VBB.de Verkehrsverbund Berlin-Brandenburg GmbH Hardenbergplatz 2 10623 Berlin EMTA General Meeting...

VBB.de Verkehrsverbund Berlin-Brandenburg GmbHHardenbergplatz 210623 Berlin

EMTA General Meeting Berlin

Hans-Werner Franz

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VBB Verkehrsverbund Berlin-Brandenburg GmbHHardenbergplatz 210623 Berlin

VBB.de

EMTAGeneral Meeting

September 17th, 2012

Hans-Werner FranzCEO VBB GmbH

President of EMTA

The problem of vehicle procurement, funding and the task

of organising competition



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Competition goals

► More passengers Increases in passenger numbers by means of incentive systems

► More quality New or modernised trains on all networks

► More services Increase in train-km possible for the same price

► Same or Cost reduction potentialsreduced lie between 10% and 50 %financial requirement



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Competition intensity in rail traffic 2012 EU-wide

High

Medium

Low or not present

Freely accessible regional rail passenger transport (SPNV) market in Germany

Germany: high SPNV competition intensity

Consistently good competition experiences

Currently 30 SPNV companies active

Long-distance rail traffic: hardly any competition



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Intensity of competition in rail traffic 2000-2012 by Federal State

Differing intensity of competition Generally high dynamics Expiry of "large-scale DB transport

contracts" Strong increase in number of contracts

70 out of a total of 640 million train-km tendered annually

Currently, however, stagnating dynamics, causes: too many procedures

simultaneously too few bidders too few new or foreign bidders lack of small and medium-sized

companies

Challenge for ordering authorities

High

Medium

Low



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SPNV competition in Berlin and Brandenburg 2012 (not inc. S-Bahn)

SPNV operators in Germany

SPNV operators in the VBB

More than 91 percent awarded in competition!



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Organisation of competition in Berlin and Brandenburg

VBB awards services on behalf of the Federal States of Berlin and Brandenburg, in part with other ordering authorities

► High synergy effects thanks to size Public tenders are the rule

► Most legally secure and fastest path to the objective

VO1370 applied since 3rd December 2009

► Securing social standards for employees In the future, a rolling award system is intended

one procedure per year

► Foresighted management ► Planning security



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Regional traffic: good marks from customers in 2011

!

!

Marked improvement in the last ten years!

No incentive for SPNV operators to improve their services in the absence of competition!

Customer satisfaction in regional traffic (companies)

Companies 2010 2011

DB Regio AG, Contract1 2.06 2.00

DB Regio AG, Contract3 2.02 2.01

ODEG, Contract1 + 2 1.46 1.53

ODEG, Contract1 3 1.43 1.37

OLA (MR) 1.42 1.38

PEG 1.67 1.52

NEB, Contract1 1 1.42 1.32

NEB, Contract1 2 1.63 1.58

Total 1.95 1.91

Basis: 3,836 regular users, weighted rating marks 1 – 6 (1 = very satisfied)

Customer satisfaction in regional traffic (trains)

Quality criterion 2010 2011

Punctuality 2.54 2.59

Cleanliness 2.02 1.95

Furnishings 1.62 1.62

Freedom from damages 1.83 1.80

Safety from criminality 1.80 1.81

Seating capacity 2.13 2.04

Info in general 1.65 1.60

Info on delays 2.49 2.43

Friendliness/Expertise of train staff 1.73 1.71

Options for purchasing tickets 1.82 1.71

Total 1.95 1.91Basis: 3,836 regular users, weighted rating marks 1 – 6 (1 = very satisfied)



RU4RU3RU2

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Recognisable trends since 2008

Permanently declining number bidders in tender procedures

Progressive bidder consolidation

Increasing risk due to DB monopoly on: network, stations and energy (infrastructure)

Increase in volume of services with ever larger size of networks

Problems with funding resources (vehicles, workshop)

RU1

RU2RU1

vs.

+ =



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The problem area of international traffic – for example Poland

Problems• Different power systems• Different control command• Vehicle registration• SPNV underfunded in Poland

Although international traffic is a special challenge, it has considerable potential

Wrocław

Zielona Góra

Poznań

Szczecin

Gorzów Wlkp.



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The problem area of used vehicles

No existing market in Germany, one single provider

Diesel trains only. Too much variety in vehicle requirements

(entry height, interior fittings) for each Federal State and ordering authority.

High conversion costs for vehicles and new registration problems

Transport contract periods not harmonised

High downtime costs No guarantee of vehicle acceptance

Photos: Alpha Trains



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The problem area of vehicles and workshops in general

Vehicles Considerable lead times and investment sums (effects of financial crisis) Larger vehicle fleets due to larger tender networks No vehicle requirement standardisation Duration and problems of registration Lack of a used vehicle market DB Energy monopoly

Workshops Dealing with existing workshops Depreciation period Increasing problem with locations Filling facilities



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Problem area of SPNV vehicles

• Manufacturers' concentration on vehicle technology

• Diesel:

• Electric:

• Foreign manufacturers: observing the market

• delivering in 2014 first diesel vehicles for Netinera a new impetus

• Existing DB framework contracts with CAF, Stadler and Alstom

• Leasing market: only one provider

• Registration duration: 44 months

• EU-wide registration not possible

Japan

Poland

Spain



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Gross distortion of the market caused by the dominating role of DB in nearly all tending procedures

