External Financing Department of CFR SA

A New Nucleus for the Better of the Railways

discussion with Mr. Florin Stingaciu,
head unit of the Management of Externally Financed Projects

Railway Journal: External Financing Department (DFE) is a new appearance in CFR SA structure, having as activity object, something relatively new for the Romanian Railways. That is why, it would be interesting to find out a few details about the role that it is assigned with.
Florin Stingaciu: Our task is to administrate the external loans of CFR SA meant to implement the rehabilitation and the modernization projects for the railway infrastructure from Romania. Concretely, it is about:
- maintenance of the evidences regarding the amounts that have been used from the external credits;
- the achievement of prognosis aiming the necessary of funds from the future external funding that are going to be used for the implementation of the projects;
- the evidence of the payment liabilities that the company has towards the financial institutions and the commercial banks where from the loans have been granted;
- the administration of the contracts afferent to the external financing projects;
- the drawing up of the accounting situations which emphasize the amounts spent in time for each project, supplying, finally, the accounting registration value of the purchased goods, of the services supplied, and of the works achieved.
To all these there are also added a lot of other reporting: to the financing institutions, to the institutions of the Romanian state in charge with the surveillance of the use of the external credits - especially the Ministry of Transports, as the credit demander, the Ministry of Public Finances, as loan or even loans voucher - and, not at last, internal financial reporting. The ones that we have mentioned above represent the current activity of DFE. Yet, in order to reach to earn our money, respectively to engage external credits and to sign commercial contracts, there should be performed a lot of other important steps, quite difficult, sometimes even hard, which, need specialty knowledge and expertise. The personnel of our department supply assistance and directly attend, together with the beneficiaries of the projects, the:
- projects definition;
- selection of the financing banks/negotiation of the loans;
- drawing up of the auction documents;
- development of the stages for the acquisition of the goods, services or works, complying with the Romanian legislation or with the specific requirement of the financing institutions;
- the negotiation of the contracts with the selected companies.
R.J.: It is well known that any beginning is quite tough. Which are the problems that you are dealing with?
F.S.: We could say that a ticklish issue is the modality of organizing what we, the ones involved in this activity, would call it a project team. To be more clearly, we should go back in time for a while and to make a brief historic of the use of external credits at the Railways.
Although there have also been other previous experiences, the management of the external loans and of the projects with external financing at the Railways has started in year 1995, once with the definition of the Projects for the rehabilitation of the railways. It has been created then, within the International Affairs Department of SNCFR, a team of specialists (railway engineers and economists), which have started off from the ground and who presently have a great experience in the management of the loans, the management of the projects, the procedures of acquisition, the management of the contracts. Once with the reorganization of the SNCFR, in October 1998, this activity has been assigned to the International Financing Department of the Company of Railway Management Services, which has taken over the activity of commercial contracts management and the accounting afferent to the projects. Part of the initial team has remained at CFR SA, forming a nucleus of what has become later on the Department for the Implementation of Externally Financed Projects. Pursuant to its annulment, by absorption, of SMF SA, in order to maintain the cohesion of the team and to valuate the level of training of the personnel, we have kept the team we have formed, also due to the experience we have gained. Therefore, taking into account the big number of projects with external financing engaged or in engagement stage for the company, starting with November 1, 2002, the team that we have activated has been integrally taken over by CFR SA. There has been decided, that within the company, we will reach to an organizational formula in which the implementation of the projects will be the assignment of the specialized departments, especially of the Technical Department, and the financing will be taken over by a new department - External Financing Department -, coordinated by Mr. Tiberiu Angelescu, director. Concomitantly, there has been created, as a separate entity, the ISPA Implementation Agency. Fortunately, in all this tumultuous process of remodeling the railway activity, the unfolding of the externally financed projects has taken advantage of the direct support of the ones that have been, in various moments, "the locomotive" of the restructuring process - namely, the management of the ministries in charge and of the railway companies. Externally financed projects have also taken advantage of the continuity and coherence, provided by those who have been along the time the promoters and the creators of these daring projects. Among them we can mention here Misters Vasile Olievschi, Virgil Daschievici, Tiberiu Angelescu and Orlando Craciun.
