NIB Nordic Investment Bank

Loan

Latvia. VAS Latvijas Dzelzcels

Date of loan: 23 Aug 2017
Country: Latvia
Customer: VAS Latvijas Dzelzcels
Amount in EUR: EUR 22.8 million
Maturity: 12 years
NACE sector / loan type: Land transport

Sectors

Infrastructure, transportation and telecom

Environmental effect

This loan contributes to climate change mitigation: 100%

Project

The loan has been provided for the modernisation of 14 locomotives in 2015–2018. The refurbishment contains the replacement of all parts above the wheels and the frames of the locomotives, including engines, electric power systems, electric transmissions, cabins, air compressors, cooling systems and other auxiliary equipment.

The modernisation will prolong the lifetime of the locomotives by about 30 years. The modernised locomotives’ fuel consumption is expected to decrease by 17%. More powerful locomotives will enable the carriage of more cargo with fewer trains. Technical capacity will increase by 50% for the improved locomotives.

The locomotives are being operated and maintained by Latvijas Dzelzcels’s subsidiary, SIA LDZ ritošā sastāva serviss. The Latvijas Dzelzceļš (Latvian Railways) Group is a fully state-owned company. The group manages the railway infrastructure and operates cargo freight as well as international passenger railway traffic to and from Latvia.

Fulfilment of NIB's mandate

Competitiveness:

The project upgrades the company’s tangible capital. The upgraded locomotives are capable of handling considerably larger loads which increases the productivity of the service. Moreover, the company’s operational costs will decrease substantially due to improvements in fuel efficiency and considerably longer maintenance intervals. These direct impacts will increase the productivity and service quality of the transport infrastructure services value chain in Latvia where railway is the most important transport mode for freight. The project is of particular importance for the logistics value chain for coal transported from Russia to global markets via Latvia.

Environment:

It is assumed that the new engines will have better environmental performance than the existing versions (no data is available on the environmental performance of the existing locomotives). The improved locomotives are expected to comply with the Euro IIIA standard.

Sustainability summary

The key environmental issues are fuel efficiency and emissions to air. The expected 17% decrease in fuel consumption equals to a greenhouse gas emission reduction by almost 15,000 tonnes of CO2 annually.

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