Opportunities for Investment and Participation in Development Plans of Railways of the Islamic Republic of Iran

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Opportunities for Investment

and Participation in Development Plans of Railways of the Islamic Republic of Iran

The Ministry of Road & Urban Development

The Railways of the Islamic Republic of Iran

Investment and Transportation Economy Bureau

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Javadzadeh, Farshad Kharazi, Dariush Azarnoush, Miss Hajar Akhavan Sales ) First edition:September 2015

Translation:International Affairs Bureau (Mr. Seyed Ebrahim Fazli Zenooz)

Published by: Public Relations Bureau ( Mr. Sadegh Sakari, Miss. Maryam Mousavi Baladeh) Design & Graphic: Miss. Mojdegan Vaziri

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Preamble...

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Statistics of current status of RAI in 2014 ...

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Freight transportation forecast (with consignment note), railway subsection and other alternatives till 2021 ...

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Passenger transportation forecast, railway subsection and other alternatives till 2021

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infrastructure projects to increase the capacity of the network ...

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Needed fleet for realization of 2021 objectives ...

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The incentives and support packages of investment opportunities ...

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16 category for investment opportunities ...

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• Infrastructure investment projects ...

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• Fleet investment projects ...

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Map of infrastructure projects till 2021 ...

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Preamble

Based on the Iranian Perspective Document and till 2025 the share of the intercity rail transportation must grow up from 4% to 18% in passenger and from 10%

to 30% in freight transportation in the entire transpor- tation of the country; to achieve the objectives of this document, it is necessary to pay more attention to par- ticipation and attraction of the private sector invest- ment in RAI’s infrastructure and fleet projects.

The investment areas in RAI are quite diverse and nu-

merous due to broadness of the industry. due to high

volume of investments in the railway projects, in par-

ticular infrastructure and fleet, first it is necessary for

RAI to present the incentives and support packages

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upon introduction of investment opportunities in the industry, and in line with feasibility of the project to proceed with attraction of investments if necessary to pave the way for growth and development of this in- dustry.

While offering the development horizons, this book

introduces the investment opportunities in two fields

of infrastructure and fleet, as well as RAI’s support

packages for participation of the private sector to ex-

ecute the said projects.

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Statistics of current status of RAI in 2014

Existing and Future Plans

Fleet

Freight and passenger transportation

Index Unit Qty.

Total length of the existing lines Km 13241

Total length of the main lines Km 10420

Length of the by lines Km 2821

Length of the electrified lines Km 196

Length of the under construction lines Km 8437

Length of lines under double-tracked Km 450

Index Unit Qty.

Total number of available locos Set 869

Total number of available freight cars Set 22715

Total number of passenger cars Set 2025

Others Set 332

Index unit Qty.

Total freight payload Thousand ton 34924

Total tonne-kilometer Million ton-km 24461

Total number of carried passengers Thousand persons 24304 Total passenger-kilometer Million pass.-km 16269

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Freight transportation forecast (with consignment note), railway subsection and other alternatives till 2021

Passenger transportation forecast, railway subsection and other alternatives till 2021

Freight transportation forecast (with consignment note), railway subsection and other alternatives till 2021

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Passenger transportation forecast, railway subsection and other alternatives till 2021

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24.4

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No. Project title Operation volume (km)

Needed sources (Million Euro*)

1 Double-tracking 3069 2033

2 Tracking 4613 196

3 Electrification 2804 3191

4 Improvement of lines 5115

3346

5 Renovation and rebuilding of lines 3073

6 Construction and repairing the route 158 7 Procurement and installation of switches with

concrete sleeper 1050

8 Increasing the axle-load from 20 to 25 tons 10453

Total 8766

Table of infrastructure projects to increase the capacity of the existing lines

* Exchange Rate: 1 EU = 40,000 IR Rials

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Table of the needed fleet for realization of 2021 objectives

Investor Type of fleet Qty. Needed sources (Million Euro*)

Total

(Million Euro*) Share Private

sector

Freight loco 618 1700

5007 56%

Freight car 28500 2138

Passenger car 1558 1169

Railway

Shunting loco 230 374

3913 44%

Passenger loco 186 512

High speed train 621 1444

Commuter train 650 1511

Heavy rescue org. 15 42

Light rescue org. 20 30

Total 32398 8920 8920 100%

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The incentives and support packages for investment

opportunities

1-Fixing access charge for the new freight cars

Railway access charge for the

4-axled and 6-axled cars up to four

4 and 6 million net ton-km hauled

during a period of max. 42 months

(whichever occurs sooner) since

the beginning of the operation will

not charged.

