The European Investment Bank Will Lend the Czech Republic the First 3 Billion for Railway Modernisation

“The terms and conditions of the contract allow the Ministry of Finance to flexibly use the credit facilities based on the implemented eligible project costs and to choose between fixed or variable rates for maturities of up to 20 years according to financial market conditions. Until then, no interest expenses arise from the contract. And if the terms of the loan prove to be disadvantageous compared to issuing a state bond with the same parameters, they may not be accepted,” said Mr. Petr Pavelek, Director of the Debt and Financial Assets Management Department, Ministry of Finance.

“We are glad that we have managed to establish cooperation with the Czech government and sign a credit agreement for such an important operation. The modernised lines will be for use to as many as 20 million passengers per year. A significant improvement should concern not only passenger comfort but also punctuality of trains. We believe that we will pick up the threads of this project in other sectors of the Czech economy,” adds Mr. Vazil Hudák, Vice President of EIB.

Under the terms of the project implementation agreement, SŽDC commits to modernising eight sections of the Czech Rail Transit Corridors I and II. Reconstruction is thus planned for sections which were modernised years ago, between Prague and Brno as well as the line between Přerov – Ostrava – Petrovice u Karviné – state border with Poland. Total estimated cost of these investment projects amount approximately to CZK 24 billion.

From this amount, CZK 11.5 billion can be financed from the agreed credit facility which will be used gradually. The first step was to conclude a loan agreement for CZK 3 billion, the negotiation of further contracts will be based on the use of these funds.

"Thanks to the high level of readiness of construction, we conclude the first partial settlement of the pre-allocated amount of CZK 3 billion to the first two constructions of key corridor sections”, says Mr. Jiří Svoboda, Director General of SŽDC.

By a loan agreement of CZK 3 billion, EIB will assure financing two line sections: Velim – Poříčany and Dětmarovice – Petrovice u Karviné – the state border with Poland. That is approximately half of the investment costs. The rest is funded from national sources with a contribution from the Connecting Europe Facility (CEF) programme. SŽDC received a contribution of CZK 1 billion based on a successful application submitted within the CEF Blending Call. One of the conditions for obtaining the grant was precisely to negotiate and conclude a credit agreement between the Ministry of Finance and EIB.

The basic objective of both constructions is to prevent speed reduction, to ensure interoperability parameters, to bring all infrastructure components into the standard state in order to increase traffic safety and flow, reduce emissions and noise. In total, both reconstructions will concern approximately 25 km of lines. The construction includes also a modernisation of platforms at stations and stops and providing their barrier-free access. Furthermore, safety and signalling equipment is to be modernised; the reconstruction will also include overhead lines, bridges and culverts.

In both cases, the project plan was approved last June; in the case of the Velim – Poříčany section, the building permit documentation is being finalised in order to submit the building permit application soon, call for tenders this autumn and launch construction works in short order. In case of the second project, the building permit documentation is expected to be completed this autumn, so that construction contractors can be invited to tender at the end of the year and the construction itself can start early next year.

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