Tunisia - Railway Project

 RESTRICTED I 1111M Report N o. P T R - 6 a This report was pepredfr use within ie Bumn und its arriliarea organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPUBLIC OF TUNISIA APPRAISAL OF A RAILWAY PROTECT April II, 1969 Transportation Projects Department Currency Equivalents National rnrrency i. the Dinar (D) divided in 1, 000 Millimes (M) US$ 1. 00 D,O. 525 US$ 1. 905 D 1. 0 US# 0. 19 M 1. O Wai chts and Mp, anvre 1 IMetric ton = 2, u0 lbs 1 Kilogram (kg) = 2. 2 lbs 1 Kilometer (kn) = 0. 62 miles 1 Meter (m) = 3. 28 feet January 1 December 31 Acronyms OPNT - Office des Ports Nationaux Tunisiens SNCFT - Societe Nationale des Chemins de Fer Tunisiens Sofomeca - Societe de Fonderie et de Mecanique REPUBLIC OF TUNISIA APPRAISAL OF A RAILWAY PROJECT TART.. nv rnT17NT Page SIMIARY 1. INTRODUCTION 1 2. BACKGROUND 1 A e n -~. B. Transport System 2 r. po-4I~JU . ~ Coo-IU~.J UJ4~l.LVLAU MTrM~ M?T'TrLr'T 1Ar TT.TA1TCr' IflL I WU±LL-itV Zit Jt.LJ. L4 A. Organization, Management and Staff 4 D. rroper vy C. Operations 9 U. fral I IC E. Present Finances 11 U. THE PROJECT 16 A. The Second Four-Year Plan 16 B. Description of the Project 16 C. Execution of the Project and Procurement 1o 5. FUTURE TRAFFIC, EARNINGS AND FINANCES 20 A. Future Traffic 20 B. Future Operating Results 20 C. Project Financing and Proposed Bank Loan 22 D. Forecast Cash Flow 23 E. Forecast Balance Sheets 24 6. ECONOMIC EVALUATION 24 7. C OlTENDATIONS 26 This report has been prepared by Messrs. Awar (Economist), Brechot (Engineer) and De Gryse (Financial Analyst). TABLE OF CONTENTS (continued) CHART 1 Organization of SNCFT TABLES 1. Track Characteristics 3. Summary of Operating Statistics (Northern-Center Network) 5. Passenger Traffic Statistics 7. Summary Income Accounts 1962-67 (as shown in SNCFT's Books) w4 -1 1 o k ULIUICU± 11±'.UII ULIU11 _7U4-Uf 9. Tentative Evaluation of Gross and Net Fixed Assets as of 10. Summary Balance Sheet as of December 31, 1967 '1 n"r - Project _L.L Ie Prupueur 12. Track Renewal and Improvement Works included in the Proposed Project 3. Irazffic Forecasts for Passengers 1y6-1y75 14. Traffic Forecasts for Freight, per Main Commodities, 1968-1975 15. oummary of Traffic Trends 16. Forecast Income Accounts 1968-1975 (2 sheets) 17. Forecast Cash Flow Statement 1968-1975 18. Pro-Forma Balance Sheet as of December 31, 1967-1975 19. Forecast Long-Term Debt 20. Costs/Benefits Analysis for Line 6 ANNEXES 1. Amendments made to SNCFT's Income Accounts 1962-67 2. Tentative Evaluation of SNCFT's Fixed Assets as of December 31, 1967 3. Description of Measures taken or to be taken by the Government to improve SNCFT's Financial Position [. Reasons for Elimination of Four-Year Plan Items from the Propbsed Project 5. Analysis of Traffic Forecasts 6. Notes on Forecast Operating Income and Expenditure 7. Methodology for Estimating Economic Benefits for the Northern- Center Network MAP Tunisian Railways (IBRD-2496) REPUBLIC OF TUNISIA APPRAISAL OF A RAILTAY PROJECT The Government of Tunisia and the Tunisian Railways have asked the Bank and the Association for a loan and a credit of US$ 8. miilion equi- alent each to help finance a railway rehabilitation and modernization pro- ject which will be part of the Governmentis Second Four-Year Plan, 196y-J1ie. The proposed loan/credit would cover the project foreign exchange element, estimated at 58% of the project total cost. ii. A UNDP-financed Transport Survey, covering all modes of trans- portation in Tunisia, was recently completed by the consulting firm Ital- consult, with the Bank acting as Executing Agent. The transport sector of the Government Four-Year Plan 1969-1972 will take into account the consul- tant's recommendations on transport policies and investment. The Plan i3 being reviewed by the Bank. iii. Rail transport - performed on two networks, recently amalgamated - is the responsibility of the State-owned Societe Nationale des Chemins de Fer Tunisiens (SNCFT). SNCFT's management is reasonably competent and opera- tions are generally efficient. The financial relationship between the Gov- ernment and the Railways - as set forth in SNCFT's present Statutes - is in- adequate, and SNCFT's present financial position is unsatisfactory. Measures to correct the situation have been agreed upon. Submission of SNCFT's amended Statutes to the Tunisian National Assembly and implementation of the aareed financial measures should be conditions for signing of the proposed loan/credit. iv. Passenger and freight rail traffic has been growing steadily over the last 10 years and is expected to continue to increase at an overall annu- al average of 8%. SNCFT's freight traffic is largely of a bulk nature, sui2> able for raLl transport. v. The -nrninnt nnqi.t of trAnk rp-npwal. thA nurchase of motive nower and rolling stock, provisions for track equipment, workshops and consulting servines and intPrtmt durina constrnution. It generally rnevpr. the immediate requirements of SNCFT to cope with present traffic demands. The consultant studies includm in +.he nrnint will 1par t.n thp identifination of a necond railway project, the timing of which will depend. upon the satisfactory execu- +.inn nf +.hno n"aQann+ nni rr - r-hc L- '- - --h-ci4-1jund~ grounds. In addition to the project investments, measures will be taken to on the net fixed assets by 1973. vii. The project provides a suitable basis for a Bank loan and an IDA credit of US$ 8.5 million each. The proposed loan would be made to SNCFT with a term of 25 years, including 4 years of grace. The term is related to the economic life of the project items. The proposed credit would be made to the Government of Tunisia and relent to SNCFT on the terms and con- ditions of the proposed Bank loan. R.PTMT.Tr F 'OTTTTTA APPDATCAT- AV A DATTTJAV PP7Mf_M 1. INTRODUCTION JW.LJ oLA~ veralLo UL ILLLu" LdI1 J. I L,O1.U LL..WL JU:".LVV.y 0 *va ~ ~ ~ o Tu ueueu unisiAoa andI1lue Sntt eu- o wnucu uuoaunaw in August 1967 requested the Bank and the Association to assist in financing a rallway rehaublitLaton ana modernization project which is part of Me Government's Second Four-Year Plan, 1969-1972. The proposed loan and c:redt,. amounting to US$8.5 million eachcover the estimated foreign exchange cost of the project, or 58% of the total project cost (US$29.2 million equivalent). The project comprises track renewal, the purchase of motive power and roLling stock, provisions for track equipment, workshops and consulting services, and interest during construction due on the proposed Bank loan. 1.02 The proposed loan and credit would be the third Bank Group operatfon in Tunisia for transportation. In 1964 and 1968 two loans totalling USS15.5 million were made for ports development to the Office des Ports Nationaux Tunisiens (OPNT). Construction of the project financed by the 1964 loan was satisfactorily completed in November 1967. 1.03 This appraisal report is based on (i) information supplied by the Government of Tunisia and the Tunisian Railways; (ii) the findings and recom- mendations of the UNDP-financed Tunisian Transport Survey carried out by Italconsult in 1967/68; and (iii) the findings of a Bank appraisal mission in June 1968 and a follow-up Bank mission in October 1968, when full project data became available. The latter mission reviewed Italconsult's recommendations with respect to railway investment. Both Bank missions comprised Messrs. Awar, Brechot and De Gryse. and this renort has been prepared by them. 2. BACKGROUND A. General 2.01 Tunisia, &ith an area f 1A)h,OO knm2 o a+ one-anethat France, is bordered by the Mediterranean to the north and east, Algeria to the west, and- T_Ibya, to - the I sout and- sotes -1-4 Its pouaiofsabu f million and is increasing at 2.3% p.a. The average population density of 27 ~nhaitatc pr _2 is low because of thie large areas ofinoptbemu- ains and deserts. Because of the concentration of economic activity in the MJ ~.9 j.' L t L4.L.LJJL . d-.A WAU, LLI.D 111, P4~~Vyk"UUa.LV11 Uu.liti.Luy. in4 W±e norlLL is~ considerably above the overall average. 2.02 Real output in the Tunisian economy grew by about 4% annually betweeen 17uu all 1ou1 so tna, in tne latter year the gross national product klir. amounted to US$963 million, or US$215 per capita.l/ 2.03 Agriculture contributed some 18% to GNP, but provided about one.-haif of total employment. The principal agricultural products arc c;reals. vep,etables, citrus frit gaaes and wine. The share nf agricultue in C,N4 Uurrent Economic Vujition and Prospects of Tunisia IJUA-3a), March 19, 1968. has been declining as mining, manufacturing and tourism have grown more rapid- steel plant began production in 1964. Further development in industrializa- volume of tourist traffic has stimulated building construction and associated activitieS., The principal sources of foreign exchange earnings are tourim and phosphate. B. Transport System 2.0 Tunisia, when it became independent in 1956, inherited a fairly ex- tensive and relatively well-developed transport system to which there nave been modest additions over the past decade. With a coastline of about 1,200 km, the counry has four major commercial ports: lunis-la Goulette, bizerte-Nenzel Bourguiba, Sfax and Sousse, all of which are under the control of an autono- mous port authority, Office des Ports Nationaux Tunisiens (OPNT)./ In addi- tion, the Government has decided on the construction of a new deepwater port at Gabes in the south-east as an outlet for phosphate exports.EY The OPNT has been the beneficiary of two Bank loans; the first (380-TUN), amounting to US$7.0 million was made in June 1964 and construction works have been satis- factorily completed; the second (573-TUN), amounting to US$8.5 million was signed in November 1968. 2.05 Tnere are about 16,000 km of roads-in the country, almost two-thirds of which are surfaced. The road network is best developed in the north where industrial activities are concentrated. Road maintenance should be substantially improved. Many of the most heavily used main roads are in need of major improvements including higher standard surfacing so as to re- duce vehicle operating costs and to handle projected traffic increases. More agricultural access roads are required to stimulate agricultural production and exchange. The possibility of Bank assistance for the highwavs is under consideration. Despite these highway needs, the rail investments in this proposed project are of high Driority. In 1966. road transnort accounted for 900 million ton-kn of freight, while the railway performed 1.3 billion ton-km, or 60% of the total; and of a total of 1.5 billion pass-km. road transport accounted for about two-thirds and the railway for one-third. 2.06 The railway network consists of 478 route-km of standard gauge and 1.522 route-km of meter gauge track. The two paiires link at Tunis. A de- tailed description of the railway system, its organization, management and operations is given in chanter I of this report.. All rail tranrpqnn. i.q np- ated by the "Soci6t6 Nationale des Chemins de Fer Tunisiens" (SNCFT) except for an electric stretnar line qprvina +the northern qnhnwh. n- T1nis. 2.07 While there arp qtu.rQ ni-r'iP1r1_Q 1n_+.n +Anii4r)nni+ +'Il nim +,'r internal air transport for commercial purpose is insignificant. The princi- nal intprn-hional airnort. is loa-,t-- nom" --n--- -n mr +hi LSmJIr+.-. V the terminal building and other facilities relating to air traffic control now Undeony +.his nirprNa+ ppears +.n he adenate 1/ The port and maritime sector are discussed in detail in Report No. TO.-648b. SSince iqnfo^rman to ases eeono mi jutiiato of+ this port i- not-,---4 4 fully available at the present time, the Government's request to include Anne i cces to the port 1as paarp 1)cluded frL t111iS jeJCt (e Annex 4) paragraph 1). C. Transport Policy and Coordination 2.08 The Government exercises a large degree of control over the trans- port sector. nntis4 is %- -~.1c~1"ITr +,ii ^-P "!4' nnd4 Ynn +.v-nn.rn-o+. w'hpere tariff approval, licensing of routes for road transport, traffic allocation tion are all instruments of control. 2.09 The road transport industry is organized on a geographical basis, Wi th thie operatbing uits ILrgel_y bei. Ir, pUlicUly Vwned% rIoa transportL VLoI--I - panies. The privately owned trucks are mainly employed in local and intra- regional trade. While most o one regional puulic companies are f'*ancdall self-sustaining, a number of the smaller ones are of doubtful viability. The trucking system suffers from rigid regulation with respect to inter-zoml oy- erations and the distribution of traffic "rights". A reorganization of the trucking industry, together with a review of existing trafic "righus is unVr consideration by the Government, and it is expected that competition between public and private truck transport would result in a more efficient utuiliza- tion of the total vehicle fleet. The tax system applying to the road transport industry at present consists of nearly a dozen separate taxes and could be simplified. A main feature is the unbalanced tax distribution between cars and trucks, the former paying more than their share. Road user charges, in the sense of the total taxes collected on the use and ownership of vehicles, (exclusive of those deriving from city streets) amount to about 80% or the total expenditures on highway maintenance and construction that Italconsult estimate as being desirable. In practice, however, the sums collected exceed the actual expenditure on highways largely because the highway network gen- erally has been inadequately maintained. The tariff structure regulating trucking is outdated and many official tariffs are below costs. However, systematic exceptions to the official tariffs are tolerated. A new tariff structure more related to costs is under study by the Government. Finally, foreign exchange allocations for the purpose of replacement and expansion of the aging vehicle fleet have been tightly controlled and this has led to the import of large quantities of spare parts. 2.10 Despite the policy of favoring rail traffic through regulatory measures, with little reliance on competition and free consumer choice, the financial condition of SNCFT remained poor until its recent take-over of the profitable Southern metwork serving the phosphate industry. Government inter- vention in the rai3Xay h-as aimed at subsidizing export commoditice (phosphate from Kalaa Djerda, iron ore) and passenger services through an inadequate tariff structure and this has been largely responsible for the past railway deficits. 2.11 Recent investment decisions in the transport sector have been taken largely on an unplanned, ad hoc, basis by the different operating agencies, frequently without the application of economic criteria. Transport policies have not been conceived as an integral part of general economic policy. A major UNDP-financed studv of transport planning and policies has recently been completed by the firm Italconsult. One of its main conclusions is thet., notwithstanding the absence of coordinated policy planning. there is no mai or distortion of traffic allocation among the various modes of transport. The transnort sector of the Second Four-Year Plan 1969-1972 will take into afccount 1talconsult's recommendations on transport investment and coordination. The Plan is being reviewed by the Bank, and agreement is expected'to be reached on. transport pdlicies which will form the basis of f lnd operations in the transport sector. 