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2- Fuel consumption saving rev- enue share

Total capital spent the new investment projects of the private sector in procur- ing freight/passenger fleets , locomo- tives and infrastructure will be refund up to the main investment ceiling in the favor of the contractual investors

The total saving amount of income from transportation of each ton-km of freight is 35 cc of gas oil and is 20 cc of gas oil for transportation of each passenger-km.

3- Support packages for procur- ing coaches

to support investments related to pro- curement of class 1 compartment coach- es, RAI shall guarantee the revenue of 1200 km-day running of 90% of the purchased cars for a period of 10 years after their entrance and operation on the condition of their availability and paying 50% of the fuel saving income according to Iranian law in return for each person- km till 2023, for the investors max. equal to the amount of investment.

4- Possibility of partnership up to 30% of total investment cost

budget of the technical and credit assis- tance divided in needed years, through opening of LC to the investors of the

private sector as in the form of establishing a company and concluding PPP contracts up to 30% of the foreseen cost for construction.

5- Paying the access charge of the existing lines in double-tracking projects

investors thru execution and

development of the new line

construction process, based

on an approved and agreed fi-

nancial model should received

access charge for existing and

new lines.

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and period of the access charge payment to the investor shall be calculated and guaranteed subject to the amount of in- vestment, payback period, and internal rate of return (IRR).

6- Paying the facilities out of the managed funds

There is a possibility to pay equal to 75%

of total investment amount for procur- ing rolling stock, machinery, equipment for the railway workshops to the private sector investors through conclusion of agency agreements and managed funds deposited in the corresponding banks (by submission of an accepted technical, fi- nancial and economic feasibility study)..

The preferential interest rate shall be fixed from 8% to 16% according to the type of investment in the passenger and freight sections.

7- Paying the facilities out of the National Develop- ment Fund resources

The corresponding banks can

pay equal to 75% of the to-

tal investments for procur-

ing rolling stock, machinery,

equipment for the railway

workshops to the private sec-

tor investors (by submission of

an accepted technical, finan-

cial and economic feasibility

study) as the foreign exchange

facilities. Based on its legal

powers, RAI can guarantee

maximum exchange rate fluc-

tuations.

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No. Title

1 Infrastructure of stations, welfare facilities for passengers

2 Electrification of exiting network

3 Construction of high speed railways

4 Construction of new lines and double-tracking

5 Development of by lines

6 Development of signaling and safety systems 7 Track construction maintenance and repair equipment

8 Development of telecommunication systems

9 Freight and passenger transportation fleet

10 Locomotive fleet

11 Fleet repair and maintenance workshops

12 Upgrading railway operating systems

13 Development of IT systems

14 Development of commuter trains

15 Construction of multimodal transportation terminals

16 Construction of training, managing infrastructures, passive, sports and cultural welfare infrastructures

16 category for investment opportunities

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Infrastructure

investment projects

in railways of Iran

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1- Construction of new line

2- Double tracking

3- Electrification

4- Multi modal Terminals and Dry Ports

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Objectives

New Line

Double-tracking

and Electrification projects

•Increased running speed of freight and passenger trains.

•Removal of capacity bottlenecks on the entire network.

•Increased safety and smooth mobility.

•Meeting the demands for freight and passenger transportation by the end of 2025.

•Connection of freight & passenger hubs to the throughout rail- ways network.

•Completion and development of freight transit routs in the exist-

ing network.

