The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) Modernization and restructuring of the road sector (P155842) EUROPE AND CENTRAL ASIA | Croatia | Transport Global Practice | IBRD/IDA | Investment Project Financing | FY 2017 | Seq No: 5 | ARCHIVED on 20-Sep-2019 | ISR38096 | Implementing Agencies: Ministry of Sea, Transport and Infrastructure (MSTI), Ministry of Finance Key Dates Key Project Dates Bank Approval Date: 28-Apr-2017 Effectiveness Date: 04-Nov-2017 Planned Mid Term Review Date: 21-Oct-2019 Actual Mid-Term Review Date: Original Closing Date: 31-Dec-2021 Revised Closing Date: 31-Dec-2021 pdoTable Project Development Objectives Project Development Objective (from Project Appraisal Document) The objective of the Project is to strengthen the institutional effectiveness, enhance the operational efficiency and increase the debt service capacity of Croatia's road sector. Has the Project Development Objective been changed since Board Approval of the Project Objective? No Components Table Name Component A: Institutional strengthening and Sector Reforms:(Cost $7.09 M) Component B: Operational Restructuring of Road Sector Companies:(Cost $16.23 M) Component C: Support to the Sector debt and financial restructuring:(Cost $795.00 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Moderately Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial Implementation Status and Key Decisions The government is pursuing the implementation of the letter of sector policy, around which the project is designed to support. However, some strategic decisions that are important in terms of implementing the letter of sector policy remain to be made, including introduction of reforms in the road sector companies aimed at reducing operational costs and the overall debt burden. MSTI and HAC have prepared time-based action plans for operational reforms and introduction of a new toll system, which -although delayed- will allow for gradual achievement of targeted efficiency improvements. MSTI with all three companies are continuing to work towards institutional and planning improvements relevant to the totality of the road sector, such as an integrated governance framework and road asset management system. The financial condition of all three road sector companies remains stable following the rescheduling and refinancing of almost 3.1 billion Euro of debt by April 2018 which has provided (for motorways) a modest increase in revenues. The World Bank guarantee is no longer required. MSTI and 9/20/2019 Page 1 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) the companies remain to review investment plans, including efficiency-enhancing investments, so as to update financial models, which will be critical to reconfirm long-term sustainability. Risks Systematic Operations Risk-rating Tool Risk Category Rating at Approval Previous Rating Current Rating Political and Governance Substantial Substantial Substantial Macroeconomic Substantial Substantial Substantial Sector Strategies and Policies Substantial Substantial Substantial Technical Design of Project or Program Substantial Substantial Substantial Institutional Capacity for Implementation and Sustainability Moderate Moderate Moderate Fiduciary Moderate Moderate Moderate Environment and Social Substantial Moderate Moderate Stakeholders Substantial Substantial Substantial Other -- -- -- Overall Substantial Substantial Substantial Results PDO Indicators by Objectives / Outcomes Institutional Effectiveness IN00730276 ►Ability of MSTI to plan road sector investments (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Creation of planning Creation of planning Motorway and road Inexistent sector-wide department under MSTI; department under networks managed Value planning coordination transport strategy MSTI; transport under rolling approved strategy approved investment plans Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Availability of planning organization elements Comments: IN00730279 ►Ability of MSTI to monitor and enforce performance of motorway and road companies using Key Performance Indicators (KPIs) and standardized accounting measures (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Inadequate performance Adoption of corporate Adoption of corporate Integrated monitoring Value monitoring system governance plans governance plans system in place 9/20/2019 Page 2 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) achieved; completed new achieved; completed institutional setup of new institutional setup sector companies; NO of sector companies; service performance NO service agreements in place performance agreements in place Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Availability of KPI monitoring system that allows tracking of performance measures to verify compliance Comments: with targets established in service agreements. Operating Efficiency IN00730277 ►Operating Expense Ratio (Total Operating Expenses / Total Operating Revenue) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for HAC: 0.38 values for 2018 were 2018; values for 2017 HAC+ARZ: <0.27 Value ARZ: 0.31 0.31 (HAC); 0.27 were 0.33 (HAC); 0.28 HC: <0.27 HC: 0.29 (ARZ); 0.30 (HC) (ARZ); 0.29 (HC) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Calculated as ratio of operating expenditures (routine maintenance, tolling, administration and€€ direct Comments: costs plus subcontracts) over operating revenue (toll, fuel tax plus ancillary revenue) IN00730280 ►Operating Expenditures per kilometer of road network (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for HAC: 0.68 values for 2018 were 2018; values for 2017 HAC+ARZ: <0.60 Value ARZ: 1.05 0.68 (HAC); 1.01 were 0.68 (HAC); 1.10 HC: <0.07 HC: 0.08 (ARZ); 0.08 (HC) (ARZ); 0.08 (HC) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Calculated as ratio of operating expenditures (as defined above) over length of network in km Debt Service Capacity IN00730278 ►Debt Service Coverage Ratio (DSCR) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for HAC: 0.15x values for 2018 were HAC: 1.0x 2018; values for 2017 Value ARZ: 0.63x 0.98 (HAC); 0.88 ARZ: 1.0x were 0.24 (HAC); 0.60 HC: 0.55x (ARZ); 0.80 (HC) HC: 1.0x (ARZ); 0.52 (HC) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 This indicator measures the capacity of the sector (road sector agencies-HAC, ARZ and HC) to meet its debt service obligations out of the cash flows generated by the sector. If the indicator is less than 1x [less than 100% if percentage representation is chosen],this means that the sector is unable to cover its debt Comments: service obligations out of its own cash flows. The indicator captures both the revenue and the debt service sides of the financial viability equation. The Indicator is defined as Cash Flow Available for Debt Service (CFADS) over Debt Service (DS) For the purpose of this indicator: 9/20/2019 Page 3 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) - CFADS is defined as total revenue net of opex and capex in the period - DS is defined as interest plus principal payable in the period IN00730281 ►Loan Life Coverage Ratio (LLCR) 10 Year (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for HAC: 0.51x values for 2018 were HAC: 1.0x 2018; values for 2017 Value ARZ: 0.66x 0.88 (HAC); 0.80 ARZ: 1.0x were 0.81 (HAC); 0.73 HC: 0.97x (ARZ); 1.14 (HC) HC: 1.0x (ARZ); 0.83 (HC) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Net Present Value of Cashflows Available for Debt Service/Outstanding Debt for period Comments: This measure is used to estimate the ability of the borrower to repay the outstanding loans. IN00730282 ►Debt to CFADS Ratio (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for HAC: 36.0x values for 2018 were HAC: 10.0x 2018; values for 2017 Value ARZ: 15.2x 14.7 (HAC); 12.2 ARZ: 10.0x were 17.1 (HAC); 12.7 HC: 9.8x (ARZ); 15.2 (HC) HC: 7.3x (ARZ); 8.5 (HC) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 The measure indicates the capacity of road sector companies to meet their financial obligations from their own revenue. Where the ratio is falling, it indicates that the company s capacity to meet its financial Comments: obligations from its own CFADS is strengthening. The indicator is calculated as follows: Debt Outstanding for Period/CFADS Intermediate Results Indicators by Components Component A: Institutional strengthening and Sector Reforms IN00730283 ►Status of implementation of new financing strategy for HAC, ARZ and HC as implemented under the coordination of the National Government [A.1] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Financing strategy Debt restructuring Financing strategy approved; execution of transactions Contract with advisor approved; execution of Value first and additional contemplated in signed first and additional debt debt optimization Financing Strategy are optimization transactions transactions executed Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 IN00730286 ►Operational status of Planning Department established within MSTI [A.2] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Inexistent planning and Department created but Department created Department is fully Value coordination functions has NOT produced but has NOT produced operational within MSTI sector plans sector plans Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Availability of policy elements IN00730288 9/20/2019 Page 4 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) ►Status of implementation of improved and harmonized accounting standards [A.3] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Improved accounting Improved accounting standards included in Non-harmonized Improved accounting Value standards included in draft Roads Act; accounting standards standards applied draft Roads Act amendment is pending in parliament Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Availability of policy elements Component B: Operational Restructuring of Road Sector Companies IN00730284 ►Weighted Average toll revenue per Vehicle-Km travelled [B.4] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for value for 2018 was HAC: 0.59 HAC: >0.67 Value 2018; value for 2017 was 0.64 (HAC); 0.65 ARZ: 0.64 ARZ: >0.67 0.63 (HAC); 0.65 (ARZ) (ARZ) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 30-Jun-2021 Average toll rate (including VAT) per vehicle-kilometer for all vehicle categories, weighted by the Comments: percentage share of each category in the total vehicle-km IN00730287 ►Status of implementation of new tolling revenue enhancement measures [B.4] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target