3. a THE TUNISTAN RAIT.AV A. OMmanima '. Management and Staff 3.01 The first railway line in Tunisia was opened to traffic in 1876, and oprated by prvte eeps., the Governmet purcha sed the North- ern Center network which was then operated on a concession basis by the "Com- pagnie Fermibre des Chemins de Fer Tunisiens" until taken over, on January 1, 1957, by the Government-owned "Soci6t6 Nationale des Chemins de Fer Tunisiens". The Southern system remained owned and operated by the "Compagnie des Phos- phates et du. Chemin de Fer de Gafsa" until January 1, 1967, when - in accord- ance with the Concession Agreements - it was also taken over by SNCFT. 3.02 SNCFT is administered under Statutes dated December 27, 1956, by a Board of Directors whose eight members are appointed by the Government. By Statute, four 'oard members (including the Chairman) are from Government, two from railway staff, and two are persons of outstanding competence from public or private sectors. The present Board comprises five civil servants, two railway personnel representatives and the President of the National Mining Bureau, so that, in fact, six of the eight Board members are from Government. Although the main railway users (phosphate and iron ore) are present through the National Mining Bureau representative, SNCFT Board should be enlarged to include representatives of other users; a more balanced representation of all interests concerned would be achieved with the following Board composition, on which agreement has been reached during negotiations: Government 4 (including the Chairman) Personnel 2 Users h Total 10 3.0 The powers of the Board are limited by the over-riding authority of the Government whose prior approval is required for: (i) decisions which, under the Corporation Law, require the approval of the general assembly of shareholders; (ii) the operating and capital budgets; (iii) the rules and regulations for personnel; (iv) tariffs; (v) the sale of assets; and (vi) bor- rowing. The freedom of SNCFT in day-to-day railway operations is not affected by these requirements. 3.0A While the Statutes state that SNCFT's main function is rail opera- t*.:ns, they nevertheless provide for the possibility to expand SNCFT's activi- tias to other fields. In the past, SNCFT has been made responsible for the collection and trading of alfa and for the setting-up and operation of a foundry.!/ SNCFT has since been freed from these activities which interfered with its main function and adversely affected its finances. During17 nego- tiations.agreement has been reached that SNCFT shall not, except in accordance 1, ., de Fo._erie et de ME-canique (Sofomeca) with a financial plan satisfactory to the Bank, be made responsible for non- rail activities.' - 3.0 All executive functions are vested in the General Manager (President- Directeur General) who must be chosen frcm the (Govfrnment. rvnreqnitatives of the Board; he is also the Board Chairman. He has adequate authority in all spheres of railway administration. Rowever- his replacement in case of absence or temporary incapacity is made on an ad hoc basis, and there is need for the appointment of a Deputy General Manacer. Agreement on this-11as been reached during negotiations. 3.06 There are five departments reporting to the General Manager: General rlyni -,Amnistan, F . innC, -- an Technica4-fl . the late is respon- sible for Operations, Mechanical, and Permanent Way Divisions. The internal orgniztio - he etalsof which are in, Cart I -- is adequate. 3.7,here is ashourtg ofL qulified..L senior sutff-i to imnprove thie situa- tion, SNCFT has obtained, under a 1968 contract with Sofrerail, 12 French rail- - o v amo1u"Lvt L1Z,vtL L1 aL Pte1o.LUU 0 Unre years. A.lunougn helplul for day-to-day operations, the assistance does not suffice to compensate for CUrs ac k of experienced senior staff at managerial level. To correct this, SNCFT has agreed to the appointment of two high.caliber experts, for a period of two years, who -will advise the General manager. Agreement should be reached during negotiations on the terms of reference of the experts, the foreign exchange cost of whom is included in the proposed loan.ana creGlt. In addition to these experts the project provides for the appointment of consul- 3.0u he General Manager has full authority over the railway staff which he appoints, assigns, promotes and dismisses in accordance with the rules and regulations for personnel and within the budgetary authorizations. At the end of 1967, the total personnel establishment was about 7,850, with a producti- vity per man employed of about 200,000 traffic units. These figures compare favorably with the performance of many railways over the world.1/ 3.09 SNCFT permanent personnel comprises two categories: established staff (personnel titulaire) and unestablished staff (personnel auxiliare); the aver- age remuneration of the latter is about half that of the former. In addi- tion, there are seasonal workers. The total establishment as of March 31, 1968, was as follows: 1/Traffic units are ton-km + pass-km. On the basis of the most recent in- formation available in the Bank, productivity figures for railways chcsen at random were as follows: East Africa: 117,000; West Pakistan: 133,000- India: 1510,000; UK: 159,000; Italy: 182,000: South Africa: 266,000; France: 290,000; Morocco: 328,000 (mainly phosphate). -6 - LNUUL-I Ce n,utU r u L I Vr. I. U U.L Network Network SNCFT Permanent: I ~ 0,~ ~ r~'~ r, fl-li 17 n6 Established 114 OL, -) f17> Unestablished h8 9% 559 22% 1,007 13% Seasonal 516 10% 567 23% 1 083 14% Total 27"l) 100% z 100 7euus ,[IX 1UU% It has been the policy or ScNCr to transfer old staff from the unestablished to the established category, so that it can be entitled to pension. At March 31, 1968, unestablished staff on the Northern-Center netwofK accounted for only 9% of total personnel while on the Southern network it totalled 22%. SNCFT intends to pursue this policy. 3.10 While the salary level has remained generally stable, the policy mentioned above has affected the average cost per employee, which increased by some 12% over the last 5 years. Over the same period, total staff cost (including contribution for pension) averaged about 5% of working expenses, which is reasonable. 3.11 Established staff is entitled, at age 60, to a pension serviced.by the Government-owned Caisse Nationale des Retraites; there is also an early retirement plan, at age 5, for certain categories of established staff. There are no official pension arrangements for unestablished staff nor for seasonal workers. 3.12 In general, and taking into account the agreement reached on the matters referred' to in'paras; 3Q2, 0 3.0.:,D5tinr 3.07, the orgahizzitibn"f SNCFT is satisfactory, its management is reasonably competent,.-and:its staffl policy is sound-. Staff display discipline and industriousness. Labor relations are satisfactory. B. ProTertv i) Track 3.13 The Northern Center network is 1,522 km long; 478 kan, or 31% is standard gauge (1.436m) and 1,044 km, meter gauge (see Map). The entire system is single-,track except for a 17 km suburban section. Tunis-Hanmam Lif. In gen- eral, the terrain presents no difficulties. Curves total 290 km; bridges 13 km; and tinnels. 2.h km. There are about 1.500 level crossings. mostly unprotected. 1lb The Southern network totals 46 Im. all meter gauge and single-track. It comprises 379 km of main lines and 77 km of branch lines to the phosphate Tni n~pz . 3."nnTrac nnr +.li Mn-+hpn-rp~ntp.r nt-twnrk is lair] with different typDes and weights of rail and largely overaged; ballasting is often inadequate. De- talsar givnn Tabe 1 About+ AKI- o)f' -rnilq nr nt lpn~. n ypars c1dl. and 63% of the track is 30 kg/m or less, which is light and limits speeds and axenae and s.cf thag f fince an airet hasr re sut sed reis iff eth maintenance, and sections of the track are worn out. At KICF's request, the condition of. U te trc As studied in 196/6 by a gru of Frnh os_V.t - 7 - (Sofrerail-Setec) who made a systematic survey of the Northern-Center network and prepared a detailed rehabilitation program. This program, together with Italconsult's findings, has been used to identify most of the track items of the proposed project described in chapter 4 of this report. 3.16 Track on the Southern system is largely all of the same type and weight and two-thirds of it have been recently relaid. Details are also given in Table 1. The main line Sfax-Gafsa-Metlaoui is in good condition and suitable for heavy phosphate traffic. Rail on the two other main lines (Graiba-Gabes and Metlaoui-Tozeur), although light (25 kg/m) is adequate for the low traffic carried. Most of the branch lines to the mines require com- plete renewal with heavier rail (36 kg/m) to allow for a 16-ton axle load. 3.17 The Statutes of SNCFT provide that track and structures on the Northern-Center system remain the property of the State and are put at the disposition of SNCFT. Maintenance and capital expenditure for track incurred since January 1, 1957, has been shared between State and SNCFT on a 60W-h0% basis. This situation is largely inspired by the French Railways' thesis which considers that rail users should not be expected to pay fully for rail- way infrastructure, and that tariffs based on total investment cost, including track, would lead to distortion in favor of the road. According to Italcon- sult Transport Survey, road user charges in Tunisia cover almost 80% of what would be the proper level of expenditures if all the needed constructior. and maintenance of intercity roads were carried out. Since, in fact, expenditures for road construction and maintenance are lower than the estimated proper level of needs, it is considered that intercity road users pay their full share. To establish the basis for fairer road-rail competition the Government has agreed during negotiations to transfer to SNCFT full ownership of track and structures (including land) for which maintenance and capital expenditures will henceforth be charged to SNCFT. SNCFT's Statutes are being amended ac- cordingly. 3.18 Signalling consists of color lights on the Tunis-Sousse line and of inadequate mechanical signals on other heavy traffic lines; SNCFT is currently studying modernization to improve safety. Traffic is controlled by central telephone dispatch from Tunis. The communication system is unsatisfactory, mainly because of inadequate maintenance by PTT. Agreement has been reached during negotiations that the Government will require PTT to maintain the telephone lines of SNCFT in accordance with sound engineering practices. (ii) Motive Power and Rolling Stock 3.19 SNCFT's motive power and rolling stock at the end of 1967 is de- tailed in Table 2 which also gives the age of the equipment. - A - 3.20 The locomotive fleet is fully dieselized and 12 years old on the avrg.I- -I, ioAA CUMVPP reeie 0 adA,4-44-1 'I frvA Ik ,-A 1m-+r financed by French supplier's credit. At present, the most powerful locomo- sion of heavier track and reinforcement of bridges, it is planned by SNCFT that new LouomoiUves on the normhern-CenTer network Should also be at luasu 1,400 h.p., allowing for increased train loads and speeds. Except for .oco- motives of 620 h.p. purchased in L>U, to be replaced partly under the pro- posed project, the locomotive fleet is reasonably well maintained. 3.21 Most passenger traffic is carried by railcars and trailers whi.ch provide adequate service. The railcars average 18 years of age which is high, and their partial replacement, together with part of the trailer fleet, is urgently required and is provided for in the project. More than half of all passenger cars are over 50 years of age; 20 cars are currently being procured from West Germany through supplier finance. SNCFT's policy is to replace passenger trains by railcar services as much as possible - which is reasonable - and to scrap the old passenger car fleet progressively. 3.22 Over half the total freight car fleet of 5,334 units is more than 50 years old. Most of these cars are of the two-axle type and their average capacity, of about 15 tons, is low. Cars over 40 years old, numbering 3,839, with a total capacity of about 60,000 tons, could be replaced by 2,400 cars of improved design, a reduction of 37%. As a first step, the 640 cars pro- vided in the project will replace some 1,OO old cars. 3.23 The DroDosed nroiect provides only for renlacements. Additional equipment will be necessary to meet the traffic increases forecast by the Italconsult Trnnsnort Snrvey. To ete.nmine +.he tnhninl ohrarteristics of the equipment required to meet such increases, SNCFT has agreed to ap- point consultants (rnrnhnhir T+n1lran ii1+ -r.yh-.I 14) mr74mia the nvzomn+. condition of motive power and rolling stock, (ii) determine the units to be retaninedi and thosec to, be scapd -ii - JQmke rec.-m~adt-ons on the number and type of units required for future replacement and to meet ad-- ditinanI t.raffic, andl (il!) prp-ePii+iiY-n~ ~- ,'~44i',-, ~ } Mrriny The Terms of Reference have been agreed uponduring negotiations, The study, t.he foiPr -+xhag cs ofwic is included in- 4-oa1,-c.t will assist SNCFT in the preparation, and subsequent review, of its devel- 3. C Te ralway lacilities in runiSand lletlaoui (on tne Southern man line) which include stations, marshalling yards, etc., are inadequate in capa- city and layout, and as a result Tne operations are decreasing in efficIency as the volume of traffic increases. SNCFT has agreed to appoint consultants (proLably i.ta-consult) who will ki) review the present layouts of these sta- tions, (ii) define appropriate operations programs, and (iii) recommend modi- fications for the modernization of the facilities. The Terms of Reference have been agreed upon during negotiations. The foreign exchange cost of the study is included in the proposed loan/credit. - 9 - 3.25 EVCFT has two main workshops, one in Tunis with a staff of about 1,000, the other in Sfax with 340 men. Although the equipment in both shops is largely obsolete. performance remains generally satisfactory. The Tunis workshop serves only the Northern-Center network; the Sfax workshop, which came with the Southern network. serves the latter. This arrangement may re- sult in duplication of specialized staff and spare parts, and it may be tech- nically and financially advantayeous to redistribute work on a functional rather than a geographical basis. SNCFT has agreed to appoint consultants (orobablv Sofrerail) who will (i) nrenare A detailed inventory of nrnqent facilities in both workshops, (ii) analyze their operating efficiency and costs, and (iii) inke rPrnTnmPnt.in fdr .ho rt.-'rJhi1rAnn ^f zr^r1r ana, frnr +h. Ip lities and equipment required. The Terms of Reference have been agireed upon - during negotiations. Thp foreign Prhnmn not of the stm*Av is -, inclide in the proposed loan/credit. over the period 1957-1966 is given in Table 3. While operations generally hae -. ~ ~ ~ A..Lr W'i - L2 L UW Yt;LI 0, Wlit: UUL.".