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: 7 | ARCHIVED on 05-May-2020 | ISR41408 | 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: 21-Oct-2019 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 €Moderately Satisfactory €Moderately Unsatisfactory 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. The MSTI has adopted the tolling strategy and is seeking financing options for the new system; it is also overseeing technical assistance that prepares the detailed content of reform in all 3 companies and in planning functions. A concerted effort in cooperation with other involved Ministries is needed in order to ensure that reforms in accounting and maintenance standards are incorporated in legislation during 2020 and 2021 and to begin implementation of road asset management and e-tolling systems. Companies have generally made steps towards improving their efficiency and governance but need to reconfirm long-term financial sustainability and debt-service capacity, as the improvements already achieved (through debt reprofiling and increased motorway revenues) now need to be backed up by additional support due to the COVID19-related impact. 5/5/2020 Page 1 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) 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 €Moderate Technical Design of Project or Program €Substantial €Substantial €Moderate Institutional Capacity for Implementation and €Moderate €Moderate €Moderate Sustainability Fiduciary €Moderate €Moderate €Moderate Environment and Social €Substantial €Moderate €Moderate Stakeholders €Substantial €Substantial €Substantial Other -- -- €Substantial Overall €Substantial €Substantial €Substantial Results PDO Indicators by Objectives / Outcomes Institutional Effectiveness IN00831835 ►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 25-Oct-2019 31-Jan-2020 31-Dec-2021 IN00831858 ►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 Adoption of corporate Adoption of corporate governance plans governance plans achieved; completed new Inadequate performance achieved; completed Integrated monitoring Value institutional setup of monitoring system new institutional setup system in place sector companies; NO of sector companies; service performance NO service agreements in place 5/5/2020 Page 2 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) performance agreements in place Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 KPI monitoring system established that allows tracking of performance measures to verify compliance with Comments: targets established in service agreements. Operating Efficiency IN00831856 ►Operating Expense Ratio (Total Operating Expenses / Total Operating Revenue) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target HAC: 0.38 values for 2018 were values for 2019 were HAC+ARZ: <0.27 Value ARZ: 0.31 0.31 (HAC); 0.27 (ARZ); 0.29 (HAC); 0.25 HC: <0.27 HC: 0.29 0.30 (HC) (ARZ); 0.35 (HC) Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 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) IN00831859 ►Operating Expenditures per kilometer of road network (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target HAC: 0.68 values for 2018 were values for 2019 were HAC+ARZ: <0.60 Value ARZ: 1.05 0.68 (HAC); 1.01 (ARZ); 0.65 (HAC); 0.98 HC: <0.07 HC: 0.08 0.08 (HC) (ARZ); 0.09 (HC) Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Comments: Calculated as ratio of operating expenditures (as defined above) over length of network in km Debt Service Capacity IN00831857 ►Debt Service Coverage Ratio (DSCR) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target HAC: 0.15x values for 2018 were values for 2019 were HAC: 1.0x Value ARZ: 0.63x 0.98 (HAC); 0.88 (ARZ); 1.06 (HAC); 0.92 ARZ: 1.0x HC: 0.55x 0.80 (HC) (ARZ); 0.98 (HC) HC: 1.0x Date 31-Dec-2016 28-Jun-2019 31-Jan-2020 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 service obligations out of its own cash flows. Comments: 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: - 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 IN00831860 5/5/2020 Page 3 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) ►Loan Life Coverage Ratio (LLCR) 10 Year (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target HAC: 0.51x values for 2018 were values for 2019 were HAC: 1.0x Value ARZ: 0.66x 0.88 (HAC); 0.80 (ARZ); 1.01 (HAC); 0.82 ARZ: 1.0x HC: 0.97x 1.14 (HC) (ARZ); 0.85 (HC) HC: 1.0x Date 31-Dec-2016 28-Jun-2019 31-Jan-2020 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. IN00831861 ►Debt to CFADS Ratio (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target HAC: 36.0x values for 2018 were values for 2019 were HAC: 10.0x Value ARZ: 15.2x 14.7 (HAC); 12.2 (ARZ); 14.0 (HAC); 11.1 ARZ: 10.0x HC: 9.8x 15.2 (HC) (ARZ); 17.9 (HC) HC: 7.3x Date 31-Dec-2016 28-Jun-2019 31-Jan-2020 31-Dec-2021 The indicator measures 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 IN00831862 ►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 debt optimization contemplated in signed first and additional debt transactions at three Financing Strategy are optimization transactions stages through 2019 executed Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 IN00831865 ►Operational status of Planning Department established within MSTI [A.2] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Department created Inexistent planning and Department created but but has NOT produced Department is fully Value coordination functions has NOT produced sector plans; operational within MSTI sector plans reorganization underway Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 IN00831867 ►Status of implementation of improved and harmonized accounting standards [A.3] (Text, Custom) 5/5/2020 Page 4 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) Baseline Actual (Previous) Actual (Current) End Target Improved accounting Improved accounting standards included in standards included in Non-harmonized Improved accounting Value draft Roads Act; draft Roads Act; accounting standards standards applied amendment is