New tolling strategy New automated tolling Existing mixed toll New tolling strategy not defined (to be officially Value system completely system yet defined endorsed); bidding implemented docs not prepared yet Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Availability of policy elements IN00730289 ►Percent Reduction in Operating Cost of Motorways relative to baseline: HAC and ARZ [B.3] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Pending financial data for the target for 2018 was 2018; the target for 2017 not achieved (cost of HAC+ARZ: 823 mn HRK was not achieved (cost of 809 mn HRK, i.e. Value -30% annual 820 mn HRK, i.e. decrease of 1% increase of 1% instead of instead of decrease of decrease of 7%) 15%) Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Operating cost defined as including total amount of HAC-ONC contract plus HAC and ARZ staff and Comments: overhead costs IN00730291 ►Reduction in Operating Cost for State Roads relative to baseline: HC [B.6] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 9/20/2019 Page 5 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) pending financial data for value for 2018 was HC: 515 mn HRK Value HC: 546 mn HRK annual 2018; value for 2017 was 583 mn HRK annual 546 mn HRK Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Operating cost defined as including total amount of routine maintenance contracts plus HC staff and Comments: overhead costs IN00730292 ►Staff per Kilometer of road under operation (motorways) [B.3] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for HAC: 2.7 value for 2018 was Value 2018; value for 2017 was HAC + ARZ: < 2.2 ARZ: 3.2 2.54 2.8 Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Total staff (operator and road manager) per km IN00730293 ►Status of implementation of end-performance road maintenance standards [B.1] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Consultancy awarded Consultancy Standards without end- Service standards and underway but no underway, proposal Value performance incorporated in rolling updates yet produced to under final stage of requirements plan regulations or standards preparation Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Availability of policy elements IN00730294 ►Status of Implementation of Road Asset Management System (RAMS) development and incorporation in planning [B.2] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Scoping TA contract Road sector agencies implementation RAMS inputs concluded; Value and companies do not contract not yet incorporated in rolling implementation contract have integrated RAMS procured plan not yet procured Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Availability of policy elements IN00730295 ►Percent of HC network where county agencies (ZUC) participate in joint procurement committee (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.00 0.00 0.00 100.00 Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Comments: Total road length in respective HC business units over total HC length IN00730296 ►Percentage of TEN-T road network for which road safety audit or inspection as per EU Directive 2008/96 has been carried out [B.7] (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target 9/20/2019 Page 6 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) Value 0.00 10.00 10.00 100.00 Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Total road length with documented completed audit or inspection - information pending Comments: IN00730297 ►Citizen engagement - Maintain full responsiveness rate to comments and grievances from citizens (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 100.00 98.00 100.00 100.00 Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Value for 2018 (measured annually) Comments: IN00730298 ►Gender balancing - Ratio of women in the motorway sector after retrenchment (Number, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 0.19 0.19 0.19 0.25 Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Value for 2018 (measured annually) Comments: Component C: Support to the Sector debt and financial restructuring IN00730285 ►Private Direct Mobilization (Debt Refinancing & Rescheduling with support of IBRD Guarantee) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target over 900 mn EUR of 1.275 bn EUR refinanced 1.275 bn EUR debt refinanced and Value n/a and 1.8 bn EUR refinanced and 1.8 bn over 2 bn EUR rescheduled EUR rescheduled rescheduled for all companies Date 31-Dec-2016 31-Dec-2017 28-Jun-2019 31-Dec-2021 value achieved since 2018 Comments: IN00730290 ►Weighted average maturity of road sector companies' debt (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target pending financial data for Value 3.5 years 7.02 (value for 2018) 7.8 years 2018 Date 31-Dec-2016 31-Jan-2019 28-Jun-2019 31-Dec-2021 Data on Financial Performance 9/20/2019 Page 7 of 8 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P155842 IBRD-87490 Effective USD 23.33 23.33 0.00 16.12 8.88 64% Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P155842 IBRD-87490 Effective 28-Apr-2017 08-May-2017 04-Nov-2017 31-Dec-2021 31-Dec-2021 Cumulative Disbursements Restructuring History There has been no restructuring to date. Related Project(s) P163833-Modernization and Restructuring of the Road Sector 9/20/2019 Page 8 of 8