±4 .LUJI U.L IIIUUL.L VU power is unsatisfactory with low engine-km/engine-day ratio and availability. The- aveag urn round tiA of4 fregh cars-4 ___ r 7 _an 7n.3-das-o and meter gauge respectively) could also be improved. These results are, to some extent, due to- the preen poor ----I Iion ofte-qimetan htak 3.2 I 1anSer of freight between the two gauges is possible only in Tunis and La Goulette stations. There is no axle-change installation. Transferred ounge is about 30,000 tons per annum. Although two gauges in an integrated system constitutes a restriction, this does not significantly impair SNCFT's opera tion-1S. 3.2o Operational efficiency on the Southern network is good. In 1966, availability of locomotives was 90%, with an engine-km/engine-day ratio of 311; average tonnage hauled per phosphate train was high at 1,185 tons. Average turn-round time of freight cars, 3 days, was satisfactory, and it would have been even better with larger storage facilities for phosphate at the mines and at the port of Sfax. 3.29 On sane lines traffic is very light and it is not expected to grow significantly. This is particularly the case for the section between Mateur and Beja on line 3. During negotiations, the Government and SNCFT have -> agreed to close the section. I 3.30 It is also questionable whether operations on line 15 - from Sousse to Henchir-Souatir - will be justified in the foreseeable future. In this connection SNCFT has agreed to include in the terms of reference of the cost- ing consultant referred to in para. 3.L4, provision for recommendations on the closing of uneconomic lines and for alternative solutions. During nego- tiations, the Governent and SNCFT have also agreed to submit to the Bank the consultant's findings and recommendations, together with thei.r own views: and intentions, and to.seek agreement with the Bank on future operations on uneconomic lines. - 10 - D. Traffic (i) Freight 3.31 Table 4 gives freight traffic statistics in tonnages and ton-km broken down by main connodities, over the period 1962-1967. Between 1962 and 1966, total freight traffic on the Northern-Center network grew from 2.18 mil- lion tons to 2.77 million tons, an increase of 27%, or 5.4% per annum; ton-km increased similarly from 404 million to 509 million, the average distance per ton carried averaging 184 km haul. Iron ore from Tamera and Djerissa and phosphate from Kaiaa Djerda averaged about 55% of total ton-km. Becuise of crop failure and decrease in mineral production, traffic on the Northern- Center iletwork droppead.in 1967 to,a level comparable to that of 1962/63. Provisioial figures for 196..show substantial improvement 1/. In 1966, the Ubes year U t perio LL7U-.96i7, traffic reached -1h,UUU Ton-KM per [m of track, which indicates under-utilization of the facilities. 3.32 On the Southern network, freight traffic grew from 2.60 million tons in 1962 to 3.97 million tons in 1967. an imoressive increase of q31 or Ahout 9% per annum. During the same period ton-km increased from 546 million to 767 million. an increase of L0K. Phonhatp now announts for 92x of total ton- km. In 1967, the average haul per ton was 193 k, and the density of traffic was a high 1.682.000 ton-km nAr km of trank. A333 Tnt.,l T\I.'PT freiaht. traffir in 1QA7 n h+.h networks annte to 6.2' million tons, which, with an average haul of 189 km, represents 1,182 million +xn-kn and aou 60000A 0 nn-km no km ofP reak; 78 of +tal ton-krm was phosphate and iron ore. (ii) Passengers 3.34 Details of passenger statistics for both main line and suburban increased from 3.5 million in 1962 to 4.2 million in 1966, an increase of 5% per onnum*y -nc -lr -wr. avgk fase r -Pron 081 in "1040 +. TOO 1 )'A -,-I .V' _. _- 9lI V -' -14*~fflf E5 .LCS LJ . .J jj M J c-w L 4J.LJ± I L7'C UJ )S I lion in 1966, an annual increase of 6%. The average distance travelled per duced the earnings of a large portion of the population, traffic dropped sub- ..1± LJ.7Uf . V%O±UL0_11.L L J4L±L.L-U _1 .L7uu 011UW J4IIFIP1UVt:AI11b -/1 Tunis-Hammam Lif line, serving the southern area, traffic totalled 10.1 nil- lion passengers and _:) m-I±zu± no7 -yo( xbr unat year, it accountou for 74% of total passengers and 32% of total pass-km; the average distance .P rassenger traffic on the Southern network is noT important; nigh- est figures attained were 521,000 passengers and 36 million pass-km in 1966. Iuring Une period January-August 1968 the Dorthern-Genter networK carrliea 311 million ton-km against 264 million ton-km during the corresponding period in 196o, an increase or 18o. 2/179 million pass-km during the period January-August 1968 against 17h mil- lion pass-km during the corresponding period in 1967, an increase of 3%, E. Present Finances (i) Statutory Regime 3.37 The financial relationship between the Government and SNCFT, and f"TM e I~ -~ 041PTfl . - -4 their respective financial responsibilities, are 1ai down .in 0±%rt ± OvaUUvOo of December 27, 1956. The main features are as follows: (a) the Government, when imposing general or partial tariff reductions, is under obligation to compensate NOFT; (b) if, after receipt of above contributions, 6Uf's income account is still in deficit, the latter is compensated - after depletion of the reserve fund - by a Government sub- vention; in case SNCFT's income account shows a surplus, ccntributions under (a) above are reduced or cancelled so as to balance the account; if, after such cancellation, the income account still shows a surplus, the latter is to be used (i) to replenish the reserve fund up to 10% of gross operating revenue, and (ii) to reimburse past Government subventions. All surplus funds left after replenishment of the reserve fund and reimbursement of subventions go to the Government. 3.38 These provisions are inadequate in that the Government's obligation to compensate for revenue lost as a result of its action applies only as long as SNCFT is in deficit. In addition, the above provisions limit funds left annually to SNCFT to the amount of the reserve fund and the annual depreciation provision. This would not allow SNCFT to undertake the financing of an :Ln- vestment program, such as the project, the execution of which is i be spread over a number of years. 3.39 In practice, the financial provisions of the Statutes have not been fully implemented. Government compensation for loss of revenue has so far been granted only for iron ore transport; no specific compensation has been made, or requested by SNCFT, for passenger traffic where numerous fare reduc- tions are irmosed by the Government. The total Government contribution to balance SNCFT's accounts has nevertheless been substantial; it amounts to D 12.1 million for the neriod 1957-1967. and represents 20% of total aross receipts. Details on the past contributions from users and State are given in Tahl (. A o Thp mnttPr wan HisnusqH with thn Government and SNrFT who acknow- ledged that the present system did not promote the efficient allocation of transport resources of th e count.7-y and that it cn.stitnt.pr nn innrasna burden on the general budget. During negotiations it was agreed that SNCFT's R+ o+min a 11 he amonde +n.he hean or f the0 CAll rdn ein ?inionsl to costs; (b) tariffs will be adjusted from time to time so as to produce reruec suiinu nd t a_ anp aeatn rene onhevlue ing depreciation, and to earn an adequate return on the value - 12 - of net fixed assets in use; (c) if, in exceptional circumstances, the Government should deem it necessary that certain services be provided at less than official tariffs, the resultant subsidy will not be a burden on SNCFT but will be paid for by the Government; (d) internally generated funds (net operating revenues plus depreciation and other provisions) will be maintained by SNCFT at a level sufficient to (i) meet debt interest and amortization. (ii) provide adequate working capital. (iii) establish and retain adequate liquid reserves to meet accruing liabilities qnd future continrencies. and (iv) cover a material part of the cost of capital invest- ments. includinL rePnl-emnts le) no dividends will be distributr1 before the reuni .ment. under (d) are met; (f) as a transitional measure, and until tariffs can be million per annum, as a lump compensation for inadequate ;*9 LVv LLUvo jUUV.LU01U Ullct orn'ri iIfluo oLUjIulb UQ W1 U0V fmjF1L for approval its annual draft operating budget, together with proposals ;U 4--IL-4 S4 ' . T'r --P~- the- ir t az Jiu.m-Lnu. PL ane Uavernmn1tLU usagrees witn tne proposed adjustments, it must decide on the amount of compensation and subvention. dUe uo 0S1UT. Tariff adjusuments are by and large made on the oasis of what the Government considers traffic can bear. In general, the tariff structure i.S inadequate ana it requires an overall review by the consul- tants referred to in paragraph 3.44. Since January 1, 1957, there have Uen no Lari .increases except for the selective increases made on October 1, 1966, which averaged 30% for passenger and 5% for freight. 3.42 Average receipts and costs per traffic unit calculated on the basis of SiuT's income accounts are shown below (in millimes): Receipts Costs Depreciation Depreciation Northern-Center network Ton-km 6.3 7.1 6.1 rn 7T__4. 1. n '7 1J.L JAU UIjLL, U L4U Vortnern-Center network Pass-km 3.8 6.9 6.0 Ton-km 6.0 .1 7. Traffic Unit 5.3 7.5 6.5 Southern network Pass-km . v.A. N.A. Ton-km 4.6 N.A. N.A. Traffic Unit 4.6 3.1 2.3 On the Northern-Center network average receipts, although increased as a. re- sult of the 1966 tariff adjustments, remain below average costs. This is particularly evident for passenger traffic, where, because of numerous fare reductions imposed by the Government, the average receipt does not cover op- erating expenses excluding depreciation. On the Southern network costs are covered. The above figures are tentative and should not be considered as a suitable basis for tariff adjustments; however, they are indicative of the present position and underline the need for a fundamental review of the tar- iff structure. 3.43 The present situation on the Northern-Center network stems from the Government policy (i) to improve the competitive position of phosphate Cnd iron ore on the world market, (ii) to keep prices of food products low (main- ly cereals and flour), and (iii) to promote welfare through reduced fares. Export promotion would be better achieved through reduction or cancellation of ad valorem export duties levied since 1964 on phosphate (10%) and iron ore (5%) rather than by imposing below cost rates on the railway. This was dis- cussed during negotiations. and the Government acknowledgLd'that the present system was inadequate, and confirmed that studies were presently undertaket to review the overall export Dromotion Dolicy for minenals. 3.hh The correct solution would be a cost-based tariff structure. As SNCFT's accounting system does not now provide the data for this purpose, SNCFT has agreed to appoint consultants (probably Sofrerail) who will estab- lish a detailed cost accounting system and recommend a structure and level of tanriffs whinh wonl-d be such as to nrovide SNCFT with a satisfactory finan- cial rate of return on its net fixed assets within a reasonable period of time and suffi'-iPn. .qpn-p rms s nar. AhO-b'and d). The Terms of Reference were agreed upon during negotiations. The foreign exchange cost r)f the nonmil--mts' srnrvlnres is includerl in fhe. pronpi lhn/ rprit_ - 14 - (iii) Operating Results 3.45 The income accounts for the years 1962-1967, as shown in SNCFT's books are in Table 7. Althouph until 1966 contribiitinns frnm thp Stata hnuve increased steadily, SNCFT's operating ratio has deteriorated from 101% in 1962 to 110% in 1966. The situation chanced in 1967 with thn tak,-nvPr of t.he Southern network, which is operated at a substantial profit; the 1967 consoli- dated accounts for both networks show a small rnofit_ thn first. for qNr1P since 1960. However, the income accounts in Table 7, which are presented in accordance with the provisinns of SNRTIA nrRnt Statuts do not onfrm with generally accepted accounting principles, and they do not reflect the true earning nosition of SN'R._ o asnse the laer the inome aont haen bee- adjusted by the exclusion of Government contributions and the inclusion of a denpeiat.ion charge more appITropriate for the asset s in u-se, as exlie in-_ -A- detail in Annex 1; the amended results are given in Table 8. It shows an nstsator poiin I,ith a.L oI &peting WLr,-a tio de terioratiLng f rom 1295, in 1962 to 139% in 1966, then improving substantially to 107% in 1967, largely becaus of th tae-oveof the Suthern nevwork, and to a lesber extent., because of the 1966 tariff increases. In 1967, the rates of return, expressed -s pe- Ag eo of the net fi&ed asseus as valued in annex 2 and in Table 9, were -14.3% for the Northern-Center network, 13.8% for the Southern network, a0 -.9 o Vr NV. I hey indicate a fundamental unbalance between tne two networks and an unsatisfactory overall result. (iv) Financial Position 3.6 SNCFT's balance sheet as of December 31, 1967, as registered in the books, is summarized in Table 10. The balance sheet does not reflect SNCFT's position in that only part of the fixed assets are taken into account ' 6.2 millon net fixed assets as compared with D 21.4 million shown in Table 9). The balance sheet shows an unsatisfactory current position, at U.oo, ana, because or undervaluation of capital, the debt/equity ratio is 55/45. The unsatisfactory current position is mainly due to (i) large receivaoles owed by the Government, State-owned companies and the Gafsa Phosphate Company, and (ii) current debts resulting from treasury advances and interest accrued thereon, and from payments made by the Government to the previous railway concessionnaire. 3.47 At the Bank's request the Government, on March 11, 1969, took the following measures: (a) Clearing of outstanding current accounts, at December 31, 1968, between the Government, SNCFT, the Gafsa Phosphate Company, Government-owned companies, and the National Pension Fund; and (b) Incorporation into SNCFT's equity of outstanding treasury advances. In addition the Government agreed during negotiations to also incorporate Into SNOET's equity ki) the interest accrued on treasury advances, and (ii) payments made by the Government to the previous railway concessionnaire. Details on the financial measures taken and to be taken by the Government are given in Annex 3. They will improve SNCFT's current and liquid position satisfactorily. (v) Accounting and Audit 3.h8 SNCFT's accounts are reasonably well kept, the anomalies described earlier resulting from inadequate statutory provisions rather than from the accounting system itself. There are presently no adequate cost accounts; to correct this, the setting up of a detailed cost accounting system has been included in. the terms of reference of the consultants referred to in paragraph 3.44. 3.49 Audit of all Government agencies is carried out by financial comptrollers appointed by the Minister of Finance. All commitments of expenditures over D 5,000 are subject to the prior approval of the comptroller appointed to SNCFT. Although this does not result in serious delays in authorization, the figure is low and the prior approval of the comptroller should be required only for larger commitments, over D 20,000. Agreement on this has been obtained during negotiations. The comntroller reports annually to SNCFT's Board on the balance sheet and related financial statements. After Board approval, the statements are submitted to the "Commission de Verification des Comptes," then for final approval to the Ministers of Public Works and Finance. 