In order to face the increased volume of activity, the team created within the External Financing Department has been completed with other people that we have identified as being fit to the activity unfolded in this field. We are trying, as much as possible, to disseminate the information that we have accumulated and to train ourselves in fields that are less familiar for the railway exploitation and, generally, for the labor market in Romania. The team is formed in majority of economists, less engineers and railway specialists- whom, we would wish to have, yet we already have a formed nucleus, people that have succeeded to learn to draw up a coherent auction document, to follow the procedures of the financing institutions in the acquisition field. I consider very important the fact that we have a good team, which appropriately manages the loan agreements and the commercial contracts signed by the Railways and supervises all the obligations that are resulting from this commitments. I come back to your question referring to the issues that we are dealing with and I would like to mention that we are in the position to provide - and, most of the times, we succeed to do it - a close collaboration with the specialized departments which are directly in charge with the implementation of the projects, in order to supervise their achievement calendars. We are also collaborating with the Economical Department in order to draw up the project budgets based on data included in the loan agreements and in the contracts, in order to establish the necessary amounts for each period, based on the provisions, in payment performance to the external suppliers, in payment the liabilities issuing from the engaged credits; all these should be taken into consideration.
Therefore, we permanently face a complex factor picture, which finally converge, in a cash-flow necessary for the implementation of the projects according to the planned calendar. By all means, all these data will be dynamically reflected in the budget of the project. Many times, the budget that has been required is not the same with the available one. And, here we have certain syncope. In order to finance the projects, besides the amounts that are provided from external funds are also necessary other amounts, quite large, which compete to the successful implementation of the project; for example, the local funds. It is about a contribution from its own funds, as well as from the state budget. I do not refer only to the custom taxes, commissions, VAT - quite large amounts, in fact -, but also to other co-financing amounts, which come to complete the investment. I would give you an example of the projects of a great span: the achievement of four centralized electronic equipment at Arad, Timisoara, Brasov and Bucharest. For these, through the agency of two contract externally financed, there is performed the design of the equipment, there are purchased and assembled the equipment and the works are supervised, in their assembly. Yet, the projects also stipulates the achievement/adaptation of buildings in which there are assembled these equipment, the cabling to the signals and the track switches etc., works which need other contracts for execution, construction - assembling, and which financing is achieved from investment funds. I, as well as many other colleagues of mine who have directly worked in this field, consider that, especially for the complex projects, there should exist a project team, which should control the entire implementation process. Although we are directly involved in various aspects of the project management, we could not and should not assimilate everything. Especially the complex projects that cannot be disparately treated, by several bodies. There could be find solutions. For example, first of all there should be identified the projects which need such an approach, and then there should be nominated a chief of project, which should control the project. We would like that this person and his project team to represent an interface which all those involved work with and through the agency of which to be supplied data, to communicate with all the specialized department which participate to the implementation of the respective project; if you like to, there should be achieved a temporary structure, parallel to the current structure of the companies, which will take a good care of the implementation of the respective project, on overall. And that entity should keep in touch with the Technical Department, External Financing Department, with Economical Department, with all other specialized departments involved in the project, which, on their turn, should make their own part of work that they are good at.
R.J.: There seems that the railway field is this way enriching with a category of more…special specialists.
F.S.: Yes, we somehow succeeded to specialize in a new field for the Romanian Railways. I hate the word "specialization" in the sense of limitation to only one aspect. Fortunately, we are specialized in a quite complex activity, which implies knowledge and multidisciplinary approaches. With the existing team we succeed to successfully handle, I can say, the current requirements. Yet I am afraid that the avalanche of projects will be larger and larger, and well-trained personnel are not sufficient. I refer especially to the real chiefs of projects.
R.J.: In order to better understand the implications of this situation, there would be interesting to know which are the railway projects you are in charge with.
F.S.: Since we have started to unfold our activity within CFR SA, we have not abandoned the tasks that we had before. According to the order of the minister regarding the annulment of SMF SA, we still have the task to manage the Project for the railway rehabilitation on behalf and for the other railway companies.
This is the first project of great span that the Romanian Railways has engaged to. It has been started in 1996, being co-financed from three sources: BIRD loan 3.976, in a value of 120 million USD, having as borrower and beneficiary CFR SA (yet all the railway companies have taken advantage of certain assistance components); EBRD loan 438, in a value of 72.6 million USD, for which the borrower, SNCFR, has sub-lend to the beneficiary companies, CFR Calatori and CFR Marfa; for a component of the project, Co-financed with EBRD, has been engaged by CFR Calatori the BNP Paribas loan, in a value of 31,068,419 Euro and 5,355,197 USD, a supplying credit (ECA) covered by the French agency COFACE. EBI loan 17.521, in a value of 200 million Euro, is associated to the Project for the rehabilitation of the railways and has as objective the financing of the rehabilitation of Bucharest - Brasov main railway section. The works that have been engaged cover Bucharest - Campina railway section.
