In June 2014, the EU and its Member States on the one side, and Ukraine on the other side, signed  the EU-Ukraine Association Agreement which, inter alia: (i) encourages the two parties to intensify their cooperation in the field of transport; (ii) aims at facilitating the restructuring and modernisation of Ukraine's transport sector; (iii) assists Ukraine towards achievement of efficient, safe and secure transport; and (iv) promotes a gradual approximation towards operating standards and policies comparable to those  in the EU. In the field of railway transport, Ukraine shall, for instance, implement the provisions of Directive  2008/57/EC of the European Parliament and of the Council of 17 $^{th}$ June 2008, as amended, on the  interoperability of the rail system within the Union.  In that context, financial support is needed to ensure the implementation of the provisions of the  agreement and the reform of the sector. Indeed, Ukraine is currently engaged in a sectoral reform  that follows the National Target Program on Railway Reform 2010-2019, approved by the Cabinet of  Ministers of Ukraine on 16 th December 2009. In particular, the Joint Stock Company “Ukrainian  railways” (Ukrzaliznytsia), the former State Administration of Railway Transport of Ukraine, was  established as a Public Joint Stock Company on 1 $^{st}$ December 2015 and subsequently reorganised  as Joint Stock Company on 31 $^{st}$ October 2018.  The network of railways of Ukraine is the largest in Europe with approximately 21,600 kilometres of  tracks, of which about 45% are electrified. The networks is the fourth largest by volume of traffic in  Europe. The railway network in Ukraine is of great strategic importance for Ukrainian trade and  import-export industries. At present, the transport sector in general meets only basic demands of the economy and society.  The levels of safety, quality and efficiency of passenger and freight transportation as well as energy  efficiency and impact on environment compare poorly with EU standards. The existing transit  potential resulting from its favourable geographical location of the country is not fully exploited. These  factors result in a high share of transport costs in the delivered cost of products. Ukraine is undertaking a project concerning the electrification of the Dolynska - Mykolaiv section and  the Mykolaiv - Kolosivka section of the railway network in the southern part of Ukraine, together with  the modernisation of signalling and telecommunication systems in stations and on open lines.  This electrification project is in line with the strategy formulated by the European Commission on  “Improving transport connectivity with the EU-Neighbourhood East region” focusing on the extension  of the TEN-T network in the Eastern Partnership region.  As the ppoject shall provide the missing link of the electrified comprehensive extended TEN-T railway  corridor in Ukraine, as well as it is in compliance with the maritime port’s development strategy of  Ukraine, the Project has been identified as a priority investment under Ukraine’s National Transport  Strategy to 2020 prepared with support from an EU-financed technical assistance programme. It is  also on the priority project pipeline established in the context of the Eastern Partnership Transport  Panel and located on the Eastern Partnership regional transport network. The project safeguards and develops Ukraine’s export and transit freight flows by modernising lines.  The project will result in increased traffic capacity and higher speed on the modernised lines,  therefore relieving traffic and congestion in the corridor and reducing transit time. It will also lower  energy, operating and maintenance costs and will allow traffic to circulate using a more fuel efficient  and environmentally friendly mode, reducing emissions. The total investment costs are expected to be approximately EUR 306 million including contingencies  and without VAT. The Promoter intends to finance this project using the proceeds of the loans from  the EIB and the EBRD (“the Banks”) in amount of approximately EUR 150 m each. NIP grant of  EUR6 million has been made available to finance the supervision services.  Page 4 of 18 AA-000799-002 Terms of reference  1.4.1  General Current situation in the sector 