3.50 The audit carried out by the financial comptroller is largly of a budgetary nature; it confirms that expenses have been properly authorized and that the accounts are presented in ancorancep with the Statutes. The audit by the "Commission de Verification des Comptes" is carried out irremilarly. ThA hnupn rannements do not comly .wT geneanll accepted auditing standards, and during negotiations SNCFT has agreed to have its accounts audited annually. -onnpncing with the fiscal year 196, %y independent external auditors acceptable to the Bank, who will report to the Ministers of Puih1in Werkm nnd Vvinnt - 16 - 4. THE PROJECT A. The Second Four-Year Plan 1969-1972 4.ol A railway plan - which will be incorporated in the transport sector of the Government's Second Four-Year Plan 1969/1972 - has been prepared. It calls for exnenditures of about D 29.3 million (US$ 8 million equivalent), with a foreign exchange component of about US$ 23 million. The railway plan is of the right order of magnitude in that it takesinto account SNCFT's financial and technical resources during the plan period. During negotiations it was agreed that, unless the Bank otherwise agree, and until the proposed project is completed, SNCFT shall not undertake any investments other than those provided for under the railway plan. 4.02 The railway plan 1969 - 1972 includes: D Million Estimated Total Cost Foreign Exchange (a) The project as described below 15.3 8.9 (b) The Gafsa-Gabes Line 6.0 1.4 (c) Signalling Works and Equipment 2.0 1.3 (d) Tunis Railway Station 1.4 0.4 (e) 4anoubia Tunnel 0.3 - (f) By-pass of Sousse 0.3 - TOTALS: 25.3 12.0 although not without merit, proposals under (b) to (f) are considered to be of lower priority or for items for which adequate justification has not been adduced at the present time and they have been excluded from the proposed' project (see Annex 4). B. Description of the Project 4.03 The project consists of the high priority items of the railway plan. It amounts to D 15.3 million (US$29.2 million equivalent), with a foreign exchange component of D 8.9 million (US$17.0 million), or 58% of the total project cost. The proposed loan/credit will finance the foreign exchange component, including interest during construction due on the proposed Bank loan. The project contains only replacement items which are urgently required and fully justified at the present traffic level. Additional equipment will be necessary to meet future traffic requirements and the consulting services provided in the project are intended to identify the future needs. The list of project items is in Table 11; they are summarized below aid described in the following paragraphs. - 17 - (D 000) (US$ 000) % of Local Foreign Total Local Foreign Total Total 1. Track 4,270 4,000 8,270 8,134 7,620 15,754 53.9 2. Motive Power, Rolling Stock & spare parts 1,630 3,420 5,050 3,105 6,515 9,62U 32.9 3. Workshops 60 190 250 116 360 476 1.6 4. Consulting Services 150 210 360 286 400 686 2.4 6,110 7,620 13,930 11,641 14,895 26,536 90.d 5. Contingencies 5% 310 390 700 580 745 1,325 4.5 ,20 U,210 1,630 12,221 1T,60 27,661 95.3 6. Interest during construction - 715 715 - 1,360 1,360 4.7 Total 6.L2CW 8.92 15.3h5 12,22r-17,000 29,221 100.0 1/ D 4,250,000 for local works and D 2,170,000 for custom duties. LI/ US$8,090,000 for local works and U0'$4',l31,VVU for Ustom1 Uti.LO 4.04 Track renewal and improvement works take into account 1te present poor condition of the track and traffic density. Track will be renewed, totally or partially, on four main lines and on branch lines i thlle Southern mining area, over a total length of 352 km. Heavier rails, increased sleeper density, better ballasting and reinforcement of bridges will permit higher speeds and axle-load, thus improving operating efficiency. Details of works to be performed on each line, with expected time scheduLe, are given in Table 12. 4.05 Motive power and rolling stock include seven mainline diesel locomotives (three for standard gauge and four for meter gauge) of 1,0u hp to replace 17 diesel locomotives of 620 hp purchased in 1950, which are uneconomic to maintain and operate; the new, more powerful locomotives mill also make double and triple heading of trains unnecessary. Ten railcars of 600 hp, of modern design and increased capacity (four for standard gauge and six for meter gauge) will replace 17 units which must be scrapped; the five trailers (two for standard gauge and three for meter gauge) will replace an equivalent number of overaged units. 640 freight cars (all meter gauge) of improved design and capacity will replace 1,415 cars over 4o years of age. 34 ballast cars are for track works under the project and continuing maintenance requirements. 4.06 Workshop equipment is limited to minimum requirements; more eauipment will be needed but it cannot be defined until the study of the workshops, to be undertaken as part of the project, is completed. - 18 - L e%1 MI -L. -1 n12 4 .±nTe consulang services are bnose aescra0e in paragrapub .Ur (management), 3.23 (motive power and rolling stock), 3.24 (stations), 3.25 kwork5hops), and 3.44 (costing). Terms of reference for all studies nave been agreed with SNCFT. Finalization of the contracts is expected soon and completion of the studies by mid 1570. It is expected that the consultants' studies will lead to the identification of a second railway project, the scope and timing of which will depend upon the performance in the execution of the present project. 4.08 For the reasons given below the proposed loan Includes a provision for interest, and other financial charges due on the loan during the construc- tion period of the project: (a) funds generated by SNCFT during 1969-72 will not be suf- ficient to finance SNCFT's share of the project and simultaneously pay interest on the proposed loan; (b) although SNCFT will progressively profit from cost reductions, the benefits resulting from the project will nevertheless not be fully felt until 1973; (c) substantial payments of Tunisia's foreian debt fall due during 1969-72; postponement until 1973 of interest pay- ments on the nronosed loan will heln snreading the burden. C. Execution of the Prniect on Promremsnt h.09 SNOFT is comptent n arn y ut e + niect- T. han reuePte Italconsult to prepare the technical specifications for the motive power ~ndrolin stckincluded in the project, andthi W ile ar__alt the consultant in conjunction with the assignment described in paragraph 3.23, Track ree ,aand improv.ement works willI- be doeby Mrn forces; co-_nc r e tn sleepers will be manufactured in SNCFT's workshops which are adequately W WIL F.HL.F%d~JOW* Itn OU11IL JJ. VJ A.-.L'A %,CIjJLD Ua-L.LCIDU %.C24O), will also be carried out in SNCFT's workshops. Previous experience has - TVA&*s WaArLv %144 %dU4LJLL.Y 0LAA%. t.AJ0I UL &V'.L j10.CUL(%.L "U L Q.I . W1AlV U..L I-L. VIC W A.UVA that of imported complete cars; in addition it reduces substantially the 4ay Cos esmutUaes of the foreign exchange elements of the project are based on the most recent quotations obtained under international competitive bidUng for similar items financed by the Bank Group. The provision for motive power and rolling stock includes an allowance ranging Irom t% to 10% for spare parts. Although there is presently no inaucation that world prices for steel - the main component in the project items - would increase, such possibility should not be ruled out because or the continuous increasing cost of labor in industrialized countries. An overall contingency allowance of 5% has been added to the foreign exchange estimated cost of the project, and consequently to the proposed loan/credit. Estimates for local works are based on actual costs for similar works recently carried out by SNCFT; ad valorem custom duties are those presently applied. A 5% contingency has been allowed for works payable in local - 19 - currency to allow for the nossibility of a general increase of the minimum legal salaries during the construction period of the project. 4.11 All foreign exchange project items will be procured through in.ornn+An1rI c-nopetitve bidtina- in acco^rdel-n wtit.h .he nYrnc-nAirP_qe) rfthp Bank Group, except for concrete sleeper clips which will have to be procured frM the F.-an. Patentee; the forei5 -1-i-q- ~ 4 n .+Jm+,r about US$300,000 equivalent. Project items to be imported through interna- tional competitive- 1,ddAng are: -- crossings and welding material; 110,000 steel sleepers; I 'IL -A.-%_ - -X-- ^ n^ I - - - - -- - - -- -A J.I.IS anU U.LU-UdrUi IUr 6U~VVsAJV UVIIUJ'L~Aa O.WYULZ UL-LLU steel elements; and track maintenance equipment. (b) Motive Power and Rolling Stock: 7 diesel locomotives, 10 railcars, 5 trailers, 3 Dalast cars, and components lor the manufacture of 640 freight cars. (c) Workshops: Various machine tools and equipment. 4.12 Under the present SNCFT regulations bids over D 50,000 must be approved successively by SNCFT's Board, a special Award Board for railway contracts and the National Board of Award. The average delay for final approval is about six months which hinders seriously managerial action. During negotiations agreement was reached on simplified procedures, namely: (a) Contracts up to D 100,000 will be entered into by the General Manager, without prior approval from SNCFT Board, or Government. (b) Contracts over D 100,000 will be approved by SNCFT Board, after consultation with a Railway Award Committee. 4.13 The project is expected to start by mid-1969 and its completion is forecast for theend of 1972. All the foreign exchange items are ex- pected to be imported in 1969/71, with the proposed credit funds fully disbursed in 1970 and the proposed loan funds fully disbursed in 1971, except for interest during construction. Progress payments in foreign ex- chanae and local currency are scheduled as follows: fl 000 $COO Local Currency Foreign Exchange Equiva- Total Works Customs Imnorts Interest Dur- lent ing Construc- Foreign tion exchanLe I169 2 - QA )10t) qnn P0l o no()'it 1970 7,700 1,300 1,300 5,000 100 9,720 1071 3 0A 1,300 370 1,910 900 96.g0 1972 1,635 1,250 385 730 Total -L_')2J4 4, L-> 2,170 0.,1 715 .L 1,000LA Disbursements from the loan/credit accounts will be made on the basis of actual approved foreign exchange exDenditures. IDA funds being user first. .14 Contracts for the consultinL services incnvd in the prnojet are expected to be finalized soon, which might imply down payments by SNCT before the proposed loan/credit an be signed. Benana tho rentyo+c ae urgent and will have been entered into in agreement with the Bank, it is recommended that they should he raimhnioe onie P emad+ A.vA. f4 in- --+ reimbursements would not pre-date April 1, 1969 and the total amount involved would not exceed uSt10non Pmniuln+ L.15 The propvvoed lon/rei roiefor 4-1- --- ------ cost of items required for present traffic levels. If there are savings in the Ba4ID-4nne itms 4-t4 ispoosdta-teeb ----A-' --±±~~ foreign exchange cost of additional but similar project items to be determined in agreement with tUh ank, and on the basis of the recommendations or the consultants. Any additions would help SNCFT to deal with the expected traf- 5. FUTURE TRAFFIC, EARNINGS AND FINANCES A. Future Traffic 5.01 Traffic prospects for SNCFT are good. A study made by Italconsul.t, as part of the Tunisian Transport Survey. shows that rail t+rnfic iso n- pected to increase steadily, although unevenly, for all categories of pas- sengers and aoods. Details of traffic forecasts fov the peiod 10619A07cre in Tables 13 and 14; an analysis per category of traffic and groups of com- modities is riven in Annex 5; J+.+.k Jr14-r --- + + -, - -- - ' a mo r competitive transport sector. The summary of traffic trends shown in Table 15 indicates that the antni l6AA-1067 and exec-+e 10A68197eff e annual increases are 6% on the Northern-Center network, 11% on the Southern network, with an overall weighteond A for QunC. Th1se a g realistic. 5.02 Phosphate traffic projections on the Southern network are based on -h assumption t th ,aLCes raay line anu tU PUrtu o Uaues Wa.LL be operative by 1973. From 1973 on, phosphate traffic has been apportioned between the S-a and Gabos rutes; ,.( mu.j"on ons (3.U 0millon tons for export; 0.7 million tons for the fertilizer plants) are expected to be carried he existing Sfax route and the remainder, about 2 million tons, on the new Gabes route. This distribution is consistent with the Government intention, ,,~ 4- T-_~ , lrhefrah 4" Ir jau %AAMunuou uuring tne negotiations Sor tne Lecond Tunisian Port Project, to continue exporting some 3.0 million tons of phosphate through Was. nuw ver, it may be that continued export through Sfax will prove un- economic, and in this event it is understood that the Bank and the Government wLL revIew the situation. 0 ruture Qperating Results 5.u3 A detailed operating income and expenditure forecast 1968-1975 is given in Table 16. The revenue forecast is based on the traffic forecast - nl.A using present tariffs; the forecast expenditures take into account the cost nf MnVinaY +.)I 0"Aw~tincr +.V-!n'rr pvNg3e.p -1p +1, -4A 'K-4- __ .,~ cm i lation are in Annex 6. Gross operating revenue is expected to rise from D 9Q1 millinn in 10A +- n I [L 1 m4114- , 4- ovE * - f'&ncv operating expenses, including a provision for depreciation, would increase from D 9. iinJLL196 to7V DV 12. mUl"l1 inJ975 anl icreUase of 31.b 5.0 DeDreciation. althouph onlat.d at the hich fieniyn ^o 17< ^f gross operating revenue; remains nevertheless low (2.0% - 2.5,) when compared with gross fixed assets as tentatively valued by the Bank. It may well be that part of the fixed assets should be written-off and that the value of gross depreciable fixed assets will be lower than the figures arrived at in Table 9. A detailed valuation of SNGFT's fixed assets is included in the terms of reference of the costing consultants referred to in para. 3.44, and agreement has been reached during negotiations that SNCFT will provide for depreciation allowances, from 1971 on, based on replacement value of all depreciable fixed assets and their useful life calculated in accordance with sound accounting principles. 5.05 The following is a summary of income account forecasts during the period 1968-1975 (D 000): Gross Operating Ex- Operating penses Exclud- Cash Depre- Inter- Net Revenue ing Depreciation Surplus ciation est Surplus 1968 9,543 7,984 1,559 1,622 170 (233) 1969 10,387 8,335 2,052 1,766 204 8;2 1970 11,516 8,745 2,771 1.958 178 635 1971 12,335 9,053 3;282 2,097 155 1,030 1972 13,354 9,383 3.971 2.270 128 1-571 1973 13,730 9,510 4,220 2,334 389 1,497 1974 14.538 9.777 h.761 2.72 61A 1 6M 1975 15,157 9,971 5,186 2,577 616 1,995 The operating ratio which was 107% in 1967 is expected to improve to 87% in 1972, at the end of the project Deriod. and to 81' in 1975. Howuver, a shown in Table 16, improvement of SNCFT's operating ratio is due to the Southern network. the Northern-Center network continiine to opae + deficit. This indicates that, on the basis of present tariffs, phosphate from the South would nnt-innp .nhniijdi7ina otherrafi +aPn 4 paiul passenger traffic, on the Northern-Center network. Measures to correct the situation are discussed in nara 5-07. 