World Bank Helps Improve Sustainability and Affordability of the Croatian Railway Sector

April 30, 2015

WASHINGTON, April 30, 2015 — The World Bank’s Board of Directors today approved three loans totaling EUR163.5 million (US$183.4 million) to three independent railway companies – HZ Infrastructure, HZ Cargo, and HZ Passenger Transport. The loans for the Sustainable Croatian Railways in Europe Project, with the guarantee of the Republic of Croatia, are aimed at improving the operational efficiency and the financial sustainability of the public railway sector in Croatia.

The Croatian railway sector went through a significant transformation over the past decade to meet the European Union (EU) accession criteria, harmonizing its legal and institutional framework with that of the EU. The Croatian railway sector now comprises three independent public companies – HZ Infrastructure, HZ Cargo, and HZ Passenger Transport – and the Government plans to make each company more customer-oriented and competitive. These transformations also aimed to reduce the high budget support provided to the daily operations of the railways.

While significant, these reforms are not enough for the Croatian public railways to survive and grow in the large and competitive EU transport market. The sector’s productivity is still behind its peers, and additional efficiency measures are needed to make it sustainable and competitive.

To help with further reforms of the Croatian railway sector, the project will assist the three railway companies to improve their operational efficiency and financial situation in order to deliver better services in a financially sustainable way. The project complements major investments in infrastructure on international corridors funded by the EU by focusing on the overall sector restructuring and the sustainability of the public companies, which is in line with the Government’s EU agenda. The Project will also assist the Ministry of Maritime Affairs, Transport, and Infrastructure to coordinate and manage the railway sector reform.

“We are very pleased to support the Croatian Government in the development of a financially sustainable railway sector that is able to compete in the demanding European Union market, and help Croatia to increase its role as a transport gateway to Central and Southern Europe. The project will also allow for a more efficient use by railway operators of EU-funded infrastructure, preserve public resources for investment, and diminish the need for operations subsidies,” said Mamta Murthi, World Bank Regional Director for Central Europe and the Baltic Countries.

“Furthermore, the project will help the companies implement their restructuring plans by providing financing for investments in critical bottlenecks in railway infrastructure and safety measures, the modernization of IT systems, rehabilitation of the rolling stock fleet, and finalization of assets separation in the railway sector. In addition, it will support affected workers by providing financing for severance packages, training, and requalification opportunities,” concluded Murthi.

Three Euro-denominated variable spread loans have been approved to HZ Infrastructure, HZ Cargo, and HZ Passenger Transport. The EUR 41.5 million loan to HZ Cargo has a final maturity of 20 years, including a grace period of five years. The loan to HZ Infrastructure in the amount of EUR 79 million has a final maturity of 10 years, including a three-year grace period, while the EUR 43 million loan to HZ Passenger Transport has a final maturity of 18 years, including a grace period of three years.

Since joining the World Bank in 1993, Croatia has benefited from financial and technical assistance, policy advice, and analytical services provided by the global development institution. To date, the World Bank has supported 53 operations amounting to around US$3.5 billion, and approved 53 grants with a total value of US$70 million.

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