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1-New Line

Introduction of project

Title Isfahan – Ahvaz

Type and volume New line 545 km

Location

Province: Isfahan – Khuzestan – chaharmahal va Bakhtiyari

Venue of General Dept.: Isfahan - Jonub Main cities on the route: Mobarakeh-Borujen- Lordegan- Ize – Ram hormoz

Forecast of direct outcomes

Capable of freight transportation, 45 million tons

Capable of passenger transportation, 2 million passengers

Economic assumptions

Total investment 2075 Million Euro*

Equity of investor Min. a quarter of total investment amount Expected Payback

period: 20 to 30 years

Min. IRR 20% to 25%

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Title Rasht – Astara

Type and volume

164 km

Location

Province: Gilan

Venue of General Dept.: ـــ Main cities on the route: Talesh Forecast of direct

outcomes

Capable of freight transportation, 2.7 million tons Capable of passenger transportation, 2 million passengers

Economic assumptions

Total investment 350 Million Euro*

Capital share of investor Min. a quarter of total investment amount Expected Payback

period: 20 to 30 years

Min. IRR 20% to 25%

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2- Double-tracking

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Introduction of project

Title Ghazvin – Zanjan

Type and volume  Double-tracking 171 Km Location

• Province: Ghazvin – Zanjan

• Venue of General Dept.: Shomal-egharb

• Main cities on the route: Ghazvin – Zanjan Forecast of direct

outcomes

Capable of freight transportation, 6.4 million tons Capable of passenger transportation, 22 pairs of trains

Economic assumptions Total investment 125 Million Euro*

Equity of investor Min. a quarter of total investment amount Construction period 1 to 2 years

Operation period 5 to 8 years

Min. IRR 25% to 30%

Title Chadormalou - Ardakan

Type and volume  Double-tracking (around 201 km) Location • Province: Yazd

• Venue of General Dept.: Yazd

• Main cities on the route: Ardakan Forecast of direct outcomes

Capable of freight transportation (considering existing capacity), 19 million tons

Capable of passenger transportation, 3 pairs of trains

Equity of investor Min. a quarter of total investment amount Construction period 3 years

Operation period 10 years

Min. IRR 25% to 30%

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Introduction of projec Type and volume  Double-tracking (around 254 km) Location

• Province: Isfahan - Yazd

• Venue of General Dept.: Isfahan - Yazd

• Main cities on the route: Meybod Forecast of direct outcomes Capable of freight transportation, 5 million tons

Capable of passenger transportation, 14 pairs of trains

Economic assumptions Total investment 142.5 Million Euro*

Min. IRR 25% to 30%

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Introduction of project Title Badroud – Mohammadieh Type and volume  Double-tracking (around 145 km) Location • Province: Isfahan - Qom

• Venue of General Dept.: Isfahan - Qom

• Main cities on the route: Kashan Forecast of direct

outcomes

Capable of freight transportation, 5.62 million tons Capable of passenger transportation, 19.4 pairs of trains

Min. IRR 25% to 30%

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Introduction of project Title Mohammadieh – Samangan Type and volume  Double-tracking (around 157 km)

Location

• Province: Qom - Markazi

• Venue of General Dept.: Qom - Arak

• Main cities on the route: Arak Forecast of direct

outcomes

Capable of freight transportation, 7.76 million tons Capable of passenger transportation, 11.2 pairs of trains

Economic assumptions

Total investment 120 Million Euro*

Min. IRR 25% to 30%

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Introduction of project Title Samangan – Doroud Type and volume  Double-tracking (around 130 km)

Location

• Province: Markazi - Lorestan

• Venue of General Dept.: Arak - Lorestan

• Main cities on the route: Azna – Shazand Forecast of direct

outcomes

Capable of freight transportation, 7.46 million tons Capable of passenger transportation, 11.2 pairs of trains

Economic assumptions Total investment 92.5 Million Euro*

Min. IRR 25% to 30%

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Type and volume  Double-tracking (around 145 km) Location • Province: Yazd

• Venue of General Dept.: Shargh - Yazd

• Main cities on the route: ـــ Forecast of direct

outcomes

Capable of freight transportation, 15 million tons Capable of passenger transportation, 4 pairs of trains

Min. IRR 25% to 30%

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Introduction of project Title Jandagh– Tabas – Torbat-eHeydarieh Type and volume  Double-tracking (around 542 km)

