Rail Network Expansion, Upgrading and Electrification
Rail Network Expansion, Upgrading and Electrification
Business Model Description
Invest in the expansion, upgrading and electrification of the rail network through tenders announced by the ministry of energy and infrastructure, through public-private partnerships (PPPs), where the investor can take the responsibility of executing the rail network expansion or upgrading, covering operation and maintenance of the infrastructure for a specified period, and generating revenue from various sources including passenger fares, freight transportation fees, or other revenue sharing models agreed by the tender.
Expected Impact
Enhance connectivity, reduce greenhouse gas emissions, and drive economic development by offering efficient and sustainable passenger and freight mobility solutions.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Albania: Tirana
- Albania: Durrës
- Albania: Vlorë
- Albania: Shkodër
- Albania: Elbasan
Sector Classification
Transportation
Development need
The transportation sector constitutes the largest proportion of final energy consumption across all sectors, at 40%, and remains the most emission-intensive sector responsible for 60% of CO2 emissions, compared to the global average of 20%. The road, maritime and rail networks suffer from outdated equipment and lack of upgrades, resulting in low travel speeds, frequent disruption's and inefficient freight transport (1, 2).
Policy priority
National Strategy for Integration and European Integration (2022-30) acknowledges need for affordable transportations links to improve quality in life in remote areas, while the Government Program 2021-25 includes modernization of transport services among its key goals, providing grants up to EUR 5 million to enterprises in the transport sector (6, 7).
Gender inequalities and marginalization issues
Existing poor state of the transportation infrastructure hinders economic growth and private sector development in rural areas, directly impacting agricultural competitiveness & regional integration. Many people living in remote areas cannot easily meet their daily needs for health care/medicine, food and other basic supplies partly due to a lack of affordable transportation (3, 4, 6).
Investment opportunities introduction
Transportation falls under the strategic investments determined by the Law on Strategic Investments of 2015, providing incentives for investments between EUR 30-50 million (USD 32 - 53 million). Albanian Investment Development Agency lists road, rail, sea, and air transport as key investment opportunities due to the country's strategic location and connection to European corridors (6, 12, 13).
Key bottlenecks introduction
Alignment of national legislation with that of the EU for transport of goods and passengers, construction of necessary infrastructure for road and maritime transport and development of electric transport, observance of technical standards for transport safety, maintaining existing infrastructure, and development of intermodal capacities are cited as the key challenges facing the sector (6).
Land Transportation
Development need
The road and rail networks fall short of neighbouring European standards. Of the 18,000km road network, only 35% is paved, and 80% is in poor condition. The rail system lacks modern upgrades, like electrification and updated communication systems, causing slow travel, frequent disruptions, limited passenger services, and inefficient freight transport (2, 4, 5).
Policy priority
The Economic Reform Programme 2022-2024, includes electrification of key transport lines under its planned activities and lists the rehabilitation and construction of the Durres-TIA-Tirana railway as part of key reform measures. The Nationally Determined Contributions of the country includes key mitigation measures in the sector including increasing share of public transport for passengers and freight, and shifting road transport to other modalities including rail (8, 9).
Gender inequalities and marginalization issues
Women in rural areas, experience limited access to transportation, with direct implications on access to health, social services, and economic opportunities, partly due to gender stereotypes where vehicle operation is associated under male responsibility. Even in rural district women rely more heavily on public transportation, with 60% of bus passengers in Tirana being women (10, 11).
Investment opportunities introduction
Transportation infrastructure investments, including road and railway structures and exports of associated machinery and know-how are cited as key opportunities for foreign investors. The Economic Reform Programme 2023-2025 allocates ALL 0.43 billion (USD 4.3 million) to support public transport and ALL 120 million (USD 1.2 million) to urban transport sectors (14, 15).
Key bottlenecks introduction
Widening infrastructure gap, state ownership and governance and slow pace of sector reform, adopting a low carbon approach across the sector, road safety and environmental and social risks, and progress on electric mobility over long distances and associated infrastructure are among the key bottlenecks (2).
Rail Transportation
Pipeline Opportunity
Rail Network Expansion, Upgrading and Electrification
Invest in the expansion, upgrading and electrification of the rail network through tenders announced by the ministry of energy and infrastructure, through public-private partnerships (PPPs), where the investor can take the responsibility of executing the rail network expansion or upgrading, covering operation and maintenance of the infrastructure for a specified period, and generating revenue from various sources including passenger fares, freight transportation fees, or other revenue sharing models agreed by the tender.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
204 km of railway network, serving 139,000 tons of volume of goods and 3,290 passengers in 2023.
European Bank of Reconstruction and Western Balkans Investment Framework provided a loan of EUR 36.9 million (USD 39.4 million) and grant of EUR 35.5 million (USD 37.9 million), respectively, for the rehabilitation of the Tirana-Durres line and the construction of a 5 km railway branch between Tirana and Rinas Airport, to serve both passenger and freight transport (17).
