Indecon Consulting

[Montenegro] – Transaction Advisory / SOE

• indecon •

Assignment Name

Outsourcing Railway Infrastructure Maintenance activities

Location

Montenegro

Total Value

Large (> EUR 800K)

Consortium

N/A

Description

In the context of Montenegro’s railway sector reform, the Ministry of Transport (MoT) decided to have the railway infrastructure maintenance works carried out by an external, i.e. independent third party on the basis of a Multi-Annual-Contract (MAC). With the purpose to have a comprehensive strategy and a tailored MAC developed and subsequently implemented, the Privatisation Council of Montenegro appointed indecon consulting as Transaction Advisor. The assignment consisted of:

  • An assessment of the procedures for planning, carrying out and monitoring rail infrastructure maintenance;
  • An assessment of the institutional and legal framework required for the outsourcing of rail infrastructure maintenance and the introduction of a MAC and subsequent advice to the MoT on necessary adjustments;
  • Development of a scheme for having the rail infrastructure maintenance planned by the infrastructure manager ŽICG, carried out by an independent party and monitored by the appointed disbursement agency (the Railway Directorate) and subsequent advice to the MoT on its implementation;
  • Development of a detailed strategy to (i) identify the relevant staff involved in planning and monitoring maintenance on one hand and staff involved in carrying out maintenance on the other hand; (ii) transferring the latter staff to a newly established separate maintenance department, exclusively dedicated to carrying out maintenance; (iii) spinning-off said department into a newly legal entity (company); (iv) privatising the new company; and (v) entrusting it with the performance of rail infrastructure maintenance activities on the basis of a MAC;
  • Advice to the MoT on issues related to the implications of the various types of MAC and its respective implications;
  • Development of a Multi-Annual-Contract;
  • Preparation and implementation of the tender documentation, identifying and stirring interest among potentially interested parties.

The yearly amount dedicated to the Multi-Annual-Contract is approx. EUR 10.000.000.

Type of Services Provided

  • Assessing the spin-off process from Railway Company of Montenegro into (a) Railway Infrastructure and Railway Transport and subsequently from Railway Transport into (b) Railway Passenger Transport and (c) Railway Freight Transport (MONTECARGO) and identifying unsettled and non-addressed aspects with relevant implications for the performance of the companies, in particular Infrastructure Company ŽICG;
  • Performing a procedural assessment at ŽICG to comprehend its organisational structure, applied procedures and allocated responsibilities for performing rail infrastructure maintenance and capture the respective financial flows;
  • Illustrate the applied procedures involving the Railway Directorate as disbursement agency and advising the MoT on the envisaged scheme;
  • Designing a scheme and developing a corresponding implementation strategy for the outsourcing;
  • Outlining the economic and legal implications with the intention to build ownership at company level for the envisaged change;
  • Development of a tailored measured term Multi-Annual-Contract;
  • Assessing the management’s willingness to support privatisation;
  • Assessing the availability of national technical railway standards in relation to their applicability to a MAC and advising the MoT on how to overcome  the current;
  • Preparing tender documentation for the divestiture of the new Infrastructure Maintenance Company and for the award (by competitive bidding) of the five year Multi-Annual-Contract. The process includes identifying potentially interested parties, stirring their interest in the investment opportunity and performing the respective contract negotiations;
  • Identification and attraction of suitable investors.