Location

• Province: Yazd –khorasan-e jonubi– Khorassan Razavi

• Venue of General Dept: Shargh - Khorassan

• Main cities on the route: Tabas – Torbat-eHeydarieh Forecast of direct

outcomes

Capable of freight transportation, 10.4 million tons Capable of passenger transportation, 4 pairs of trains

Equity of investor Min. a quarter of total investment amount Construction period 3 to 4 years

Min. IRR 25% to 30%

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3- Electrification

Introduction of project Title Hormozgan route (Sirjan – Bafq – Bandar Abbas) Type and volume  Electrification (around 613 km)

Location

• Province: Hormozgan

• Venue of General Dept.: Yazd - Hormozgan

• Main cities on the route: Sirjan – Bafq – Bandar Abbas

Forecast of direct outcomes

Capable of freight transportation, 25 million tons Capable of passenger transportation, 4 pairs oftrains

Operation period 7 to 10years

Min. IRR 25% to 30%

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Proposed model of participationand Support packages for

New Line, Double-tracking and Electrification projects

Proposed model of participation

 BOT (Build, Operate, Transfer)  BLT (Build, Lease, Transfer) Support packages

Possibility of RAI›s participation up to 30% in investment as ex gratia

Type and rate of supports are determined as per the agreed financial model Introduction to the National Development Fund

Contribution through fuel saving revenue * Guaranteed minimum income payment

Paying the access charge for the existing and new lines Possibility of issuing guarantees for the corresponding bank

Possibility of issuing guarantees for the Securities and Exchange Organization Guarantee the exchange rate fluctuations, above 10% annually

* : According to Iranian budget law

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4- Multi modal Terminals and Dry Ports investment projects in railways of Iran

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Title Aprin dry Port

Type and volume •Construction a dry port (Total area 400 hectares)

•First phase, 35 hectares

•Second phase , 165 hectares

Objectives •development of rail transport oriented container transport

•Construction a central dry port in railway net work Predicted capacity for the first phase 400000 TEU

Proposed model of participation  BOT (Build, Operate, Transfer)

Economic assumptions

Total investment (35 hectares) 42 Million Euro*

Capital share of investor Min. a quarter of total investment amount

Construction period 3 years

Operation period 20 to 25 years

Min. IRR 15% to 17%

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Type and volume

•Construction a Multi modal terminal

•(total area 1200 hectares)

•First phase 50 hectares

Objectives

•Increase in transit transportation

•Construction Discharge terminal, loading, storage and marketing

•Increasing cross-border transactions in the export and import of goods

Predicted capacity for the first phase 7 million tonne

Proposed model of participation  BOT (Build, Operate, Transfer)

Economic assumptions

Total investment

(50 hectares) 62 Million Euro*

Capital share of investor Min. a quarter of total investment amount

Construction period 3 years

Operation period 20 to 25 years

Min. IRR 15% to 17%

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Fleet

investment projects

in railways

of Iran

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Title Investment in procurement of freight cars (with stabilization of access charge) Type High-sided wagon

Qty. 600 wagons Objectives

Increased rail transport freight share from the land goods in the country, reduced fuel consumption and air pollution, reduced average life cycle of the freight fleet and promoted safety

Financial and economic index Total investment amount

(foreseen price of each high-sided wagon in 2015, around 50,000 Euro*)

31.5 Million Euro*

Capital share of investor 100% of total investment

Amount of paid facilities -

Construction period 1 to 3 years

Regular payback period 2.5 years

Internal rate of return (IRR) %41

Net present value (NPV) 14.5 Million Euro*

Evaluation period 10 years

Economic assumptions

Daily traveling 150 Km

Annual freight transport capacity 960 Million ton-km

Annual revenue (reference year) 28.5 Million Euro*

Annual costs (reference year) 16 Million Euro*

Min. IRR 25 Percent

Support packages Subsidized Rial bank loan Interest rate of 14% □

* credits of part 1 ,*, note 2 of the Budget Law (2014)

Based on the revenue earned from fuel consumption savings □

Stabilization of access charge Stabilization of access charge to the amount of 1 Rls. Per 4 million tons or 3.5 year Per each new wagon ^g

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Title Investment in procurement of freight cars (with stabilization of access charge) Type Low-sided wagon

