The European Bank for Reconstruction and Development (EBRD) has arranged a €40mn financing package to Kiev City Transport.

The finance will allow Kiev Metro to buy 10 new metro trains of five carriages each from the Russian manufacturer Vagonmash. It is part of a large modernisation programme through which Kiev’s ageing rolling stock will be replaced. It’s added to a previous loan of €60mn (signed in 2007) which allowed Kiev PasTrans, the tram operator, to purchase 25 new trolley-buses and 125 diesel buses.

The finance has a tenor of 10 years and 40% is financed by the commercial banking sector. GTR understands that the participants in the syndicate are DEPFA Investment Bank (a Dublin headquartered German-Irish infrastructure lender), Dexia Crédit (a Belgian lender to the public sector) and Hypo Investment Bank (of Liechtenstein).

The finance is guaranteed by the municipality of Kiev and Anton Usov, a senior advisor at the EBRD’s Kiev office, tells GTR that without such guarantees (and without the involvement of the development bank) it would be difficult to convince the commercial sector to participate.

He continues: “International commercial banks have been reluctant to lend in Ukraine after 2008. Many banking groups left the country to concentrate on their traditional markets. Domestic banks typically offer short-term lending only because of their insufficient and expensive funding base. Market leaders in recent years are mainly Russian banks, which are keen to work with large corporates and offer some retail products.”

He says that the EBRD expects the tourism and commercial sectors in Kiev to reap the benefit. The city is officially home to 2.6 million people, but it’s estimated in some quarters that the figure is closer to 4 million. It’s hoped that the additional public transport investment will alleviate congestion and pollution levels in the capital.