These projects have as deadline the current year. But there are started off new projects, which our company is thinking about and for which there are engaged financing.
EBI loan 20.777, in value of 15 million Euro, which was initially meant for the acquisition of the track maintenance machines and a ticketing system, which is presently in amendment stage; there is required to the financing party the use of the funds only for the track maintenance machines.
JBIC Loan ROM -P3 and the non-reimbursable ISPA credit are two major financing meant for the modernization and the rehabilitation of Bucharest - Constanta railway section. Although both financing parties are meant for the same project, we are not dealing with a co-financing. Each credit has as a certain objective: JBIC financing aims the extremities of Bucharest - Constanta railway section, namely Bucharest Nord - Baneasa and Fetesti - Constanta, while the non-reimbursable ISPA credit is dedicated to finance (almost 75%) together with the Romanian state, Baneasa - Fetesti railway section. From JBIC loan, in a value of almost 23 billion yens (the equivalent of almost 200 million USD), which we are handling, we already have engaged consultancy contracts.
A financing ECA type is meant to rehabilitate two railway sections - namely, the achievement of Valcele- Ramnicu Valcea railway section and the consolidation of the supporting walls of the railway in the area of the hydro-energetic system from Portile de Fier I, works contracted with the Italian company S.E.Co.L. With respect to the financing of another project, the modernization of the big railway stations, there have been contracted two credits. The first credit engaged in this respect is EBRD loan 12.936, in a value of 24 million Euro, meant for the modernization of five railway stations, namely: Constanta, Cluj, Craiova, Iasi and Timisoara. Besides the modernization of the constructions and their endowment with modern lighting and heating equipment, from this loan there are financed three components of technical assistance, among which one is the supervision of the works in the five stations. The second commercial credit, implying 60 million USD financed by Credit Suisse First Boston, is meant for the modernization of several important railway stations on CFR network.
R.J.: These are the projects in development stage; what can you tell us about the future plans of the External Financing Department?
F.S.: Our future plans are the plans of the company. We are sure that we will have other project proposals. We should collaborate with the specialized department within MLPTL in order to find out adequate financing for the proposed projects. In the same time, we are trying to keep up with the new structures imposed on the market, and I refer here to the commercial credits, which become more and more accessible. We have even "fold" to the chart on such procedures. We have joined CFR SA proposing a new management unit for the commercial credits. Two of the large loans that we have mentioned - namely Credit Suisse First Boston and ECA credit from EFI Banca and HVB, together with the afferent co-financing - are supervised and managed by this unit.
We have completed the team with personnel taken over from CFR SA structure and we have succeeded to intensely communicate with them, to teach them as much as possible about our activity field, about the verified, retread steps that have to be followed. More exactly, we are all involved in the daily activity, in the least details, by seeing and doing. We should all participate, each of us, to the well development of the projects, only as a team we will succeed! And when I say team I do not refer only to the personnel of our department, and also to the project responsibilities from the specialized departments, to the personnel from the Economical Department, that we count on in many situations, to all those we are directly working with.
I avouch that, unfortunately, regarded from the outside, a bit from above, from lateral and from below, our department is not quite well known. Only the ones directly working with us are aware of our action way. In spite of this, the functional relationship of DFE within the company is well defined, only they are not completely formalized. We are hoping that soon enough we will formalize through the issuance of a disposition, which should regulate the way of working of our department with the other specialized departments and the sub-units from the structure of CFR SA. There should also be achieved a handbook of procedures regarding our activity. There is a lot to do; yet our first emergency is always represented by the current activity.
We are expecting that in the future to have a larger volume of work, but we are confident that we will handle the situation, that we will promptly meet all the requirements. We are willing to impose austerity and promptness in our activity. I am sure that we will get some support from all those involved in the well development of the externally financed projects, on behalf of our colleagues, from any organizational structure of CFR SA they belong to. We all act to the welfare of the Railways.
Given the fact that we are for a short while in the company (namely, since November 2002), I should admit that we were likeable surprised to ascertain, on one side, the dynamism that CFR SA management proves in the promotion of new projects which have as finality the modernization of the railways, and on the other hand we are glad to have the direct support of Mr. Mihai Necolaiciuc, the general director, in solving the issues that we are sometimes facing. It is very important to get the support you need in due time!...

Written down by
Silvia Mirea