The first section of Kraków premetro to be launched in 2025

In the spring of 2023, once the RCC decision (ZRID) is obtained, construction works for the tram route to Mistrzejowice will start. If everything goes according to plan, the new 4.5-kilometer track section – made in the public-private partnership formula – will be completed at the end of 2025.

On 30 January, a direct agreement was signed for the investment of Stage IV of the expansion of Kraków Fast Tram. The agreement, signed by the City representatives, the contractor (Gülermak) and the financing institutions, finalizes several years of documentation work and works on financing the largest transport project in Poland to be made in the public-private partnership formula.

– The tram route to Mistrzejowice is the largest transport project in the public-private partnership model in Poland. The fourth stage of the Kraków Fast Tram expansion is a 4.5-kilometer route between the terminus in Mistrzejowice and the intersection of Meissnera and Lema Streets – says Jacek Majchrowski, the President of Kraków.

Shortened travel time to the city center

Tracks will run from the intersection of Jana Pawła Avenue with Lema and Meissnera Streets, then along Meissnera, Młyńska, Lublańska, Dobrego Pasterza, Krzesławicka, Bohomolca, ks. Jancarza streets up to the existing terminus of Mistrzejowice. The investment is worth a total of PLN 1.92 billion.

– This connection will shorten travel time to the city center by approx. 12 minutes. Trams will be launched here at the end of 2025. The route includes a tunnel with a multi-level transfer hub in the vicinity of the Polsadu roundabout – adds Jacek Majchrowski.

The biggest PPP project in Poland

Pursuant to the agreement signed in December 2020 between the City of Kraków (the public entity) and the consortium of PPP Solutions Polska and Gülermak Ağır Sanayi İnşaat ve Taahhüt (the private partner), the latter is to secure financing, design, obtain the necessary construction consents and implement the tram route to Mistrzejowice. It will then take care of its infrastructure for 20 years. The city will take it over afterwards.

This is the biggest project of this kind in Poland. Kraków’s experience will serve as the basis for guidelines developed by other local governments wishing to use this formula to implement similar projects. The entity responsible for the project on behalf of the city is Kraków is Kraków Municipal Road Authority (ZDMK).

The European Investment Bank agreed to co-finance the investment. Other co-financing institutions are the European Bank for Reconstruction and Development, Bank Pekao SA and the Polish Development Fund (PFR).

– We are now waiting just for the RCC decision to authorize the implementation of the road investment. Actual works will begin in the second quarter of this year – says Jacek Majchrowski.

Kraków model for partnership

Public-Private Partnership is an investment model based on long-term cooperation of a public entity (e.g. a city, a commune) with a private partner. Benefits, as well as the responsibility involved in the cooperation, are split between both parties in line with an agreement whose purpose is to improve the quality of infrastructure and services available to residents.

– We realize that residents have been waiting for the construction of this route for a long time. We had this in mind in recent months while compiling hundreds of documents, holding complex negotiations and preparing to meet the stringent requirements of the financing institutions. Already today we can say that this unique project will set new standards and will be a role-model in Poland and across Europe. Working hard we adapted the project to the subsequent requirements set by the City of Kraków – we prepared the infrastructure to serve the future premetro and reduced the impact of the investment on the environment – says Bülent Özdemir, Country Director Poland with Gülermak.

The Kraków PPP model for the construction of KST IV assumes payment for the availability of infrastructure. This means that the city will pay a certain amount successively if the infrastructure is maintained to an appropriate standard and operational for tram traffic. As a consequence, we minimize interruptions in tram operations on this route.

The PPP leverages on the private party’s experience to build modern infrastructure and reduces investment costs throughout its life cycle.

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Financing documents signed – Final Closure

We’re proud and humbled to announce that we’ve signed the financing documents for Krakow Tram project as of December 2022. The European Bank for Reconstruction and Development, European Investment Bank and PFR are among the lenders financing the construction of KST IV!

Under the project structure, Gülermak has undertaken to provide equity, arrange financing from financial institutions, organize construction and subsequently maintain the tram line.

The financing represents the longest ever tenor achieved in a PLN financing in Poland and the largest loan ever in PLN in the infrastructure project. In addition, the financing includes a Mezzanine Debt tranche provided by PFR. Gülermak is also injecting its equity financing without any equity partner.

Financing for the Kraków tram in the PPP formula

Construction works will start immediately once the ZRID decision is ready – it is expected in Q1 2023.

“This is a pioneering project and establishes the benchmark with regard to PPP and finance documentation for the next generation of PPP Projects in Poland. Now, we have a well-structured PPP documentation, a first application of Direct Agreement between the Lenders and the Municipality and well-established parameters of financing in place. We should also congratulate Krakow Municipality and their advisors for their leadership against all the odds at a time of regional conflicts, volatile global economy and a high-inflationary environment. We’re also grateful to our lenders EBRD, EIB, PFR among others and our advisors, DLA, JK Law, CMS, Atkins, F1F9 and Indecs – says Turkekul Dogan, CEO, PPP Investments at Gülermak.

Among others, we and the lenders have prioritized environmental and social impact of the Project and applied highest international standards to achieve ‘green loan’ status and also with regard to impact of the project on people during construction and operation stages.

Tramway to Mistrzejowice – a benchmark for local governments

With this project, Krakow Municipality has also established a benchmark for successful delivery of the project among the public entitites and municipalities. The steps taken by the partners of the Kraków project will be a model for other local governments wishing to implement key investments without affecting debt ratios and current financing of other projects.

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