EBRD has also provided a sovereign loan up to EUR 98.75 million (USD 105.55 million) to the Republic of Albania, benefitting Albanian Railways (HSH) to finance the rehabilitation and electrification of the railway line between Vlore and Hani i Hotit on the border with Montenegro. The Project will be co-financed by the EIB and the Western Balkans Investment Framework which has provided investment grants in the amount of up to EUR 125.8 million (USD 134.46 million) and technical assistance grants in the amount of up to EUR 12.1 million (USD 12.93 million) (21).
The length of the railway network in use in Albania is 204 km; volume of goods transported in 2023 reached 139,000 tons and 3,290 passengers used rail transport as a means of travel during the first quarter of 2023 (22).
Indicative Return
10% - 15%
The Electrification of the Railways system in Albania was estimated to produce a net present value of ALL 14.3 billion (USD 146.2 million) and an IRR of 12% (24).
A benchmark project for high-speed railways in France, connecting to South East Europe estimated an IRR between 15-16.5% (23).
Investment Timeframe
Long Term (10+ years)
The project payback period for the Trans-European Railway with direct connections to Albania through North Macedonia and Greece, was calculated at 26 years, positioning such investments in the long-term timeframe (25).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Business - Supply Chain Constraints
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
Albania's railway network remains outdated and has suffered from a lack of significant upgrades, including the absence of electrification, obsolete telecommunication and signalling systems, where the entire network remains a single track, and remains un-electrified (5, 15).
The limited infrastructure of the network results in low travel speeds with a maximum operating speed of 40 km/h falling to 20 km/h in some sections, frequent traffic disruptions, seasonal passenger services, and inefficient freight transport negatively impact agricultural competitiveness & regional integration of the private sector (3, 4, 26).
Road transport remains the main means for passenger and freight transportation, rendering the sector the largest contributor to GHG emissions at 60%. Rehabilitating and expand the railway network is pivotal to de-carbonize the transport system and improving the environmental conditions, especially addressing air pollution in metropolitan areas (2, 15).
Gender & Marginalisation
People living in remote areas, such as rural regions or urban peripheries experience difficulties in accessing key services including health and education, and employment opportunities due to the decaying transportation infrastructure and over-dependence on road transport through private means (6).
The construction industry exhibits a substantial gender disparity, with women comprising less than 5% of the workforce. Additionally, women's reliance on transportation infrastructure and services is higher, influenced by gender-specific travel patterns, preferred modes of transport, and utilization of infrastructure and services (28).
Expected Development Outcome
Investments in railway upgrades and electrification will address the outdated railway infrastructure, leading to future improvements in railway efficiency, safety, travel speed, reduced disruptions, and increased capacity.
Investments in the railway network will promote a shift to intermodal transport as an alternative to road transport directly benefitting agricultural competitiveness and regional integration of the private sector through interregional transport and cross-border connections with neighbouring countries (15, 27).
Gender & Marginalisation
Investments in railway infrastructure will enhance greater use and accessibility to rail transport, producing socio-economic benefits to local communities and businesses, providing an affordable and sustainable alternative to road transportation (27) .
Investments enhancing railway infrastructure and connectivity will be especially advantageous for women, given their higher dependence on transportation services and infrastructure due to gender-specific travel patterns (28).
Rail network expansion and upgrading investments will enable faster, more regular train services between urban centers and the outskirts, enhancing local communities' access to services including health and education, and economic opportunities (27).
Primary SDGs addressed
9.1.2 Passenger and freight volumes, by mode of transport
9.4.1 CO2 emission per unit of value added
Number of passengers 24,018 by rail, 862,757 by sea, 2,928,275 by air in 2021. The volume of goods transported by rail was 139,000 tons in 2023 (22, 29).
The transportation sector constitutes the largest proportion of final energy consumption across all sectors, at 40%, and remains the most emission-intensive sector responsible for 60% of CO2 emissions, compared to the global average of 20% (2).
N/A
The sustainable transport plan aimed for a 16% reduction in Co2 emissions from road transport by 2020. Under its Nationally Determined Contributions, Albania committed to a GHG emissions by 20.9% by 2030 (31, 33).
11.2.1 Proportion of population that has convenient access to public transport, by sex, age and persons with disabilities
Data on access to public transport in Albania is limited, most intra-urban transport is carried out by private companies (30).
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Outcome Risks
Railway projects can lead to increased energy consumption and decreased energy efficiency, unless energy-efficient technologies and practices during rail operations are deployed.
The construction process including clearing land for railway tracks may disrupt local ecosystems and wildlife habitats, negatively impacted by noise, vibrations, and changes in land use (27).
Gender inequality and/or marginalization risk: Populations residing along railway infrastructure projects, especially owners of agricultural land, can face involuntary resettlements and adverse social and economic impacts from land acquisition or restriction (32).
Impact Risks
Climate change, including rainfall and sea-level rise risks and natural disasters can impact delivery of railway services, limiting positive impact (32).
Lack of controlled safety systems for trains' movement along the line can increase the risk of accidents and cause safety hazards (26).
Without consistent maintenance services, transport infrastructure is prone to deterioration over time, constraining effectiveness, given that the typical lifespan of most transportation-related assets is a maximum of 50 years (2).