pending in amendment is pending parliament in parliament Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Component B: Operational Restructuring of Road Sector Companies IN00831863 ►Weighted Average toll revenue per Vehicle-Km travelled [B.4] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target value for 2019 was HAC: 0.59 value for 2018 was 0.64 HAC: >0.67 Value 0.65 (HAC); 0.65 ARZ: 0.64 (HAC); 0.65 (ARZ) ARZ: >0.67 (ARZ) Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 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 IN00831866 ►Status of implementation of new tolling revenue enhancement measures [B.4] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target New tolling strategy New tolling strategy endorsed by MSTI; New automated tolling Existing mixed toll endorsed by MSTI; Value design phase started system completely system bidding docs not but bidding docs not implemented prepared yet yet prepared Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 IN00831868 ►Percent Reduction in Operating Cost of Motorways relative to baseline: HAC and ARZ [B.3] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target the target for 2018 was in 2019, HAC+ARZ not achieved (cost of 809 total opex amounted to HAC+ARZ: 823 mn HRK Value mn HRK, i.e. decrease of 780 mn HRK, i.e. a -30% annual 1% instead of decrease decrease of 4% from of 15%) baseline Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Operating cost defined as sum of HAC-ONC contract plus HAC and ARZ staff and overhead costs Comments: IN00831870 ►Reduction in Operating Cost for State Roads relative to baseline: HC [B.6] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target in 2019, HC opex was value for 2018 was 583 659 mn HRK, HC: 515 mn HRK Value HC: 546 mn HRK annual mn HRK increased by 21% annual compared to baseline 5/5/2020 Page 5 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Operating cost defined as sum of routine maintenance contracts plus HC staff and overhead costs Comments: IN00831871 ►Staff per Kilometer of road under operation (motorways) [B.3] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target HAC: 2.7 value for 2019 was Value value for 2018 was 2.54 HAC + ARZ: < 2.2 ARZ: 3.2 2.49 Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Comments: Total staff (operator and road manager) per km IN00831872 ►Status of implementation of end-performance road maintenance standards [B.1] (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Standards without end- Consultancy underway, Consultancy Service standards Value performance proposal under final completed; update of incorporated in rolling requirements stage of preparation rulebooks pending plan Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 IN00831873 ►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 Road sector agencies RAMS implementation RAMS inputs implementation contract Value and companies do not contract not yet incorporated in rolling not yet procured have integrated RAMS procured plan Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 IN00831874 ►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 25-Oct-2019 31-Jan-2020 31-Dec-2021 Comments: Total road length in respective HC business units over total HC length IN00831875 ►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 Value 0.00 10.00 17.60 100.00 Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Total road length with documented completed audit or inspection Comments: IN00831876 5/5/2020 Page 6 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) ►Citizen engagement - Maintain full responsiveness rate to comments and grievances from citizens (Percentage, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 100.00 100.00 100.00 100.00 Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Value for 2019 (measured annually). 8,148 grievances were received from road users during 2019, related to toll charges. 100% were resolved. Additional information on citizen engagement: The project- funded communica tion consultancy has provided continuous support in the preparation of media announcements and reactive (crisis) communication, as well as in analysis of survey results, media analyses, planning and conceptualizing of promotional campaigns for 2020 (targeted at various user Comments: categories, behaviors, opinion on planned innovations) and support related to COVID19 external communication. Surveys show a significant transformation in the quality of communication between the company and the external public. In addition, the management of information at higher levels of corporate governance has been modernized and awareness about the importance of quality communication management has been improved. IN00831877 ►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 0.20 0.25 Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 Value for 2019 (measured annually) Comments: Component C: Support to the Sector debt and financial restructuring IN00831864 ►Private Direct Mobilization (Debt Refinancing & Rescheduling with support of IBRD Guarantee) (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target 1.675 bn EUR over 900 mn EUR of 1.275 bn EUR refinanced refinanced and 1.8 bn debt refinanced and Value n/a and 1.8 bn EUR EUR rescheduled over 2 bn EUR rescheduled through 2019 (three rescheduled for all stages) companies Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 values for 2019 Comments: IN00831869 ►Weighted average maturity of road sector companies' debt (Text, Custom) Baseline Actual (Previous) Actual (Current) End Target Value 3.5 years 7.02 (value for 2018) 6.4 (value for 2019) 7.8 years Date 31-Dec-2016 25-Oct-2019 31-Jan-2020 31-Dec-2021 5/5/2020 Page 7 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) Data on Financial Performance 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 17.88 7.19 71% 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 5/5/2020 Page 8 of 9 The World Bank Implementation Status & Results Report Modernization and restructuring of the road sector (P155842) 5/5/2020 Page 9 of 9