapuoso p/ 0 r \ Po Un o o OSA6 FRANCISCO Morcin f /r o C oeio Rio do o5 FLORIANAPOLIS + \ Ycru2 ~~~~~Alo I.btub 1b J°° loe °Coxos do Sol + f i UR l~~~~~~~~~~Ro dos S nos t- %woro/ A Cochoeiro PORTO ALEGRE Ontori Coclioora P6RTO ALECORE 0 00 200 300 400 500 L 5 Se.t4o I I I I II _ \ otos KILOMETERS L,.- 'N Igo~~~9 10 200 300 '1 Jag0 00 Rio Gronde MILES (sU RUGUAY 'o so, AO NOVEMBER 198o u . .......... ~ ~ ~ ~ ~ ~ ~ ~ , . C 0~~~~~~~~~~~~~~~~~1 a S -LO'0 t7~~~~~~~~~~~~~~~~~~~~~~~0C ___________.___,_____.________________--___________________--_ IBRD 11571R' ,,, : , , 4T, A' * .*,,.*,l.o BRAZIL SAO PAULO STATE RAILROADS DOUBLE TRACK SINGaL 1RACt . ,N-H IV,s k ELFCiRifiED [tCtR1t 'fI D rI [. . 1 Ubtriosd,00 FEPASA N A S G E ; R A I S . . Met,(s Gouge (I 00 m) Bload Gouge (1.60 rn) ,Polost.no Dual Gauge (1 00,1 60 m RFF SA. I4Ajaorvs3io3sto riMetric Gouge (1.00 m.) \ @ b ICrciI o Biontd Gauge (1.60 m f2,, g~~~~~~~~~~~~~~~~~oorz,g sfio * *., , ,,Z,.. , ,,,{{+,,; a, RA * *, ) A2 Op3;0 Rivers *,, ,,-o;3rnb r 1 862 5XConnde eat/. . State Boundaries ,, * ,it.ver -. - Intenrnational Boauidcares 6^ 0 ~~~Piose rso Be'retos0 S JoG J;4 . F S Jose oe Rio P'et O'ons,, ( .. 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