5-06 IMe1 in+.Pr0:C+. nevvr-e' rai ol mpo porssvlAo1. times in 1972, and decrease to about 4.0 times thereafter when interest on the --r. A t vu rvne uub cUverage ratio would improve to 7.7 times in 1972, and decrese to about 4.5 times thereafter when repaymentj of the proposedZ" loan/credi stDs.Tese are satisfactory LeVOeLS. .0? The expCUe raes of return on tne average net fixed assets given below show the fundamental unbalance between Northern-Center and Southern netwoks.J 22 - Year Northern- Southern SNCFT Center Network Network 1968 -10.8% 16.0% -0.3% 1969 - 9.0% 18.3% 1.2% 1970 - 6.1% 20.% 2.9% 1971 - 4.3% 19.3% 3.4% 1972 - 3.6% 19.5% 4.5% 1973 - 3.2% 19.4% 5.7% 1974 - 2.9% 23.0% 6.1% 1975 - 2.5% 26.5% 7.2% While, on the basis of present tariffs, SNCFT's rate of return is expected to improve steadily, and reach an overall satisfactory level by 1975, the rate of return on the Northern-Center network remains negative. It has been agreed during negotiations that the rates of return on both networks will be progressively balanced, with SNCFT vielding by 1971 a rate of return of not less than 45, and by 1973 - when the full benefits of the project will be felt - a rate of return of not less than 7 on the net fixed assets in use. It has also been agreed that the rate should improve further in subsequent years, The financial targets.for 1971 and 1971 will be rcnlcuated on the new valuation of the fixed assets arrived at by the costing consultant, in nartmPmnt wit.h AN!Fr. Tho +.nrat fni- 1971 wniilrl ipmni"n only nn ovprqll tariff increase of about 1.5%. However, to attain a better balance between RNOWTim' I rTM "oVrak +Mwifffm , +ho WT"+nhevm_nvnfn " +r aill hnv?p +n be increased more substantially, while tariffs on the Southern network may -vell he A-ra-md 5.08 During negotations confimatioan was obtained that, subjctv t approval by the "Commission d'Approbation des Investissements", net operating revenues - J.-E re e± 40UAlInO - Ult are ;11Ut: L1-V11 .L L±11UU11A:1 " L SNCFT's revenues will be fully used to finance part of the railway plan, incuLug the project, and since anCr is expected to selI-finance a uatveria part of future investment, the forecast income accounts do not provide for paymentW of3 incorne~ tax~. C. ro jee F.rin,ncig and Proposed Bank Loan and ID& Creduit >.09 The foreign exchange element of the project cost is estimated at D 8,925,000 (US$17,000,000 equivalent), or 58% of the total project cost. It is proposed that the project be financed by a Bank loan and an IDk credit of US$8.5 million each. SNCFT does not benefit from exemption and custom duties to be levied on the project import components are included in the project local cost. They are estimated at D 2,170,000. The Government has agreed during negotiations that the custom duties will be reinvested in the project through capital contribution to SNCFT's equity. The balance of the project cost, D 4,250,000, will be financed by SNCFT's own funds. The financing plan of the project would thus be as follows: (D 000) Pr%nn.qd P-nnk Innn mnd Tnk credit 8,925 58% rovernment. Con+.rihi+ANn 9170 1% sNiis on Funds 4 250 28% I r' lfk10M% - 23 - 5.10 The proposed Bank loan would be made to SNCFT which has the right to borrow. subject to Government approval. A term of 25 years, including a h-year period of grace, would be appropriate. The proposed term is related to the expected average economic life of the project items. estimated at about 27 years. The proposed IDA credit would be made to the Government who would relend the nroceeds to SNGF on the terms and conditions of the proposed Bank loan. During negotiations agreement has been reached on a subsidiary loan aorPPmAn. hritwon thp. PrnvPnmPnt and SNrT n- WPn"Pn,.+. rnnin Pirmr 511 The -^shf l.owoeA_107c ev-tynr, in, rPnhl, 17. W.- pected sources of funds take into account Government contributions of (i) T)o 170 f)n me - -1 +4- 4 r+- Ar+c-m 4n +me t4;) T) ),On Mn0 onii-q 414 C_, I 'S' Y Wl "~& '...J VWJL VA " WI W" Vk.Wj_ "_ - I - - ' -" "" - 3 -1 to 60% of track expenses in 1968 on the Northern-Center network, as provided 4'. -. CM0,M.Li - 4 0.4,4. . - - (4 4 4h N h n n V nnn ~ rinn for imposed below-cost tariffs during 1969 and 1970 (para 3.40-f). Also ±11U±LLUtZU LO I t-JJM L V 11 LI-LUil .L-:UL LU .Lrom~ RtuI-m~a"4 .LJJ P ~ ~ ..L ~ ~ signalling works and equipment. The cash flow allows for the investments included ia the railway plan 19;7-(, ad 1i particular forhe co nstruction of the new railway line Gafsa-Gabes, at an estimated total cost of D 6 million. while the Government has decided on the construction Of the line Ung the project period, no arrangements have so far been made for its financing and., although a Government participation should not be ruled out, the cash flow assumes that the full cost of the construction would be borne by SNCFT. In any event, it has been agreed during negotiations that, during the project period 1969--72, investments outside the project, to be fully financed by SNCFT's own funds, shall not exceed D 6 million. 5.12 A summary of the forecast cash flow for the periods 1968-72 and 1968-75 is as follows: (D 000) Sources of Funds 1968-1972 1968-1975 Opening Cash 1,221 1,221 Government I,590 4,590 IDA Credit 8,925 8,925 Other Borwing9 _71A 9-718 Total _1 05,256 Apl.ication of Funds The Project 15,345 15,345 Other Railway Plan Items 10,000 10,000 Other Capital Expenditure 1,718 1/ h,718 1/ Increase in Stores 412 712 Increase. in3 orking Capitai 398 398 Debt Service Z>,9ou Closing Cash 46 8,103 Total 31,089 hS,2>o 1/ D 1.718.000 in 1968. and D 3,000,000 in 1973-75. - 24 - 5.13 Cash availability. although eenerally satisfactory. is expected to lower towards the end of the project period. Therefore it is possible that durine the oroiect neriod SMCFT will need financial assistance outside the Government contributions referred to in para. 5.11. It has been agreed. durino negotiations that- should the need for some ansistanrt- aris-e the Government will provide SNCFT with funds on terms and conditions satisfactory to the BLank. 5.1h Tf traffic and rpvenue develon as Ancted, a quhqtantial cash surplus should accumulate from 1973 on. Part of the surplus is expected to finane a nnrtion of the canital invetments which will hn rmniw to nnn with the expected increases in traffic. E. Forecast Balance Sheets 5.15 The pro-forma balance sheet position, 1968-1975, is given in Table 18 and the rant for 1068 1079 and 1075 are snrmmoizd ealow* (D 000) 1968 1972 1975 Net Current Assets 1,345 2,46 10,403 Net Fixed Assets r_puL) 39,66 Q;Y,-o2 Total 23,756 42,129 h5,685 Iebt 4,273 12,723 11,146 Equity 1L83 29,406 3.39 Total 23,756 L2,129 -5,685 Although debt is expected to increase from D h.3 million in 1968 to D 12.7 million in 1972, an increase of about 300', the debt/equity ratio will not exceed 30/70 which is satisfactory. Details on debt service over the period 1968-1979 are given in Table 19. During the project period the current ratio would vary between 2.0 and 3.0 and the liquid ratio between 0.7 and 1.7. The latter may result in inadequate working capital and, as explained in para. 5.13, may require Government assistance. 6. ECONOMIC EVALUATION 0.01 A major objective of the proposed project is to reduce the costs of handling traffic at existing levels of output on SNCFT. A small, but incidental, increase in the total capacity or the system will result, now- ever, from the improved track conditions, more powerful motive power and newer rolling stock as well as from the improvements in managerial and general operating efficiency envisaged under the project. For reasons explained in para. 3.23 the focus of the project has been limited to existing requirements and not future needs. 6.02 The major elements of the project are highly integrated, with slightly over one-half of the total cost being for track improvements and one-third for more powerful locomotives and.new rolling stock. Accordingly -25 - the method of analysis used was that of comparing the totals of the various elements of costs - operating, maintenance, and overhead - with and without the project. Because particular parts of the project consist of items with unequal economic lives (such as track improvements and locomotives), the benefits were evaluated on the basis of the shorter-life item and appropriate adjustments made for the residual value of the longer-life item. 6.03 The main measurable benefits of the project stem from: (a) a reduc- tion in the cost of maintaining track, locomotives, and rolling stock: (b) savings in traction costs; (c) savings resulting from a general increase in operating efficiency over the entire railway system through a better uti- lization of equipment - e.g. decreased turn-around time and less deadweight of freight cars hauled: and (d) passenger time savings. The benefits under these headings were initially estimated by Italconsult as part of the recent Transport Survey and subsequently reviewed and revised by SI%CFT and in the Bank. 6.04 On this basis, the principal elements in the project were evaluated separately, i.e. line by line includina track. motive nower and rollin. :ztnk (see Annex '7). The economic returns for the four lines in the Northern- Center network are as follows: Line IA 9 Line 5 12, Tine 6 Line TA 13, A sample of the costs/benefits analysis for Line 6 is given in Table 20. 6.05 In view of the high degree of interdependence of track renewal and motive nownr and tnninment rnnewal on thema fno li n ech, can n i--"-:AmmI as a sub-project of a larger one for which the overall rate of return is slight1v over 197. 6-M Tna thekm Sout+hern regaion, the proiaect prvides for" complete renewal of 49 km of track for the branch lines serving the phosphate mining industry. The tntal 1:npEh nf +Ihne h-nAnh lines is 77 km ofP v-,'k 99 1- - - -In-A- been renewed and upgraded. The renovated lines have a capacity of 36 kg/m levels of phosphate traffic, these lines would have to be replaced about once eve- -three yea-rS unl'eSS their capacit-y Ai -UgraUe t-- 3VTh- their complete renewal and improvement as provided for in the present project at D 250,000 annually over a period of 30 years, as well as some possible recurrent capital outlays alone, the benefits from this investment would JJ~J . 0 J.0 ~ %d.L .LVVJUL&A V± .L ;UUj C.,?/J. %vI Dae pruect wIL nave ouhur benelits to the national economy ana which will accrue to railway users in the first instance rather than to 0NC.. DTENe are iaproveu quality of service in terms of frequency, regularity and reliability, less damage to goods, etc. The value of these - 26 - additional benefits, however, has not been quantified. To this extent, therefore, the above estimated rates of return understate the full economic benefits of the proposed project which is economically justified. 7. RECOPMENDATIONS 7.01 During negotiations of the proposed loan and credit, the following matters were discussed and agreed with the Government of Tunisia and SNCFTs (i) Increase of user representation on SNCFT's Board (para. 3.02); (ii) Non-rail activities by SNCFT to be limited (para. 3.04); iii) SNCFT to anoint a Deputy General Manager by not later than July 1, 1970 (para. 3.05); (iv) Annointment and terms of reference of consultants (paras.3..7. 3.23, 3.21, 3.25 and 3.40: (v) Transfer of track ownershin to SNCFT (Dara. 3. 11)s (vi) Improved maintenance of SNCFT's telephone lines bhy PTT (para., 3.18); (vii) Abandonment of uneconomic lines (para. 3.29 and 3..30)-. (viii) Financial relationship between Government and (ix) Review of export promotion policy for minerals (para., 3.43); (f-\ asre to- im pv QCINTLPS fi-qAiapoityn (pr 3.ln and Arney. 3); ~A. I Lj Las ig' V .LLLO LL dJ..V.J .A SNCFT's comptroller (para. 3.49); (xiii) Contents of railway plan 1969-72 (para. 4.01); (xv) Simplification of approval procedure for SNCFT contracts (xvi) SNCFT's depreciation policy (para, 5.04); /~~ *f1 n7% *. _ kx,li) Financial targets kpara. .%J); (xviii) Income tax exemption (para,, 5.08); kx-X) ne-investment by U overnmenU as equAy in OkT of proceeds from custom duties (para,. 5.09); :rxx) Re-lending conditions of IDA funds (:x:xi) Limitation of capital expenditure outside the project (para.. 1 i (~x:idi) Government financial assistance to SNCFT (para.. 3.13). 7.02 Some of the conditions listed above require the amendment of SNCFT1s Statutes, and it is recommended that the submission of the Statutes Do tre Tunisian National jLssembly, as well as the completion of the agreed financial measures, be made conditions of sigi=*g of the proposed lomn and credit. 7.03 The project provides a suitable basis for a Bank loan and an IDA credit olo USY'8.5 rtillIion equivalent each. r.TYe proposed loan would be made to SNCFT with a term of 25 years, including 4 years of grace. The proposed credit ould be made to the Government of Tunisia and relent to SN(F on the termes and conditions of the proposed Bank loan. April 11, 1969 TUNISIAN RAILWAYS ORGANIZATION OF SNCFT L BOARD - - - f - ~- _ _ _ - - _ _ _-- - GER2AL MSAOUER TECHNICAL GERAL STMIES AIENISTRATION F INANCE SUPPLY MECHANICAL OPMULONS PEREANNT WAY Statistics Salaries ani Wages Central Accounting Contracts Administration Administration Administration Traffic Costing Personnel Bxiget Stores Rolling Stock Operations Signalling and Personnel Policy Claims General Accounting Administration Motive Power Cmmercial Telecommnications Documentation Social Welfare and Punch Card Unit Technical Permanent Way Health Bridges and General Matters Buildings February 3, 1969 TUNISIAN RAILWAYS Track Characteristics 20 25 30 34 36 75 38 16 100 1. Type of Rails kg/n kg kz/- kg/ kg/ La kg/r kg/r lb/yd Total Northern-Center Network Km of standard gauge 8 198 46 5 115 97 9 478 Km of meter gauge 105 433 215 6 252 9 24 1,04A Km total 105 441 413 6 298 14 139 97 9 1.522 7% 29% 27% 1% 19% 1% 9% 6% 1% 100% Southern Network Km of meter gauge 213 243 456 148% 52% 100% 2. Age of Rails 50 years 30 to 49 20 to 29 10 to 19 Less than and over years years years 10 years Total Northorn-Center Network Km of standard gauge 275 111 15 59 18 h78 Km of meter gauge 1 132 157 19 22 1 0 Km total 989 243 172 78 40 1,522 65% 16% 11% 5% 3% 100% Southern Network Km of meter gauge 136 13 307 )i$ 30% 3% 67% 100% 3. Type of Sleepers Wood Steel Concrete Total Northern-Center Network Km of standard gauge 122 328 28 478 Km of meter gauge 265 677 102 1H4 Km total. 