Gender inequality and/or marginalization risk: If the infrastructure fails to extend to rural or poorly maintained areas, either due to cost constraints or accessibility challenges, its impact may be restricted, as it would not effectively reach crucial stakeholders.
Impact Classification
What
Railway investments will facilitate movement of goods and people, promote economic growth, and contribute to a sustainable mode of transportation.
Risk
High maintenance costs, disruptions to local communities, natural disasters and extreme weather events may hinder delivery of impact.
Contribution
Investments can contribute to government strategy to provide comprehensive and sustainable transportation services in line with EU standards, including the Strategy of Transport & Action Plan (31).
Impact Thesis
Enhance connectivity, reduce greenhouse gas emissions, and drive economic development by offering efficient and sustainable passenger and freight mobility solutions.
Enabling Environment
Policy Environment
Sectorial Strategy of Transport & Action Plan 2016 – 2020, 2018: main goal of the strategy is to have an efficient transport system, integrated in the region and in the EU network, including creation of new railway bodies and opening the rail market to the European corridor (31).
National Strategy for Development and European Integration 2022-2030, 2023: includes the policy to reform the railway sector for the creation of real opportunities for the operation of railway transport for the public and the creation of an open market for public and private investors, transforming the Albanian railway network as a functional actor in the transport corridors of South-Eastern Europe (6).
Economic Reform Programme 2023-2025: calls for a modernization of the Albanian railway network among the key transport market reforms, to enhance interregional and cross-border transport with neighbouring countries and reduce emissions from road transport (15).
Instrument for Pre-Accession Assistance (IPA III) Programming Framework for the period 2021-2027: commits support for greening the transport sector with investments in railways and forming fast and efficient transport links within the region and EU (34).
Financial Environment
Financial incentives: The Economic Reform Programme for 2023-25 budgets an additional 0.02% of GDP (approximately USD 5.6 million) for electrification, energy efficiency, and greening of the railway system (15).
Fiscal incentives: Legal incentives including land consolidation, support for ancillary infrastructure, access to state-owned immovable property and expropriation of assets are provided to strategic investments in the transportation sector, for between EUR 30-50 million (USD 32 - 53 million) (12).
Other incentives: For the development of the Trans-European railway network, EBRD has provided a sovereign loan of USD 105.55 million for the Vlore-Hani i Hotit line and USD 39.4 million for the Tirana-Durres line and WBIF provided USD 147.39 million and xx, respectively for the two projects (17, 21).
Regulatory Environment
Law No 142/2016, The Railway Code of the Republic of Albania, 2018: aligns the operation of railways with EU codes, including certification of drivers, railway safety, and interoperability within the EU (31).
Law no.8/2018, On the ratification of the Transport Community Treaty: aims to create a Transport Community in the field of road, rail, inland waterway and maritime transport as well as the development of the transport network between the European Union and the South East European Parties (35).
Law no. 55/2015 On Strategic Investments, 2016: aims to increase Albanian and foreign strategic investments in the sectors of the economy considered as strategic sectors, through the establishment of special favorable administrative procedures, mitigating and support services to the investors (36).
Law no. 125/2013 On Concessions and Public Private Partnership, April 2013 (amended 2019): abolishes the 2006 Law no. 9663 on Concessions, provides that changes in the ownership or the management of the Special Purpose Vehicle (SPV) are subject to the approval of the contracting authority and the Ministry of Finance, unless such changes are due to trading of shares in a regulated capital market (41).
Marketplace Participants
Private Sector
Albrail Sh.p.k, HSH Albanian Railways S.A., ERR European Rail Rent GmbH, G. Transport, Merex, MFD Rail GmbH, Transwaggon Group, TransCare GmbH, Progress Rail, ECM, INC, Italferr, Alb – Star Shpk, Matrix Konstruksion Shpk.
Government
Ministry of Infrastructure and Energy, Ministry of Economy, Culture, and Innovation, Ministry of Agriculture and Rural Development, Ministry of Environment and Tourism, Institute of Statistics of Albania (INSTAT), Albanian Investment Development Agency (AIDA), Regional Councils, National Agency of Territory Planning.
Multilaterals
European Bank for Reconstruction and Development (EBRD), European Union – Delegation to Albania, World Bank Group, Western Balkans Investment Framework, International Bank for Reconstruction and Development (IRBD), United Nations Conference on Trade and Development (UNCTAD), United Nations Economic Commission for Europe (UNECE), United Nations Framework Convention on Climate Change (UNFCCC).
Non-Profit
Ecovolis, Co-PLAN, Foreign Investors Association of Albania (FIAA), Albanian Development Fund, Environmental and Rural Development Institute (ERDI).
Public-Private Partnership
ECM, the subsidiary of Progress Rail, won a project to modernize the signalling system on the Tirana-Durres Railway line in Albania, along with Italy-based INC, serving more than 34 km of railway track between Tirana and Durres, and help with the construction of the extension to the Rinas Airport (18).
Target Locations
Albania: Tirana
Albania: Durrës
Albania: Vlorë
Albania: Shkodër
Albania: Elbasan
References
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