Metrorex: next stop network expansion

With an action plan requiring EUR 8 billion of investment over the coming years, the first results of the subway network expansion should arrive in 2015. Gheorghe Udriste, the Metrorex GM, told BR the first new subway line, Raul Doamnei-Eroilor, is expected to be fully operational in about four years, as works will start this spring.

Dana Verdes

What is the status of the works on line 5, Drumul Taberei-Pantelimon?

Currently, we have the resources to finance works on the section Raul Doamnei-Eroilor – the first phase of line 5, Drumul Taberei-Pantelimon, which will be 6 kilometers long and have 10 stations. We have already organized the bid for the construction works but it was stopped because of complaints from some companies that participated in the auction. For this first part of line 5 the wining companies in the auction are Astaldi-FCC-Delta-AB Construct. Of this line a small segment will go to the Bancusi neighborhood where we will build a depot. For this part of the line Max BOEGL Romania was declared the winner. Aktor is the company that challenged the bid. The Raul Doamnei-Eroilor section of line 5 will probably be ready in about four years. Construction will begin this spring.

What other investment plans are there?

For metro line 6, which will connect the subway network with Otopeni Airport, the procedures have been started to select the technical consultant. We already have a shortlist of interested firms. We estimate that the tender for the execution works will start towards the middle of next year. This line will be 16 kilometers long with 19 stations.

Another important project that we have proposed is a new metro line on the route Bragadiru-Rahova-Piata Unirii-Obor-Colentina-Voluntari through a public-private partnership. The line will be 21 kilometers long with 31 stations.

What are Metrorex’s financing sources for these investments?

Since last year, the Finance Ministry and Transport Ministry have arranged a loan of EUR 395 million through the European Investment Bank (EIB). Under the agreement with the EIB, the Romanian state has to come up with another EUR 395 million for the first phase of metro line 5, Raul Doamnei-Eroilor. The terms of the credit are 3.5 percent interest per year, with a repayment period of 15 years and a grace period of 7 years.

Also, we have a credit of 41 billion yen (approximately EUR 320 million) to partly finance the works on line 6, which links Piata Victoriei to Otopeni Airport. The government also pledged to find funding sources to co-finance this project. To further reduce the cost, we changed the starting point. While the initial terminus was Piata Victoriei, we think that another solution would be to start it from 1 Mai station, which would reduce the project costs by EUR 200 million to approximately EUR 850 million. The terms of this loan, through the Japan International Cooperation Agency are 1.5 percent interest per year, a repayment period of 25 years and grace period of 7 years. The cost per one kilometer of functional metro track amounts to EUR 50-60 million.

Are you searching for other financing sources and are you concerned that political changes could block these projects?

I’m afraid that a political change in the governing process could affect Metrorex’s development projects. Regarding financing, I can say that the Transport Ministry has initiated a new memorandum project for the approval of an additional credit line from the EIB to finance part of the construction of line 5 from Universitate to Pantelimon, worth approximately EUR 465 million. The state would have to come up with the same sum. We think that the commitment will be initiated this year. Also, we have proposed and approved a total budget of RON 233 million for this year. A third of this sum comes from the budget and the remaining RON 160 million from foreign loans and the local component.

We also have money to purchase 37 new trains, 16 of which will be used to replace some old stock. The acquisition should take place in June this year. The remaining 21 trains will be procured for the use of line 5.

How did Metrorex finish last year?

Metrorex’s activity improved over last year as the number of passengers grew by about 8 million people compared to 2009’s results. Metrorex handles about 600,000 passengers per weekday and has a capacity of around one billion passengers. We cannot talk in terms of profit. Currently, our activity is about 60 percent subsidized by the state budget, while the rest is covered by ticket sales and other activities such as renting commercial or advertising space on the subway. Under the government’s agreement with the International Monetary Fund (IMF) we will have to reduce the subsidies, meaning an increase in ticket prices. Currently, we are analyzing such an increase.

Let’s not forget about the unpaid debts of Metrorex. The company has debts of RON 200 million to Alstom for maintenance expenses accrued from 2008 to 2010. Here we are faced with a problem as the maintenance contract stipulates that these operating expenses be paid through government ordinance from the state budget. But the payments were not made over these three years and now they have to be covered from Metrorex’s revenues and state subsidies. Currently, we are in the process of renegotiating the contract with Alstom which should be done by late March.

What is the status of the investment projects started last year?

Metrorex had available a total budget of RON 400 million last year which was 99 percent spent. About 30 percent of this budget (RON 77 million) came from budgetary allocations, and the rest from the state and from a loan taken out from the EIB.

The money was used to finance further construction work at line 4 stations 1 Mai and Parc Bazilescu – which will continue this year – upgrading the existing energy facilities in the subway. Also, last year’s budget funded facility projects, meaning the installation of escalators – a project which has been completed – and installation of elevators that will continue this year. And we contracted the technical and legal consultancy services for metro line 5, Drumul Taberei-Universitate.

The collective work contract expires next month. Do you anticipate problems from the Metrorex union?

We are in the process of negotiating a new collective work contract for March 2011-March 2012. Unfortunately, this year’s budget does not include salary increases. Moreover, so far we have had 3,000 applications for new jobs at Metrorex.

dana.verdes@business-review.ro

Investment plans

New lines

M4 – Gara de Nord – Gara Progresu EUR 950 million

M5 – Drumul Taberei – Pantelimon EUR 1.7 billion

M6 – 1 Mai – Otopeni

EUR 850 million

M7 – Bragadiru – Voluntari

EUR 1.9 billion

Network extensions

Pacii – Linia de Centura Vest

EUR 250 million