387 705 130 25% 66% 9% 100% Southern Network Km of meter gauge 200 256 456 43% 57% 100% February 3, 1969 TABLE 2 IUNISIAN RAILWAYS Co-.position of Motive Powar and Rolling Stock as at December 31, 1967 i. LOCOMOTIV1S Weight No. (tons) H. Year Aety a. Northern-Center netirork Standard gauge 8 55 620 '5) 1950 17 Line: freight ard passengers 540 400 1958 9 Switch, freight anJ pansengers 13 (a~eage 14) Meter gauge 2 67 620 1938 29 Switch 25 5 620 1950 17 Line: freight and oaseners i 3,9 LO 1958 9 Switcfh, freight a-d pasneirs 12 59 950 1965 2 Line: freight and passengers (average 12) b. Sotsrern net.work 6 92 1,400 i96h-66 1-3 Linei fraight 17 51 600 1950-51 16-17 Line : freight and pa-::pers (Meter gauge) 4 b8.5 560 1962 5 Switch, freight and passeers 4 49.5 650 1965 2 2 26 160 1955 12 (average 10) Total II. RAILCARS Weight NO. Agen>Te- Du ty a.Northern=Centpr netw,,rk Standard gauge 5 33 300 1935 32 katn line 6 33 300 1949 18 Main line 6 3- 1961 - Main_l 17 (average 17) Meter gauge 6 42.14 600 1961 6 Main line 6 47 600 1951 16 suburban 6 39 300 1952 15 Suburban 12 b5.5 100 1937 30 315 (anerage 19) b. Southern network (meter gauge) 4 hi 370 1916 21 Main line ILI. PASSENGMR GARS .n twork Standard gauge 27 b2 to 58 Meter gauge 60 12 to 72 b. Sonthorn networi (meter gauge) 31 40 to 68 Total 118 IV. VANS NO .g a. Northern-Centør network Standard gauge 18 U1 to 64 Meter gauge 28 4h to 62 b. Southern network (meter gauge) 28 46 to 68 Total 7L 7. TRAtERS a. Northern-Center netvork Standard gauge 10 6 'IPter gauge 27 6 to 18 b. Southern network (meter gauge) 2 13 Total T. FRIOHT "ARS Years of Life No. Under 25 5 to . ' 0 to 50 Over 50 a. Northern-Center network Standard gauge: box :are 359 flats 173 gondolas 276 minerals 85 tan-ks 23 othe re 2 9 330 165 1J46 317 'eter gauge: box Tara 571 flate 888 gond las 400 minerals 548 tanki 46 others 6 2, 539 249 196 1,534 b. Southern etwork (me er gauge) box ars 123 flat's 80 minerals 1,532 tanldt 39 others 8h 212 45'9 1,197 Total 5 1,081 (20%) 1,i (8%> 791 (15%) 3,0 8 (57%) February 3, 1969 TABLE 3 TONISIAN RAILWATS Summary of Operating Statietics (all traffic) (Northern-enter Network) 1957 198 1959 UO 1961 1962 1962 1961. 1965 196 . TRAFIC Pass-km (million) 261.7 255.0 295.1 320.9 331.8 380.3 409.7 426.7 141.7 483.7 Net ton-km (million) 421.3 413.4 427.8 488.1 433.2 411.6 433.1 138.7 485.5 514.0 Traffic-units (ton-km + pasn-km) 683. 0 .. 722.9 809.v 768.o 791.9 842.8 865.4 923.2 997.7 I. OPERATIONS Train19 (000) St 1,419 1,400 1,433 1,561 1,488 1,581 1,622 1,691 1,707 1,726 34Y.7>fl4 _J,42 3,BU 3.996 3.849 3.788 14.018 I.8Shb Ai Total 5,71 lm 5,33 t39 C64 Engine-km (000) Dizeel st 635 611 676 763 709 678.8 675.? 742.4 775.5 786.0 M 2,190 2,576 3,ikh 3,223 3,117 2,771.3 2,877.7 2,800.2 3,063.5 3,026.0 Railcars St 943 1,052 934 999 1, Ow 1,407.6 1,466.8 1,421.4 1,3m.0.7 1,233.0 M 2,160 2,043 1,848 1,822 1,828 2,348.6 2,)459.4 2,207.2 2,061?.8 2,211.9 Number of engines in fleet St 5 11 11 11 fl 11 11 11 13 13 m4 30 40 40 0 40 0 40 40 50 50 Railcears St 11 11 11 11 16 17 17 17 17 17 4 Tt mi p2L 24 24 24 29 30 30 30 30 3 Total m,otivre power -___ ___ units 70 et 86 66 96 98 98 0' Engine-km per engine-day in fleet Diesel st 347 152 168 190 176 169 168 184 1.63 165 m 200 176 215 220 213 189 197 191 168 165 Railears St 231 262 232 2k8 178 n.a. n.a. 229 P11 198 m4 246 233 210 207 172 n.a. n.a. 201 1.88 201 Traffic-units per motive power ki n fleetmillion) 9.7 8.8 8.4 9.4 8.0 8.0 8.6 8.8 6. 9.n Traffic-units per train-lon (million) 132 132 136 1k5 i" 117 14? 156 362 17 Pass-km per peasenger ear in fleet (million) 1.9 1.8 1.9 2.4 2.0 2.2 2.3 2.5 2.5 2.8 Ton-km par frelght car in fleet (700) 129 124 133 146 12b 124 123 124 ]1i 148 Freight care loaded (000) St 38.6 27.3 27.8 38.7 35.3 n.a. n.a. 46.0 LE.5 58.6 Y Total 103.1 111.7 127.1 7 127. n.a. na. 123.0 123.2 121.3 Total5. 15är4 21.~~SY lJE ~ 3 o..-.19ö 172.-7 M Available fright ear days (000) st 322 315 345 333 300 n.a. n.a. 3140 21 338 799 782 836 884 900 n.a. n.a. 91L 989 913 Average turn-round time of freight care (days) St 8.2 1.,6 12.3 8.4 8.5 n-= n.a. 7.3 6.6 5.7 7.7 6.9 6.5 6.5 7.0 n.a. n.a. 7.4 7.1 7.3 Average load of freight care (tons) St 14.6 11.9 11.5 12.8 11.8 n.a. n.a. 13.6 16.0 14.7 16.4 18.2 15.8 15.7 14.7 n.a. n.a. 14.0 15.7 16.3 I. STAFF Number of employees (total) 4,767 4,819 4,741 4,98 5,083 5,333 4,683 4,908 5,0%) 5,452 Traffic-unit 000/employee 143 138 152 163 151 148 178 176 1132 183 1 it Standard gauge: M • Meter gauge February 3, 1969 TABLE 4 TUNISIAN RAILWAYS Freight Traffic Statistics Iron Oue nor r1-3en-er Ceoroyaoy Lo UO Toal TONS (MmILION) J96- 762 235 L4 00 .183 -099 2,10- 1962 1609 26 L946 1 0 64 o228 19163 170 281 628 287 109 241 1965 1762 674 369 22 132 2631 1966 1,230 252 393 150 73 2,768 1967 Northern-Center Network 890 218 290 167 705 2,270 Southern Network 3,393 577 3,970 Total SNCFT 890 3,611 290 167 1,282 6,240 TONAMg (MILLION) 1962 160 56 149 314 105 140h 1963 175 51 62 28 109 425 1964 1714 67 36 22 132 431 1965 193 86 143 214 134 480 1966 231 63 A1 29 135 509 1967 Northern-Center Network 164 52 38 33 128 115 Southern Network 708 59 767 Total SNCFT 164 760 38 33 187 1,182 Februar 3, 96 TABLE 5 TUNISIAN RAILWAYS Passenger Traffic Statistics Northern-Center Network Southern Main Suburban Network Total Lines Line PASSENGERS (MILLION) 1962 3.5 7.7 11.2 1963 3.9 8.3 12.2 1964 4.0 8.9 12.9 1965 4.1 9.5 13.6 1966 4.2 10.5 14.7 1967 3.2 10.4 .4 14.0 PASS-KM (MILLION) 1962 280.8 99.5 380.3 1963 301.8 107.9 409.7 1964 310.4 116.3 426.7 1965 318.5 123.2 641.7 1966 347.5 136.2 483.7 1967 262.2 134.9 25.6 422.7 February 3, 1yy TUNISIAN RAILWAYS Respective Contribution frai Users arxi State (D 000) Total 1957 1958 1959 1960 1961 1962 1963 196h 1965 1 1967 1957-67 A. Contribution fram users 3,762 3,715 4,172 1,660 h,3h5 4,421 4,519 4,346 h,722 5,252 h,842 48,756 B. Contribution fram State: 1. Compensation for loss of reveime on iron ore transport - - - - - - 119 178 195 238 173 903 2. Track expenditure 513 524 565 557 626 ý678 663 686 814 987 901 7,514 3. Subvention 915 860 - - 98 139 19 249 617 812 - 3.848 S/total 1,L28 1,38L 565 557 72 _ 817 9 0 1,3 1,626 2,037 1,07h 12.265 C. InTAL 5 5,099 ,737 5,217 538 5L9 5,459 6,348 7,289 5 916 61 021 01 B/C % 28% 27% 12% 11% 11% 16% 17% 20% 26% 28% 18% 20% February 3, 1969 TUNISIAN RAILWAYS SLuma Income Accounts 1962-67 asshown in SNCFT Boo:ks (Dinars 000) Northern Southern 1962 1963 196h 1965 1966 Center Total Revenue Traffic revenue: Paasengers 1,190 1,284 1,333 1,415 1,598 1,594 13,4 1,728 Freight 2,848 3,C051 2,991 3,323 3,648 3,142 3,708 6,850 Other 383 303 199 18o 243 279 101 380 S/total 147Tn 71 67 L r* Non-traffic revenue 169 168 277 156 239 324 - 324 State contribution for track expendliture 678 663 686 814 987 901 - 901 Total revenue 5,268 5,469 5,486 5,888 6,715 6,24o 3,943 10,183 worIng Expenses 4,916 5,092 5,201 5,825 6,669 6,012 1,913 7,955 Taigs on-gmssrevenue 208 221 225 256 407 193 Total warkin ea !5,124 5,36 5,26 6,81 7,076 6,331 2 106 1437 -Working surplus/deficit 144 153 60 (193) (361) (91) 1,837 1,716 Depreciation: on Government initial contribution 80 76 72 68 64 500 500 on fixed assets acquired since 1/1/57 127 139 135 198 219 580 450 1 Total dereation 207 7S -U5 -1 - Total operating expenses 5,331 5,531 5,633 6 7 7,359 L1 2,55 9 OperatirW def Lcit/surplus (63) (62) (117) (159) (6U.) (1,171) 1,387 216 Interest charges 76 96 102 158 168 131 - 134 Net deficit/surplus -L39) 12) (249) (617) (812) (1,305) 1,387 82 Operating ratio: 101% 101% 103% 108% 110% 119% 5% 98% February 3, 1969 TUNISIAN RAIIAYS Amended Summary Income Accounts 1962-67 (Dinars 000) 1. 9 7 Northern Southern Total 1962 1963 1964 1965 1966 Center nevenue Traffic Revenue: Passengers 1,1y 1,2on 1,333 1, 1o,4u 1,714 Freight 2,848 2,932 2,813 3,128 3,410 2,969 3,708 6,677 Other __383 303 199 180 243 279 101 380 S/Total ,421 619 4,3465 ,723 5-,251 ,42 J7 o13,7o5 Non-traffi Revenue 169 168 277 156 239 32 - 324 Total Revenue before Taxes 4,590 4,687 4,622 4,879 5,49o 6,166 3,943 9,109 Less Taxes on Gross Revenue 208 224 225 256 407 289 193 482 Total Revenue after Taxes , 382 4,63 1,397 4,623 r,08, , , 83760 8,27 Expenses Workinp ERrenses 4.916 4.898 4,94 5,553 6,197 5,868 1,913 7,781 Depreciation 745 759 747 786 864 829 637 1466 T,o-1 v-e-ses AA1 r6A7 691 6.11 7.061 6.697 2.50 9,247 Operating Deficit/Surplus (1,279) (1,194) (1,29LI) (1,716) (1,978) (1,820) 1,200 ( 620) Interest Charges 76 96 102 168 168 13 - 134 Net Deficit/Surplus (1,355) (1,290) (1,396) (1,0) (2,6714) (1,5L1>) 1,2UU 764) Operating Ratio: 129% 127% 129% 137% 139% 137% 68% 107% February 3, 1969 TUNISIAN RAILWAYS Tentative Evaluatiouu o uross and Net Fixed Assets as of December 31, 1967 (Dinars COO) Northern-Center Network Southern Network Replacement Accrued Depreciated Replacement Accrued Depreciated V -1ue DprcitonJJS Va O.LL d-Lu £Jp-Ud±l aue Track Stanuard Gauge 11,000 9,200 1,800 - - - Meter Gauge 20,900 18,100 2,800 9,100 3,500 5,600 Telecommunications 1,500 800 700 500 200 300 S/Total 33,400 28,100 5,300 9,600 3,700 5,900 Motive Power and Rolling Stock Locomotives 6,300 3,600 2,700 3,300 1,880 1,750 Railcars 3,7850 2,700 1,050 300 250 50 Trailers 1,500 600 900 100 80 50 Passenger Cars 2,400 2,200 200 880 800 80 Vans 450 400 80 300 280 80 Freight Cars 8,700 6,900 1Q0 4,650 S/Total 23,100 16,400 6,700 9,800 7,100 2,400 BuildingR.wnrkshons. And Miscellaneous 1,500 800 700 900 800 400 Total 28,000 18,300 12,700 20,000 11,300 8,700 FebruaOy 3, 1969 TUNISIAN RAILWAYS Summary Balance Sheet as of acember 31, 1967 As in SNCFT's Books (Dinars 000) Fixed Assets Northern-Center Network State Contribution: Track Motive Power arrd Rolling Stock Miscellaneous 3,000 Less depreciation 1,32 S/total 1,680 Acuisitions since 1/1/57: Motive Power and Rolling Stock 5,252 Miscellaneous 763 Less depreciation S/total 4,531 Southern Network Track Motive Power and Rolling Stock Miscellaneous Less depreciation 450 S/tat, al (i50) Total Net Fixed Assets in Use 5,761 Wrs anx rrocurement in Progress 1,39L Investments 44 Stores 2,74h 'urrent Assets Cash and Banks in Station Accounts 1,110 State 231 Gafsa Company 1,255 Other 258 Total Current Assets 3,562 TOTAL ASSETS 13,U58 LIABILITIES Current Liabilities: State 950 National Pension Fund 783 Suppliers 1,175 Bank Overdraft 87 Other 38 Total Current Liabilities 3,375 lng-Term Dbt Do "mtic: Tr.eury Advances 952 Treasury Advances for Sofomeca 400 National Pension Fund 215 Socigtd Tunisienne de Banque 210 S/total 1,766 Foreign: DLF 1,088 Eximbank 791 General Motors 125 Coface 649 S/total 2.652 Total Long-Term Debt iI, 'isspense Account: Interest due sn Treasury Advances 251 Interest due on Transury Advances fr Sc.-_ca 4o, Government Payments to Concesenaire 1,211 Other 496 TraSnapense acouw. 1,998 Own Fuods State Contribution Prvisions 3, 575 Total 0m Funds 2,575 tins o82 TOTAL LIABILITIES 13,458 TUNISIAN RAILWAYS THEm POPOSED' FOjCT $ 000 D '000 E a l/ 1/ Local Currency Foreign Foreign CR RR Total Wo Uustoms Exchange Exchange I - TRACK Line 1/6 (73 km) 27.1 - 680 300 80 300 Line T.A. 11.2 - 280 125 35 120 (196 km) - 33.1 550 200 75 275 Line 5 67.8 - 1,500 680 180 64o (278 km) - 117.3 1,860 690 255 915 Line 6 28.6 - 715 230 105 380 (2.32 1m) - 17.8 275 105 35 135 Branch Lines: Gafsa-M'Dilla 13.0 - 290 130 35 125 tabe-d eueyesf 36.0 - 985 290 150 5L5 & Seldja-Moulares nent 810 ho5 90 315 Trnack Mai-n.n-no Equipment 2 10 6 250 73 168 ,270 316 10 4,000 7,620 II - MOTIVE POWER ROLLING STOCK & SPARE PARTS 7 Main line 1400 HP Diesel Locomotives (: StG-4MG) L/ 1,160 - 230 930 10 Railcars (600 HP) (hStG - 6MG) 1,100 - 220 880 5 Trailers (2 StG - 3 MG) 260 - 50 210 Freight & Service Cars: (a) Totally imported: 20 t oaB.last Cars 135 - 30 105 16 MG Ballast Cars 95 - 20 75 Manufacture of: 130 (bogies) Mineral 2r- (MNl An 190 150 690 90 Open Cars (MG) (two-axle) 305 110 45 150 360 flat cars (MG) (two-axle) 965 350 130 665 60 box cars (MG) (two-axle) 220 70 35 114 5,050 720 910 3,T20 6,515 III - WORKSHOPS 250 10 50 190 360 17- nNITT,TTNr ERVTES 360 150 - 210 0 13,930 , 2,065 7,20 V - CONTINGENCIES (aboutr 700 205 105 3907 T~ v 2,17 to o . 5,0 0 VI - INTEREST DURING CONSTRUCTION Total 15,365 6,250 2,170 8,925 17,000 RR = Rail Renewal MG Meter Gauge April 11, 1969 TUNISIAN RAILWAYS TABLE 12 Track Renewal and Improvement Works included in the Proposed Project Sections (mileage point Length of 1/ to mileage point Working Sites Year Nature of Work No. of Line (Km) (Km) 1969 RR (36 kg/m rail) 5 28.6 to 38.6 10.0 h7.7 +. 781 n A 78.1 to 122.1 64.0 CR (36 kg/m rail concrete sleepers) Gafsa-M'Dilla 13.0 977- LY(U U (3O Kg/M rail 5 142.23 to 187.5 .2 concrete sleepers) 192.3 to 214.9 22.6 CR (16 kv/n rail Tabpditt - steel sleepers) Redeyeff 17.0 1971 RR (36 kg/m rail) 5 187.5 to 192.3 4.8 214.9 to 235.5 20.6 270.7 to 278.2 7.5 32.9 CD (L 7)' / l,' , t /- d.41 steel sleepers) 6 206.4 to 235.0 28.6 RR (36 kg/m rail ballast cleaning) 6 162.2 to 180.0 17.8 CR (36 kg/m Seldja- steel sleepers) Moulares 19.0 98.3 1972 CR (46 kg/m rail 85.2 to 92.0 6.8 coLnc-rte TL?' TA I n)- R to 10.2 1. . 1. 11.2 RR (6 kg/m rail TA 19.9 to 72.7 228 ballast cleaning) 74.8 to 85.1 10.3 33.1 CR (46 kg/m rail 1/4 24.7 to 49.4 24.7 concrete sleepers) Tindja-Menzel 2.4 Bourguiba 27.1 71. 10UUJ Z1) KT /CR = Complete renewal (rail, sleepers,ballast) RR = rail renpr al only February *3, 1969 TABLE 13 TUNISIAN RAILWAYS Traffic Forecasts for Passengers 1968-1975 Main Suburban Lines Line Total PASSENGEIRS (MILLION) 1968* 3.6 10.9 lb 1969 4.6 12.3 16.9 1970 lo 1971 6.9 16.6 9 1972 An14.A 0 1973 6 17.82. 197L 6.A 1 9. 197q 7.1 on . e7 PASS-EM (MILLION) 1968* 304 142 66 1969 383 160 543 1970 46o 179 639 1971 506 199 705 1972 544 216 760 1973 575 232 807 1974 605 249 854 1975 635 265 900 * Based on 8 months actual figures. February 3, 1969 TUNISIAN RAIIkAYS Traffic Forecasts for Freight per Main Commodities 1968-197 NOR THERN- C ENTER NETWORK S O U T H E R N N E T W O R - - - Iron Phosphate Cereals Flour Other Total P H 0 S P H A T E Grand Ore SFA Route GABES Route Other Total Total 49US ('~@ ND) 1968* 1,120 220 350 180 820 2,690 3,400 750 4,150 6,84o 1969 1,230 230 360 18,2 828 2,830 3,600 830 4,430 7,260 1970 1,270 250 370 18,4 846 2,920 4,100 950 5,050 7,970 1971 1,310 285 380 186 854 3,015 4,4oo 1,070 5,470 8,485 1972 1,340 290 390 188 872 3,080 5,000 1,210 6,210 9,290 1973 1,340 31.0 400 190 88) 3,120 3,700 1,60 1,290 6,590 9,710 1974 1,350 340 410 192 908 3,200 3,700 2,100 1,410 7,210 10,410 1975 1,350 360 420 195 945 3,270 3,700 2,300 1,500 7,500 10,770 TON-KM (MILLION) 1968* 210 53 62 32 146 503 867 90 957 1,460' 1969 230 55 66 33 151 535 918 100 1,018 1,553 1970 237 60 70 35 160 562 1,045 11i 1,159 1,721 1971 245 68 75 37 168 593 1,122 128 1,250 1,843 1972 251 70 78 38 176 613 1,275 145 1,420 2,033 1973 251 74 82 39 179 625 944 312 155 1,411 2,036 1974 252 82 85 4o ,90 649 944 WLo 169 1,523 2,172 1975 252 86 89 41 200 668 944 k1h8 180 1,572 2,240 * Based on 8 months actual figures. February 3, 1969 February 3, 1969 TUNI SIAN RAILWAYS Summary of Traffic Trenids 1966_ 1967 1972 1975 _Average Traffic Units Irdex Traffic Units Index Traffic Units Index Traffic Units Index Annual (Million) (Million) (Million) (Million) Increase Northern-Oenter Network Passengers: Main Lines 348 100 262 75 93 142 574 165 7% Suburban Line 136 100 135 99 216 159 . _195 i% S/total h8h 100 397 82 709 146 839 173 8% Freight: Iron Ore 231 100 164 71 251 109 252 109 1% Phosphate 63 100 52 83 70 111 86 137 4% Other 215 100 199 93 292 136 330 154 6% S/total 509 100 415 82 613 121_ 668 131 3% Total 993 100 812 82 1,322 133 1,507 152 6% Southern Network Passengers 36 100 26 72 51 1)1h 61 169 8% Freight: Phosphate 727 100 708 97 1,275 175 1,392 191 10% Other 66 100 59 89 145 220 __180 273 19% S/total 793 100 767 97 1,420 179 1572 198 1% Total 829 100 793 96 1)471 177 1j63 197 11% GRAND TOTAL 1,822 100 1,605 88 2,793 153 3,1o40 172 8% Total Passengers 520 100 423 81 760 146 900 173 8% Total Freight 1,302 100 1,182 91 2,033 156 2,20 l?2 8- Total Freight without Southern 575 100 471 83 758 132 848 147 5% Phosphate TUNISIAN RAILWAYS Forecast Incoms Accounts 1968/1975 (Dinars 000) 9 L...L 1 9 1 T 7 0 1 9 7 1 ___ Northern- Southe rn Total Northern- Southern Total