Qty. 600 wagons Objectives

Financial and economic index Total investment amount (foreseen price of each low-sided wagon in 2015, around 55,000 Euro*)

34.5 Million Euro*

Regular payback period 3 years

Daily traveling 117 Km

Annual freight transport capacity 749 Million ton-km

Annual revenue (reference year) 22 Million Euro*

Annual costs (reference year) 11 Million Euro*

Min. IRR 25 Percent

* credits of part 1, *, note 2 of the Budget Law (2014)

Stabilization of access charge Stabilization of access charge to the amount of 1 Rls. Per 4 million tons or 3.5 year Per each new wagon ^g

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Introduction of project Title Investment in procurement of freight loco Type Freight loco

Qty. 10 locos Objectives

Financial and economic index Total investment amount (foreseen price of each loco in 2015, around 1.8 Million Euro*)

18 Million Euro*

Freight transport capacity (daily per loco) 363600 Ton-km

Revenue tariff 198 Rls. Ton-km

Annual costs (reference year) 5.5 Million Euro*

Min. IRR 25 Percent

Based on the revenue earned from fuel consumption savings ^g

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Title Investment in procurement of freight loco (with Bank loan) Type Freight loco

Qty. 10 locos Objectives

Financial and economic index Total investment amount (foreseen price of each loco in 2015, around 1.8 Million Euro*)

18 Million Euro*

Net present value (NPV) 175000 Euro*

Revenue tariff 198 Rls. Ton-km

Annual cost (reference year) 5.5 Million Euro*

Min. IRR 25 Percent

Support packages

Bank loan Interest rate of 6% ^g

*Credits of part 1, *, note 2 of the Budget Law (2014)

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Introduction of project Title Investment in procurement of passenger coaches

(with Bank loan and traveling guarantee) Type coaches

Qty. 50 coaches type of coach: first class compartment

Objectives

Increased rail passenger transport share by RAI from the passenger share in the country, reduced fuel consumption and air pollution, reduced amount of acci- dents, fatalities, and relevant damages, reduced average life cycle of the railway passenger fleet

(foreseen price of each coach in 2015, around 800,000 Euro*)

40 Million Euro*

Amount of paid facilities 75% of total investment

Ticket price (for around 1200 km) 27.5 Euro*

Annual traveling 365 Freight

Number of passengers 520,125 Passenger

Revenue (reference year) 19 Million Euro*

Daily cost for loco 1800 Euro*

Min. IRR 25 Percent

Bank loan Interest rate of 6% ^g

Based on the revenue earned from fuel consumption savings (former 50% in)* □

Traveling guarantee Traveling guarantee for 1200 km per day, with income coef- ficient of 75% ^g

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Title Investment in procurement of passenger coaches (with traveling guarantee and *)

Type coaches

Qty. 50 coaches type of coach: first class compartment

Objectives

Increased rail passenger transport share by RAI from the passenger share in the country, reduced fuel consumption and air pollution, reduced amount of acci- dents, fatalities, and relevant damages, reduced average life cycle of the railway passenger fleet

(foreseen price of each coach in 2015, around 800,000 Euro*)

40 Million Euro*

Regular payback period 3.5 years

Ticket price (for around 1200 km) 27.5 Euro*

Annual traveling 365 Freight

Number of passengers 520,125 Passenger

Revenue (reference year) 19 Million Euro*

Daily cost for loco 1800 Euro*

Min. IRR 25 Percent

Based on the revenue earned from fuel consumption savings (former 50% in *) ^g

Traveling guarantee Traveling guarantee for 1200 km per day, with income coef- ficient of 75% ^g

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Introduction of project Title Investment in rebuilding locos

Type Alstom loco Qty. 50 locos Objectives

(foreseen cost rebuilding each loco, 1.4 Million Euro*)

70 Million Euro*

Economic assumptions 27.5 Euro*

Revenue tariff 198 Rls. ^Ton-km

Annual costs (reference year) 25.5 Million Euro*

Min. IRR 25 ^Percent

Subsidized Rial bank loan Interest rate of 14% □

Based on the revenue earned from fuel consumption savings □

Service purchase guarantee is %90 that means 360000 ton-km per day per loco g

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