Information published on 23 April 2019 in the UIC electronic newsletter "UIC eNews" Nr 643.

Czech Republic: European Investment Bank to lend the Czech Republic the first three billion for railway modernisation

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The Ministry of Finance has concluded a loan agreement with the European Investment Bank (EIB) for up to CZK three billion to finance the development of the railway infrastructure. This is the first part of the total loan facility of CZK 11.5 billion dedicated to co-finance the modernisation of selected railway corridor sections as approved by EIB and approved by the government last autumn. The project execution is provided by the Správa železniční dopravní cesty (SŽDC) which also concludes an implementation agreement with EIB.

“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 will 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,” added 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. The total estimated cost of these investment projects amounts 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 three 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 three billion to the first two constructions of key corridor sections”, said Mr Jiří Svoboda, Director General of SŽDC.

(Source: SZDC)