Strategy for railway infrastructure development

s mil. RON 337.32 547.23 890.17 808.22 918.92 3 501.86 mil. Euro 1 552.19 2 490.02 3 348.66 2 926.75 3 270.28 13 587.91 TOTAL mil. lei 7 450.52 11 952.10 16 073.59 14 048.41 15 697.36 65 221.97 The Strategy for Railway Infrastructure Development is complementary to the General Transport Master Plan of Romania, in the sense that it develops and details the general strategic recommendations of the GTMP regarding the consolidation of the railway transport position in the internal transport market. Considering that the General Transport Master Plan was approved by the Government Decision no. 666/2016, which gives it the status of a reference document on the state policy in the field of transport, as well as in terms of correlation with the financial projections of the GTMP, it results that the condition of financial sustainability of the Strategy for Railway Infrastructure Development is met. CFR Network Statement - 2026 ANNEX 12.a Version: 15.0.0 Updated: 15.12.2024 Page: 12 / 14  Compania Naţională de Căi Ferate “CFR” S.A. România 6. NECESSARY MEASURES TO ENSURE THE FEASIBILITY OF THE STRATEGY FOR RAILWAY INFRASTRUCTURE DEVELOPMENT Beyond the financial sustainability and compliance with the national and European transport policy, the feasibility of the Strategy for Railway Infrastructure Development is conditioned also by the cumulative meeting of the conditions that exceed the scope of the railway infrastructure manager and, in some cases, even of the railway system as a whole. It is necessary to reconsider the role of the railway transport within the national transport system, aiming at capitalizing its inherent economic benefits in order to increase the economic efficiency of the national transport system and to reduce the costs of the national economy generated by the transport field (see paragraph 11.1 of the strategy). Balancing the competitive chances of the transport modes on the internal land transport market is a precondition for the rehabilitation of the railway transport and, implicitly, for ensuring the feasibility of the Strategy for Railway Infrastructure Development. This involves eliminating the existing distortions in this market in terms of the competitive environment, in order to provide the necessary framework for the modal balancing of the national transport system (see paragraph 11.2 of the strategy). It is necessary to implement some homogenous rules on the financing of the transport infrastructures, in accordance with the recommendations of the General Transport Master Plan, in order to ensure the stability and predictability of the financing of these infrastructures. In particular, the homogenous rules on the financing of the transport infrastructure must ensure that national and European legislation on the financing of the railway infrastructure needs is applied (see paragraph 11.3 of the strategy). It is imperative to strengthen the system of the public passenger transport services, in order to ensure the necessary framework to create a viable and attractive alternative to the individual road transport, with consequences for reducing the overload of the road infrastructure and, consequently, streamlining the traffic on the national road network. Otherwise, any effort to rehabilitate the railway infrastructure could be compromised by maintaining, in the field of railway passenger transport, a supply of services that is insufficient from the quantitative point of view and unattractive for the customers in terms of the level of performance and quality of services. (see paragraph 11.4 of the strategy). During the transition period regarding the internalization of the external transport costs in order to ensure a balanced and equitable competitive environment between the modes of transport, the need to transfer to the railways of the freight flows currently transported by road leads to the need for urgent implementation of promotion measures for the intermodal transport and the railway freight transport in isolated wagons, in order to balance the intermodal competition in the market for small freight shipments (see paragraph 11.5 of the strategy). The implementation of the Strategy for Railway Infrastructure Development, as an obligation assumed by the performance and the activity contract of the railway infrastructure manager, imposes the need to ensure a multi- annual railway infrastructure financing plan, established so as to ensure a predictable coverage of the financing needs within the strategy. It is also necessary to implement the legal mechanisms for multiannual financing of the actions that take place over time periods that exceed the horizon of a calendar year (see paragraph 11.6 of the strategy). CFR Network Statement - 2026 ANNEX 12.a Version: 15.0.0 Updated: 15.12.2024 Page: 13 / 14  Compania Naţională de Căi Ferate “CFR” S.A. România 7. NEXT STEPS In order to ensure the necessary conditions for the successful implementation of the Strategy for Railway Infrastructure Development, the following must be achieved in the next period: • Approval of the Strategy for Railway Infrastructure Development by Government decision. • Negotiation with the Ministry of Public Finance of the multi-annual financing plan for the railway infrastructure for the period 2021-2025, which shall ensure the coverage of the financing needs established by the above-mentioned strategy. • Concluding the activity and performance contract of CFR SA for the period 2021-20257. This contract establishes the mutual obligations regarding the implementation of the Strategy for the development of the railway infrastructure, based on the multiannual financing plan mentioned above. The model of this contract, which ensures the compliance with the provisions of Law no. 202/2016, was approved by OMT no. 1314/2017. • Implementation of a multi-annual financing mechanism for repair activities based on the commitment credits, which would allow contracting the execution of the complex works which last more than one year. Regarding the multiannual financing plan for the railway infrastructure, provided in art. 8 para. (4) of Law no. 202/2016, it must also ensure the compliance with the provisions of the legislation in force in the field of public finances8 that established the budgetary principle of annuality. The solution consists in defining budgetary programs to cover all categories of public funds allocated to the railway infrastructure manager. In this sense, it should be mentioned that CFR SA intensively collaborated with the Ministry of Transports, Infrastructure and Communications for the elaboration of the Institutional Strategic Plan (ISP) of the ministry9. Within this collaboration, the correlation of ISP with the Strategy for Railway Infrastructure Development was taken into account. For this purpose, three budgetary programs have been defined for the financing of CFR SA, which cover all categories of public funds identified as necessary through the Strategy for Railway Infrastructure Development. These programs are structured by expenditure categories (see also item 5, above), as follows: a) Budgetary program meant to finance the railway infrastructure renewal activities b) Budgetary program meant to finance the maintenance activities (maintenance and repairs) of the railway infrastructure c) Budgetary program meant to finance the investments regarding the modernization of the railway infrastructure, including the investments necessary for the efficiency of the company's activity. The implementation of this solution defined within the ISP is likely to ensure both the implementation of the multi-annual financing plan for the railway infrastructure and the implementation of a multi-annual financing mechanism for the repair activities, based on the commitment appropriations. 7 In accordance with the provisions of Law no. 202/2016, the new activity and performance contract of CFR SA for the period 2019-2023 must replace the current activity contract for the period 2016-2020, approved by GD no. 232/2016 8 With reference mainly to Law no. 500/2002 on public finances, with subsequent amendments and completions 9 The elaboration of institutional strategic plans at the level of the ministries is an action coordinated by the General Secretariat of the Government and is carried out on the basis of a contract with the World Bank, as a consultant. The action is financed from the European non-reimbursable funds within the Operational Program Administrative Capacity (OPAC). The Institutional Strategic Plan is an instrument that is to ensure a functional link between the existing strategies at the level of the ministries and the policy of the Ministry of Public Finance for the allocation of budgetary funds. The aim of this action is to migrate, as soon as possible, from the current objective-oriented budget allocation policy to a program-oriented (budgetary) budget allocation policy defined in correlation with the existing strategies at the ministry level. This approach is part of the commitment assumed by the Romanian Government in relation to the main international financing institutions (European Union, World Bank, International Monetary Fund) regarding the implementation of the structural reforms. CFR Network Statement - 2026 ANNEX 12.a Version: 15.0.0 Updated: 15.12.2024 Page: 14 / 14