Interest in vehicle financing slowly on the increase again However: most banks possess no understanding of the SPNV market,

therefore a conservative approach

The problem area of vehicle financing – market situation in 2012

DB's advantages

•Top rating and top credit-worthiness (Federal enterprise)•plenty of transport contracts, low residual-value risks •direct access to financial markets, more favourable credit conditions•Intra-corporate financing strategy



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Problem area: non-federally owned operator vehicle funding

Payment default on part of PTO (public transport authority) during current contract Demand for payment default protection

Definitive use of vehicles during transport contract duration not ensured

Demand for guarantee of vehicle use

Reuse/continued use of vehicles upon expiry of contract uncertain/not foreseeable

Demand for fixed reuse guarantee

Financial solvency of small PTOs not sufficiently high for large-scale sums

Demand for high securities

No financing sum > 50 million EUR

Bank consortium

Formal guarantee through PTO not affordable

High risk premiums by financiers

PTO offer markedly more expensive

Other protection possibilities necessary Surety from parent group

Of limited use only (foreign parent group)

Lengthy and arduous coordination

Tender period not sufficient

DemandsDemands ReactionsReactions



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Ordering authority funding possibilities and aid

Ordering authority (PTA) vehicle pool

(PTA vehicle ownership)

Guarantee of re-use(PTO vehicle ownership)

Undisputed assignment(PTO vehicle ownership)

Rhine-Ruhr PTA (VRR) model

(PTA vehicle ownership)

Vehicle provision model(Pool operator vehicle ownership)

Residual-value guarantee(PTO ownership vehicle, as

appropriate for 2nd TC with PTA)

Development bank model

(PTO vehicle ownership)Re-registration assurance

(PTO vehicle ownership)

Operate Lease(Lessor vehicle ownership)

Financial Leasing (PTO vehicle ownership)

Loan/Capital market financing


Purchase specification assurance

(Lessor vehicle ownership)

classical models hitherto practiced

Pool models Mixed forms, moderate aid

Refinancing aid via regional/development banks


Anmerkung des Übersetzers: Was bedeutet die Abkürzung "VV"? Verkehrsverbund?Anmerkung der Lektorin: Verkehrsverbund heißt "linked transport system"



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Practical example 1: The LNVG (regional transport company) vehicle pool

LNVG vehicle pool

PTO

Transport contract

Infra-structure

Energy

Subcontract Practical Tasks

Servicing and maintenance contract

Contract Contract

Vehicle manufacturer

Vehicle delivery contract

No representation of the contractual relationships between LNVG, OHE (East Hanover Railway) and PTO for maintenance of double-decker trains in Uelzen plant



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Practical example 2: The VRR model

VRR

PTO

Transport contract

Infra-structure Energy


Leasing contract

Framework contact

Contract Contract

Vehicle manufacturer


BankLoan contract at local authority loan conditions

Technical advisorsControlling

Joint body



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Practical example 3: Purchase specification assurance for vehicles in replacement contracts

PTO

Transport contract

Purchase specification form in replacement contractsQuotation in tender

Acceptance of quotation

Lessor

Leasing contract

Übersetzer: terminologieschwierigkeiten: Bezugsvorgabe=Purchase specification agreement?



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Practical example 4: Guarantee of re-use

Why guarantee of re-use? Minimising residual and re-use risks Equal, uniform distribution of the vehicle financing costs

over a period of two transport contracts feasible

Ensuring the vehicle financing

Basic structure of re-use guarantee Optional use by the PTO Assumption of residual-value risk by PTA Binding vehicle specifications for successive tendering

of services

Transport contract I

t

Transport contract II

Übersetzer, Terminologieschwierigkeiten: logische sekunde = logical seconds?("logical seconds" hat aber keine klare Bedeutung auf Englisch)



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Application of ordering authority contiguous vehicle financing in Germany

Ordering authority contiguous financing is becoming increasingly popular in Germany

In this regard, all the models discussed are in use

Up to now a clear East-West gradient recognisable

Excepting Bavaria: so far successful tenders even without financial aid

Source: KCW

Vehicles owned by ordering authorityProvisioning by third-party

Guarantees

Access to old vehicles

30-year contract (S-Bahn)



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Dealing with alternative financing models Ensuring vehicle financing essential through the ongoing financial crisis Responsiveness of the PTAs to maintain or increase the number of bidders Taking account of the differing credit-worthiness of the PTOs Restricting the aid to sensible cases of application Selecting the financial aid according to procedure and framework conditions

Vehicle pool or re-use guarantee / re-registration undertaking + debt servicing guarantee

- Large investment volume (size of fleet markedly in excess of average subnetwork size)

- Special vehicles (not usable everywhere in Germany, e.g. S-Bahn at 90 cm standard, direct current or dual-voltage vehicles, tilting technology)

Re-use guarantee / Re-registration undertaking - Medium investment volume with universal standard vehicles- Medium-term periods

No guarantees or assistance- Smaller specifications with used and/or standard vehicles- Medium to short-term periods



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Thank you!

VBB.de Verkehrsverbund Berlin-Brandenburg GmbH Hardenbergplatz 2 10623 Berlin EMTA General Meeting...

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