Northern- Southern Total Northern- Southern Total CetrCenter Center enT er REVBIUE Traffic Revenue Passengers 1,683 140 1,823 2,057 186 2,243 2,428 228 2,656 2,678 249 2,927 Freight 3,590 4,235 7,825 3,805 4,494 8,299 3,999 5,081 9,08o 4,210 5,466 9,676 Other 250 100 350 250 100 350 250 100 321 S/Total 5,523 4,475 9,998 6,112 4,780 10,892 6,677 5,409 12,086 7,138 5,815 12,953 Non-iaffic Revenue 100 - 100 100 - 100 100 100 100 - 100 Total 5,623 4,475 10,098 6,212 4,780 10,992 6,777 5,09 12,186 7,238 5,815 13,053 Less Tax on Gross Revenue 309 2146 555 342 263 605 373 297 Total operatng Revenue 5,314 L,229 9,543 5,870 4,517 10,387 5,404 5,112 11,516 6,840 5,495 12,335 EXPENSES Working IIoenses Passengers and Freight .5,542 1,992 7,53h4 5,828 2,057 7,885 65,101 2,194 8,295 6,322 2,281 8,603 Other Traffic 250 100 350 250 100 350 250 100 350 250 100 350 Non-Traffic 100 - Su r 100 100 - 100 100 100 100 - 100 5,892 20 ,82 6,178 2,157 8,335 2,2451 2,294 8,745 6,672 2,381 9,053 DePreciation 903 - 719 ,622 998 768 1,766 39 ,08 1 869 980 ,1 934 2,097 2rotal Operatin nes 6,795 2811 _606 :7,176 2,925 20,101 7,540 3,163 1.0,703 7,835 3,315 ll,i10 Oterstg hr ef t (1,5481) 1,98 963) (1,306) 1,592 286 (1,136) 1,949 813 7995) 2,180 1,185 - -- 170 -- - -10 - - 1 1 Net Surplus/Deficit (233) 82 635 1,030 Operating atio 128% 66% 101% 122% 65% 97% 118% 62% 93% 615% 6% 90% Times Interest earned -1.14x 4.6x 7.6x DebthCoverage Ratio 2.8 x 3.5x 0.9x 6x Rates of Retumn on Average Net Non-t -10.8% 160% -0.3% -9.0% 18-3% 1.2% -6.1% 20.4% 2.9% -4.3% 19.3% 31 DExcluding interest durig construction which is capitalized through 1962. April 11, 1969 TUNISIAN RAILWAYS Forecast Incorm Accoants 1968/1975 (Dinars 000) 1- 9 7 21 9 7 3 1 9 7-U 1 9 7 5 Northern- Southern Total Northern- Southern Total Northern- Southern Total Northern- Southern Total Center Center Center Center REVENUE Traffic Revenue Passengers 2,889 26h 3,153 3,060 285 3,34,5 3,223 300 3,523 3,403 3l6 3,719 Freight 4,361 6,167 10,528 4,447 6,287 10,73,4 4,617 6,794 11,1-1 4,767 7,1014 11,871 Other 250 100 350 250 100 350 250 100 350 250 100 350 7,00 6,531 . I,031 7707 6,672 1',429 8,090 15,284 8,420 Non-Traffic Revenue 100 - 100 100 - 100 100 - i 0 100 - 1 Total 7,600 6,531 14,131 7,857 6,632 14,529 8,190 7,194 15,384 8,520 7,520 16,040 Less Tax on Gross Revenue 418 359 777 432 367 799 450 396 846 469 L4 1 883 Total Operating Bvesnug 7,182 6,172 13,354 7,425 6,305 13,730 7,740 6,798 16,538 8,051 7,106 15,157 EXPENSES Wrking Expnses Passengers and Freight 6,493 2,440 8,933 6,624 2,436 9,060 6,785 2,5h2 9,327 6,932 2,589 9,521 Other Traffic 250 100 350 250 100 350 250 100 350 250 100 350 Non-Triffic 100 - 100 100 - 10) 100 _- _10 100 100 S/Totai 6,843 2,5540 9,383 6,974 2,536 9,510 7,135 2,642 9,777 7,282 2,689 9,971 Depreciation 1,221 1,049 2,270 1,262 1,072 2,33 1,316 1,156 2,1 72 1,369 1,208 257_ Total Operating enses 8,064 3,589 n,653 8,236 3,60, ,8) 8LS 3,798 12,2Q9 8,651 3,97 12,58 Operating 3urpus/Deficit ( 882) 2,583 1,701 ( 8111) 2,697 1,886 ( 711) 3,0CO 2,289 ( 600) 3,209 2,609 Interest harges 128 389 618 61h Net Surpu;/DLficit 1,573 1,497 1,6141 1,995 Operating Ratio 112% 585 87% 111% 575 86% 109% 56% 845 107% 55% 83% Times Interest earned 13.3x 4.8x 3.5ic 4.2x Debt Coverage Ratio 7.7x 4.9x 4.ox 4.hx ltes of Reýtew co A~srg føl. -3.6% 19.5% 14.5% -3.2% 19.4 5.7% -2.9% 23.ø: 6. -2.5% 26.5% 7.2% S hag interst drmgøcstruction which ia captalized through 1972. April 11, 1969 > TUNISIAN RAILWAYS Forecast Cash Flow Statement 1968-1975 (Dinars 000) Total Total 1968 1L969 1970 1971 1972 1968/72 1973 197h 1975 1968/75 Sources of Funds Operating Surplus (Deficit) (63) 286 813 1,185 1,701 3,922 1,886 2,289 2,609 10,706 Depreciation 1,622 1,766 1,958 2,097 2,270 9,713 2,3311 2,472 2,577 17,096 Government (Custom Duties) 500 1,300 370 2,170 2,170 Government (Contribution for Track) 420 220 120 Government (Lump Contribution for Tariffs) 1,000 1,C100 2,000 2,000 Proposed Bank Loan and IDA Credit 2,030 5,100 1,10 385 8,925 8,925 Other Loans 718 718 718 Rumanian Credit _ _ 500 750 750 22 . 2,000 Total 2,697 5,582 10,671 5,812 5,106 29,868 4,220 4,761 5,186 44,035 AppLication of Funds The Railway Plan 1969 - 72: The Project 2,930 7,700 3,080 1,635 15,3145 15,345 Gafsa - Gabes Line 500 1,000 2,000 2,500 6,000 6,000 Signalling 500 750 750 2,000 2,000 Tunis Station 1±00 500 500 1,400 1,4On Manobia Tunnel 300 300 300 By-Passing of Sousse 300 300 300 Subtotal Railway Plan 3,430 10,200 6,330 5,385 25,3145 25,345 Other Capital Expenditure 1,718 1,718 1,000 1,000 1,000 4,718 Increase in Stores 12 100 100 100 100 12 100 100 100 712 Increase (Decrease) in Working Capital 1,089 (691) 398 398 Debt Service: Interest Charges on: Proposed Bank Loan and IDA Gredit 289 570 556 1,415 Other Loans 170 20± 178 155 128 835 100 78 58 1,071 Repayment of: Proposed Bank Loan and IDA Credit 100 205 220 525 Other Loans 384 381 383 384± 385 1,917 373 339 31 2,969 Subtotal Debt Service 554 585 561 539 513 2,752 862 1,192 1,174 5,986 T3,373 3,) ?), 1061 6969 5,998 30,25 , 2," 929 2,27) 37,153 Cash at Beginning of Year 1,221 545 2,703 2,513 1,356 1,221 464 2,722 5,191 1,221 Cash. at End of Year 545 2.703 2,513 1,356 46 464 2,722 5,191 8,1'03 8,103 April 11, 1969 TUNISIAN RAILWAYS Pro-Forma Balance Sheet as of December 31, 1967-1975 (nars oo) 1967 1968 1969 1970 1971 1972 1973 1974 1975 ASSETS Current Assets: Cash, Banks and Station Accounts 1,221 545 2,703 2,513 1,356 66 2,722 5,191 8,103 Receivables 1/ 2,284 l,000 1,0)0 1,100 1,200 1,300 1,400 1,500 1,60 Stores and Investments 2,788 2,800 2,900 3,000 3100 3,200 3,300 3 400 3 50 Total Current Assets 6,293 7,345 6,603 6,613 5,656 4,964 7,422 10,091 13,203 Fixed Assets: Gross Value 79,391 / 80,633 84,063 94,263 100,593 105,978 106,978 107,978 108,978 Less Accumulated I)epreciation 5S,600 58,222 5998 61 640h3 66,3 68 7119 73,6 Total Net Fixed Assets 22,794 22,11 2h,05 32,317 ± 50 39,665 8 3331 3L859 3L2 TotaL Assets 29,087 29,756 30,678 38,930 42,206 4,629 45,753 6.950 h8,485 LIABILITIES Current Liabilities 3/ 5,373 6,000 2,200 2,300 2,400 2,500 2,600 2,700 2,800 Long-Term Debt 4,418 4,273 4,980 10,197 11,973 12,723 12,250 11,706 11,16 Equity: Capital Contributions 18,639 18,639 22,572 24,872 25,242 25,21t2 25,242 25,242 25,212 Reserves and Revenue Account Balance 657 844 926 1,561 _2591 4,16i 5,661 7 302 9, 297 Total Equity 19,296 19,483 23,498 26,433 27,833 29,i06 30,903 32,54h 34,539 Total Liabilities 29,087 29,756 30,678 38,930 42,206 Ud,629 45,753 46,950 48,485 Ratios: Current Assets to Current Liabilities 1.2 1.2 3.0 2.9 2.4 2.0 2.9 3.7 4.7 Current Assets Less Stores and Investments to Current Liabilities 0.7 0.8 1.7 1.6 1.1 0.7 1.6 2.5 3.5 Debt to Equity 19/81 18/82 17/83 28/72 30/70 30/70 28/72 26/74 24/76 17-Including assets suspense account. M L 1/ As valued in Table 9 (D 78,000) + works and procurement in progress (D, 1,391). 3/ Including Liabilities suspense account. April 11, 1969 TABLE 19 I -S ii 8M ý 8 A 0~ ~~~~~ 0 .Q .~ .~4 .Q < .A .~ . . . .4< ,QýQ 1 8 8 WIC~ I'e .5ej R .e; .ee .<4 . -... 0o ~8 F 8 b9 Al 5-eje8 e a a a a D a .4a e a & &8 he5- '- 0a ce a a a<2 n He TUNISIAN RAILWAXS COSTS/BENEFITS ANALYSIS FUR LINE 6 (thouland Dinar.) TrackSaving Renewal mainte- Saving S gin Sinig in Saving in in track r Trailera Wagona narce in maint.- ait.- rainte- ng Op general rnaïnte- Im for re- for re- equipment Total nco of once f aCTnc. of n pa- Total Lcement placement placement and new lines and co- ralcrjmane- oeuipment galt ballat renwa and nance ago stra - and new rau. te ni.t.t. 5ua.t wagon trivrragon. 99 150. 0 329. s 52. 8 12. 6 1.000. 0 2i 1. 2 93. 6 2, 849. 7 f8- - - - 33. 2 54.0 12.1 85. 0 32.0 115.0 32. 0 6.4 101.4 461.1 -- 3. 1 53.0 12.2 86.0 32.0 32.0 7. 2 - 385. 5 3.- - - - 2.0 52. 1 1 2. 2 86. 7 32. 0 163.6 32.0 8.0 - 409.46 - - - 23. 0 51. 7 12.3 89. 3 32. 0 163.6 32.0 8.6 - 412.5 - - - 22. 9 st.. 0 1Z. 2 89. 3 32.10 63. 6 32 1 9. 2 - 412. 3 s- - - 22. 7 50.8 2.1 89.2 32.0 163.6 32. 2 9. 6 - 4>2.2 - 22. 6 50. 7 12.1 89.4 32.0 63. 6 32. 3 10.2 - 412. 9 2977 - - - - 22. 6 50. 3 11. 8 89.4 32. 0 163.6 32.4 11.0 - 413. 1 - - - - 22. 4 49. 3 11.6 89.7 32.0 163.6 32.4 11.6 - 412.6 79- - 22. 2 48. 3 10.7 90.0 32. 0 163.6 32.6 >2. 0 - 411.4, 2980 - - - 22. 0 47. 7 10.0 90.6 32.0 163.6 32. 7 12.4 - 411. 0 i98> - - 21.7 46. 7 9.7 91. 3 32. 0 163,6 32.8 12.4 - 410.2 I982 - - - - 21.5 41. 6 9.4 92. 3 32. 0 163. 6 32. 9 >2.4 - 405.7 1983 - - - 21. 3 :0 9. 2 93. 3 33. 0 163. 6 33. 0 >2.4 - 405.8 Re sidual Valu .-685. 4 -99.2 -1 3 -7. 5 -596. 3 -51. l - 1,457. 4 Reoidal Inte rnal 'rat. O[ return: 12. 99 . February 3, 1969 ANNEX 1 TUNISIAN RAIMAYS Amendments made to SNCFT's Income Accounts 1962-67 Revenue 1. The Government compensations for iron ore transport referred to in Paragraph 3.LO and in Table 6 - have been excluded. 2. The 60A Government contributinnq for track xnpnditure - rPfPrrd to in Paragraph 3.17 - have also been eliminated. 3. Taxes on gross revenue which are dealt with in SNCFT's books as opera- tA yi nini-nzc. ) -trac i-nQ+,nnr )-a-ncc.' r1mr1iw+.gzA -Ne-rn~ r % Q -o-rn t' -znnn- h- .av- insead been dedacted --am b-o mo1-1- 1. 'Track exessof a Capital nature (frenewals and impro-vements) which by Statutes, must be charged to revenue have been excluded. 5. Fixed assets taken over from the Government on January 1, 1957, and fum lne GaaL Uoi-fany on January ", "", -ve -u--4 veen v-uI. To include in the income accounts an adequate depreciation allowance, the latUer has UeeL calculateu as a percentage - Lf5 - 01 gros re- venue. 6. Taxes on gross revenue, since now deducted from revenue, have been eliminated from operating expenses. April 11, 1969 TUNISIAN RAILWAYS Tentative Evaluation of SNCFT's Fixed Assets as of December 31, 1967 Northern-Center Network In accordance with SNCFT's present Statutes, fixed assets on the Northern-Center network taken over from the Government on January 1, 1957, have been evaluated nominally at D 3.0 million for the purposes of the opening balance sheet. The initial contribution of the Government to SNCFT's equity was assumed to be the same amount. Although the Statutes provide for the revaluation of the initial fixed assets within a given period of time, this has not been finalized so far. A tentative evaluation of gross and net fixed assets, as of December 31, 1967, has been made in the Bank; it includes all track works - the ownership of which is to be transferred to SNCFT - as well as acquisitions made by SNCYT since January 1, 1957. The evaluation is based on present replacement costs to which annual depreciation allowances, calculated on generally accented percentages. have been avlied. The results are in Table 10. Southern Network The Agreements between the State and the Gafsa Phosphate Comnany nrovide that- at th n th Con ssion for thp oneration of the Southern railway system, the surrender value of part of the -Nypri n.c.-pf..c will hp -rpimhir-qpH 1wr f.hp t11 .r -, f.)Ip e.mrnn The inventory of these assets has been made and the Government and the company hau agrme on a qt.1tment of D 2.8 million. Si nc this surrender value covers only part of the fixed assets, it cannot be iiA as ahbais. for valuantion of t.he Souithern nnt:wn"Ie- Therezfore, i tentative evaluation of the gross and net fixed assets has been made i;n the nn" v, the bases indiate above forI th otenCne network. The results are also shown in Table 10. April 11, 1969 ANNEX 3 TUNISIAN RAILWAYS Description of Measures taken or to be taken by the Government to improve SNCFT's financial position 1. Introduction Although SNCFT's 1968 accounts have not been finalized, and the balance sheet as of December 31, 1968 is not yet available, the measures described below are based on the tentative position as of December 31, 1968. 2. Receivables and Current Liabilities Clearing of outstanding accounts htwnn the GovRrnmPnt_ SNCFT, the Gafsa Phosphate Company, Government-owned companies and the National Pension Fund- ;q inrinn.d hloW (T) nn). Debtors Creditors Phos- ment ment Pension ti u, 'J~ ~ UU~L .WA Co. Cos. Gafsa Phosphate C Iomp any22: owned companies 312 Governnent 2,800 408 National Pen- siLon F UndL This results in improving SICT's liquid position by D 639,000. 3. Government Additional Contributions to Equity incorporation into SNCFT's equity of: (a) Treasury advances amounting to D 942,000 :/ (b) Interest accrued on (a), amounting to about D 230,000 ?/ (c) Payments made by the Government to the previous railway concessionnaire. the "Compagnie Fermrie"re des Chemins de Fer Tunisiens", amounting to D 1,211,000. . 1/ Shown in Table 10 under "Lone-Term Debt" 2/ Shown in Table 10 under "Suspense Account" April 1l, 1969 TUNISIAN RAILWAYS Reasons for Elimination from the Proposed Project o.L U1teV._V4LL, ULL.0,41 Fol1owing Four Year Plan T+-m,c 1. Construction of the Gafsa-Gabes Line (a) Phosphate output from Southern Tunisia is presently about t. mllion tons per annum. AcouU C. ( uILLuL-L tons are o the port of Sfax and 700,000 tons are used by fertilizer plants installad at Sf ax. kb) The present maximum capacity of we Gd1Sa-O. C:L.-CL line is about 5 million tons of phosphate per annum; the present phosphate exporting capacity of the port of Sfax is estumated by Italconsult at 3.6 million tons a year. With relatively minor investments the capacity of the railway line could be increased to 8 million tons a year, that of the port of Sfax to 7 million tons. (c) The Government long-range plans provide for substantial increases of the phosphate production of Southern Tunisia; the latEst figures available are: 1972: 5 million tons 1975: 6-8 " 1980: 18 " ! This would require improving extractive techniques in the existing mines and opening new mines which would be operative from 1970 on; the estimated cost would be at least US$ 100 million equivalent. The Government expects to obtain financing through barter arrangements with East European countries. Negotiations with Bulgaria for a US$ 30 million financing are reported to be completed; negotiations with other countries are at various stages of progress. (d) Since the Government long-range forecasts for phosphate production go substantially beyond the capacity of the Gafsa-Sfax line and the port of Sfax, the Goverment wants to keep investments for these facilities to a minimum. Instead it has decided on the construction of a deep water port at Gabes and the construction of a new railway link between Gafsa-M'Dilla and Gabes (see Map). The cost of Gabes port is estimated at about US$ 16 million equivalent, of which about 80% will be financed through Italian bilateral aid; constructicn is expected to strart by early 1969 and to be completed by 1972. Simultaneously with the construction of the port the Government intends to build at ahes a pm.Tor station and a chemical comnlex (Industries Chimiques laglarebines) which would utilize part of the phosphate produced in the South. The cnstrction of the Gafsa-Gabes railway line of about 14C kcx is estimated at D 6 million (us$ 11.4 million equivalent); it is also sC, I -_1p' A fA.. n-m 1,SA-h 'h-i '.J Q7 JSJ?- AINNEX 4 Page 2 (e) The Government has recently submitted to UNDP a request for a long-range study of the phosphate problem in Southern Tunisia. The study will assess whether (i) extractive techniques and productivity of the mines could sufficiently be improved to reduce costs: (ii) the quality of phosphate could be improved, possibly by calcination, at a cost which keeps it worldwide competitive: and (iii) market nrnnnet would allow Tunisia to increase substantially its share. The study should then make recommendations as to whether Tunisia shnul-d nursue its nrpsent policy towards increasing production and quality, or review its targets. (f) Because of the many uncertainties involved it is preferable to postpone consideration of nnsRihl %,nk part.inia+inn in the financing of the investment (mines, railway, port) until more data is available. Therefore- the Gafsa-Gahis railway line hae ean excided mrom the proposed project. 2. Signalling Works and Equipment This item covers signalling improvement on the main lines and at This sta n is paricuarly old u indequate for present and future traffic. However, the item is of lower priority when compared wy-I ULmC: ur e uartinqI us0I of Track, motive power and rolling stock. 4. Manoubia Tuanel The Government is building a road briCdge across the railway line in Tunis. Clearance will be insufficient and lowering of the railway track is required. >. By-passing of Sousse T.e track presently crosses the inner city close to the sea shore where tourism facilities are being developed. The new track will by- pass the city. April 11, 1969 ANNEX. 5 Page 1 TUNISIAN RAILWAYS Analysis of Traffic Forecasts i brod cJL 'U"J. 101-1 J'. L which resulted in distortion of traffic trends, 1966 is taken as reference year. iortnern-Center ivetwork Passengers 1. Main line passengers are expected to inCreaSe frum 11. miloAun in 1966 to 7.1 million in 1975, while pass-km grow from 348 million to 574 million, an increase of 65%, or 7% per annum. The average distance travelled per passenger is expected to increase slightly from 82 km to 90 km. The projected 7% growth is somewhat higher than tne o average annual growth for the period 1962-66 because of the continuous, although slow, increase of GNP. 2. Commuter passengers on the Tunis-Hamman-Lif suburban line are expected. to increase from 10.5 million in 1966 to 20.4 million in 1975, with pass-km increasing from 136 million to ?65 million. The projected growth is 11% per annum as compared with 9% during 1962-66. The high average annual increase results from the expected development of servicd activities in Tunis. 3. The average annual growth of all passenger traffic on the North- ern-Center network is expected to be 8% per annum as compared with 7% dur- ing 1962-66. Freight Prospects for iron ore are not encouraging and rail traffic for this commodity is not expected to increase substantially. An increasing portion of the output is expected to be utilized locally, at the El Fouladh steelworks and the cement plants, while exports would remain practically at4 the same level. The expected traffic growth over the period 1966-75 is 15 per annum. 5. Phosphate output from Kalaa Djerda is expected to increase from 22.000 tons in 1966 to 360.000 tons in 1975, with ton-km increasing from 63 million to 86 million, an average annual increase of 4%. The projec- ticn Jq hAd on the latest estimates Drepared by the Government which are reasonable. 6. Other goods increase from about 1.3 million tons in 1966 to ra 16 i e%ln +.ryn in 1Q74. Ton-km are orojected to arow from 215 million to 330 million, an average annual increase of 6%. tbnv -i 1 1 1040 ANNEX 5 Page 2 7. Total freight traffic on the Northern-Center network will in- crease from 509 million tons in 1966 to 668 million tons in 1975, at a 3% annual growth. Southern Network Passengers 8. Passenger traffic is expected to increase at a substantial aver- aLe annual rate of 8% hecause of the a(knowledrrd intention of the Govern- ment to devote an increasing portion of resources to the development of the Sonth. TncrasneA nhnnhate nrodcntion, as well as +.hp construrtion and operation of the Gabes chemical complex and port, will generate employ- ment. wnih(h in f.invrr ill rpi1t. in inrnnvo nanonu0 movmpnt.. 0. Thn 'J.nyn n" nlAI^.fl +n C.S.qSJ mil-A~~~l ' lion tons in 1972. Although this will require substantial financing, which Sa+ n o Irn+ -u Aann.,A +I,n +n 4a+ 4 -neAnaA r++,4mA-l P, P4 n ure of 6 million tons has been adopted for 1975. As explained in paragraph 1 nO - -mS -~ - 4-'C -oa,.nan 4 --nA bc,+, n - - 4-k- Q4'P- -rn A fl',-1- msm,, ' 1973 on. 10. Other goods are expected to increase to 180 million ton-km in 'ICnF'? - -; - - 4 - -.--m m , - - -'I in re s o I( A -1-- -- ,s-+4a- .L7 I '), M&I n prs CL U c CLIJ.UUC:L- CJJ. L710 . 0UU 0UCL .L-. . L U-L%jLi of the increase is to come from equipment required for the opening of new PJLUiUJLaut- 1IL"nes andI the cons1 utLL. UII )1 UILU tauuo~ pJurL. I1. ie toual freighU trallic on the Southern networK wll increase by an average annual rate of 11%. SNCFT 12. Traffic units on both networks which totalled 1,822 million in 1yoo are forecat to increase to 3,lO million in Ly1:?, an average annual growth of 8%. The expected development of the Southern phosphate mines substantially affect the projected traffic increases, which, without phos- phate, would average a more modest annual growth of 5%. A - -' I- z AN:aEx 6 Page 1 TUNISIAN RAILWAYS Notes on Forecast Operating Income and Elpenditure (Table 18) A. Income 1. Revenue from passengers has been calculated on the basis of the 1967 average receipts per pass-km for each category of traffic (Northern- Center main lines, Tunis-Hamman-Lif commuter line, Southern main lines). 2. The same rule has been applied to compute revenue from each category of freight on the Northern-Center network (iron ore, phosphate, "other" goods). For phosphate on the Southern main line Metlaoui-Gafsa- Sfax the new tariff imposed by the Government since January 1, 1968 has been applied. (D 1 per ton up to 3 million tons, D 0.9 per ton for ton- nages in excess of 3 million). The same rate prorated on a distance basis, has been applied for phosphate to be hauled, from 1973 on. on the new GafP sa-Gabes line. 3. Other traffic revenue (mail, parcels, LCL, etc.) has been esti- mated at D 350,000 per year; non-traffic revenue at D 100000 per annum. b. Tax on zross revenue has been deducted from income- the oresent 5.5% rate has been applied. B. Eediture 5. Operating expenses for passengers and freight on the Northern.- Center network have been nal nintetd nn +.ip ha qs evf +.h menid 19A4 income account figures shown in Table 8. (Because of substantial de- crease in traffin in 1967- +.rffje- ui+. -cz^nn+- iraq. hicherip- than normal; therefore, they have not been used as reference for future traffic and non-traffic activities, total operating expenses have been ap- variable costs on the Northern-Center network amounted to Ef% of total been applied through the period 1968-75 to assess the expected cost per Irhes p.retao eut-C-11 aCoSt St-Udy made by -talconsu- 4a part of the Tunisian Transport Survey. April 11, 1969 ANNEX 6 Page 2 6. Since no detailed cost information is available for the Southern netcwork, future cost On this system have been based on the 1967 amended income accounts shown in Table B, with variable costs estimated at 40%; this is a generally accepted percentage for rost railways. 7. tbn stated.earlier, the valuation of gross and net fixed assets has not been completed, and the final results may deviate from the tentative valuation made in the Bank. For this reason, it is difficult to relate, in terms of percentage, depreciation to gross fixed assets. Instead, annual depreciation allowances for the period 1968-7: have been estimated at 17% of the gross operating revenue of each year. 8. Interest takes into account financial charges on existing loans, the details of which are in Table 19. in addition, it includes the financial charges of the proposed Bank loan, except for interest during the project construction period 1969-72 which has been capitalized. The proposed Bank loan has been assumed at 614 interest per annum with a term of 25 years including a 4- year period of grace. The proposed IDA Credit has been assumed to be relent by the Government to SNCFT at the same terms and conditions. April 11, 1969 ANNEX 7 TUNISIAN RAILWAYS M.K+hodol- fr -S +4my.na V-rnnnir PnPfits for the Northern- Central Network * ±LOUL. L U.UMb II=L.iu~uj=.Luu V .L'JJ Vf_t JSw r in 1966 was estimated at D 600,000, or D 400 per km. Based on engineering a~.~nnt,an i2nit-Ial annual average niaintenance cost of- D 200 pe" rkm fr new track has been assumed as a reasonable estimate. This figure would in- crease over -year intervals oU reac D 400 at the en of U 0. +ar-s, average life expectancy of the rails. Given the advanced age of existing lines (over 40 years), and assuming that in the absen fu renewal prose in the project they would continue in use up to 60 years, successive main- tenance cost increases during the years 40 to OU Have been eStimated at an annual rate of 2-2.5%. Thus, savings in track maintenance costs have been estimated for each line to be renewed, considering its age and compariang, the projected maintenance costs with and without the investment in renewal. To these annual savings was added a further reduction in annual maintenance cost estimated for each year at 1% of the investment in renewal and upgrading of structures, to be performed concurrently with the work on the track equiLp- ment. The annual sum of these two elements thus represents the expected bene- fit stream stemming from the investment in track renewal. Economies on Maintenance of Rolling Stock and Motive Power a) Locomotives 2. The annual maintenance cost of locomotives was estimated at D 615,CCO or an overall average of D 10,000 for each of the 63 existing units. For each new locomotive the estimated average saving in maintenance cost is D 6,000 per annum. But since each new locomotive will provide enough traction capacity to replace about 0- of the existing locomotives, the "avoidable cost" of mai.n- taining the replaced locomotives is also added to the initial savings in n,ain- tenance cost. The distribution of these total savings per line was estimatea separately for the standard gauge and the meter-gauge networks, on the basis of gross ton-km hauled (GTKH). b) Railcars 3. The annual maintenance cost of railcars is about D 460,000 or an overall averaze of D 9.700 for each of the 47 existing units, and D 75,000 for trailers, or about D 2,000 per unit. 4. For each new railcar the estimated average annual saving is D 4,500. To this is aded the "avoidable maintenance cost" resulting from the replace- ment of 17 old units by 10 new units. For new trailers, the annual saving in maintenance q+.otqwan etimatod at an average of D 800 per unit. Distribut.Lin of savings by line was also made on the GTKH basis, for ztandard gauge and mate ga,g separa,te - ANNE, 7 Page 2 c) Freight Cars 5. The annual cost of freight cars maintenance is D 340,000 for 3,476 cars on the Northern-Central network, or about D 97 per unit. 6. Based on engineering analysis, an initial maintenance cost of D h7 ner new waLon has been estimated. This cost would increase over 5-year intervals to D 97 at the end of 40 years. Between the age of 40 and 60 years, sncssive main+.nanr cost wntild increase at 2-2.54 n.a. and level off be- yond 60 years. 7. Since new cars will have a greater capacity than the existing units,: the number of new iitq Y-rini -d ftr n ai ivn vrnl in of traffic wilT be less. This would result in additional savings equivalent to D 97 of avoidable main- tenance cost per Wnit, appliedr tor thei nf ~nn ' iinit_c re- quired to meet present traffic. This additional saving of D 97 per "unit only. 8. Since the project life has been geared to that element namely,, en- i IC6..L r U11~ s LIIU U0~ U UOU. UL L..LU U. L-J JUC610~, S .L.~.L L.L. a '.. of the project (except for branch lines in the south) have been estimated over . t :: Ie.LU u"y, a(LuIVUVIi OU11 U LJ. Uo wJLU LUuLIU LU CA.I.Lol voYano VI 4 time. As for the longer-life elements, e.g. track and rolling stock, their iuw'ual VdiU WeUe estimaUd U0 t110 I11 Ua t "141 r eI UII -ue " "' historical cost minus depreciation. The residual values were thus treated as a "negative cost" in computing tne internal rate 01 return. Savings in uperating Costs and Overhead 9. The average cost per GTM or freight trains was estimated at D 0.001, which is equivalent to the saving per GTKH empty weight arising from the reduced number of cars required for present traffic. Thiu saving stems from the smaller tare weight of new cars with a greater net capacity. 10. Additional savings in general operating and overhead costs result- ing from the overall increased operating efficiency of the railway system, and attributable to the combined investment in the various elements of the project have been estimated at about D 21,000 for the year 17(0, or 2070 of estimated overhead cost. About 14% of these savings represent reductions in overhead costs attributable to passenger services, the balance of Obfo being equally divided between similar cost reductions attributable to freight services and to general administrative expenses. Passenger Time Savings 11. The value of time savings accruing to passengers as a result of A YTNX 7 fage 3 increased speeds was estimated for each line separately on the basis o. the volume of nass-km. The unit value of fimp qavio unn a imated + D 0.20 per hour, the same as that used by the consultant for highway pro- jects. This f'irur- hoever- n -rn.T i +nn ily inti nnIrt lOeZ nf traffic on the assumptions that a large percentage of railway passenger movements cammand little ecno nmic un1r anA +U-+ on"y a pa- oP +k-+s fic will benefit from increased speed. Conclusion 12. To illustrate the above analysis, Table 2.0 provides a breakdown of th vAriu cost an benefitL.L streams estimated for JLne 6, yie.ldinlg cun internal rate of return of about 13%. 13. Based on a similar analysis performed for each of the remaining line, hU folluwAn table proviues a bulumary of lue total cost and beneli streams attributable to the total investment for the Northern-Central Net- w 1,1-4'lA ------ -------- ------- rn, yielix% U ae UO reur o over 14'; ear Total Costs Total Benefits (Thousand Dinars) 1969 8,287.3 - 1970 1,705.0 1,595.9 1971 442.4 1,357.7 1972 1,380.3 1973 1,370.7 1974 1,371.3 1975 1,373.4 1976 1,373.4 1977 1,373.1 1978 1,372.3 1979 1,355.8 1980 1,349.5 1981 1,341,9 1982 1,323.3 1983 1,318.1 Residual Value -1,829.7 Internal Rate of Return 12.26, A 41 '11 1n4ni .tip.L-L -L-L, -L7U7 Tante udi Bo0i Said Ijet Tunis PVo DZra Ud b uzp OPe TUNIS Les Atelrs é ©j 0 nasen ammam L1 B.Cedria TUNIS BejaOHe'nehir Lebma Keda FDjedd Beja B .Kea~.~ - -.. d Mastouta - L~~a MerAa(4, . n..K-Anras - Gnardlmaou neredine air lou Belaa LULF opFHAMmANET Les Salines SId Aner Fd Ettameur Djeresau Qaed Sarrath L. K.,,irAl AinGrasesla ae LRhil n Kalaa DjerdaAnGr RhKaserin - ýý '-i - -- - Gralba enchir Souatir .. - O- oulAares - r- TaceAtty Gafsa -a- Redeyef GULP OF CABES C ho t t- - ann -- . dabes*Port - - -----Gabes Menzel REPUBLIC OF TUNISIA SOCIETE NATIONALE DES ¶ CHEMINS DE FER TUNISIENS (SNCFT) NORTHERN & CENTRAL SYSTEM Standard gauge(1.435m) SOUTHERN SYSTEM 1.00m gauge PROPOSED GAFSA - GABES LINE 1.00m gauge AD g0 0A LINE NUMBER OTHER RAILWAY SYSTEMS 0_____?______ LA G0ULETTE - LA MARSA RAILWAY s. . tandard gauge ALGERIAN RAILWAYS-...-..-...--...1.00m gauge JANUARY 1969 IBRD 2496