Compania Naţională de Căi FerateNational Railway Company

“CFR” S.A.

Bucharest, October 6th, 2015

Building the new railway economy

Challenges & Opportunities

Dan M. COSTESCU, Chief Executive OfficerDan M. COSTESCU, Chief Executive Officer

Network length:10 629 km

Double line:2 909 km

Electrified line:4 028 km

Number of stations:930

Network characteristicsNetwork characteristics

Institutional separation and open access Institutional separation and open access to the railway infrastructure in to the railway infrastructure in

accordance with the EU Directives accordance with the EU Directives (1998)(1998)

Infrastructure Manager (CFR S.A.)Infrastructure Manager (CFR S.A.) National Passenger Operator (CFR Calatori)National Passenger Operator (CFR Calatori) National Freight Operator (CFR Marfa)National Freight Operator (CFR Marfa)

Institutional separation and open access to the Institutional separation and open access to the railway infrastructure – Railway Undertakings railway infrastructure – Railway Undertakings

that concluded the access contract on the railway that concluded the access contract on the railway infrastructure managed by CFR S.A. in 2015infrastructure managed by CFR S.A. in 2015

Type of license Number of undertakings Owner

Passenger and Freight 3 Private

Freight 21 1 State owned, 20 Private

Passenger 4 1 State owned, 3 Private

Projects for the modernization of the railway sections

Modernization of Romanian railway stations

Rehabilitation works to bridges and tunnels on the TEN-T railway network

Increase in traffic safety

Challenges Challenges & &

OpportunitiesOpportunities

Expensive IT solutionsExpensive IT solutions

vsvs

Low cost rail servicesLow cost rail services

Innovative Innovative

DigitalisationDigitalisation

vsvs

Overregulated Overregulated and change-and change-

resistant resistant workforce workforce

Railway atomisationRailway atomisation

vsvs

Strong Railway Strong Railway AdministratorAdministrator

IntraIntra-modal competition -modal competition

vsvs

InterInter-modal competition-modal competition

Sustainable business environment

Assuring a level play field

Recast directive

Amending the national legal frame

Modal Shift

ImplementingImplementing aa new legal frame & business environmentnew legal frame & business environment

1st Stage: Present situation, introductory steps:- Bring topic in public & political debate- Run market and econometric studies- Design the legal frame- Set the new financial mechanisms

2nd Stage: Implementation according to an appropriate timing :

- Costs internalization for road- Railway access fees reshaping- Improving the KPI of infrastructure

3rd Stage: Including the ignition and progress of modal shift over the break-even point when the

subsidy turn to profit

Financial mechanismsFinancial mechanisms

Already known, and validated by on-going activity

- Own revenues – access fees- Own revenues – noncore activities- State budget - subsidies

Financial mechanismsFinancial mechanisms Not yet tested or validated,

existing or new “positivecross-subsidies” from the polluter

- 20-30% of environment tax (from road)- 20-25% of RO-vignette tax (from road)- % of the over excise duty for fuel- 100 % heavy lorries/coaches over tax

Extending the concept “polluters pay” to “polluters pay to… green modes”

Financial mechanismsFinancial mechanisms

Further different developments:

- to be identified after further internal analysis

- to be identified by consultants- resulting from the experience or best

practices of other railways

Impact of modal-shift over GDPImpact of modal-shift over GDP

External Costs – Passengers Transport

10% modal shift from road to rail

1% of Romanian GDP

Modal Shift EffectsModal Shift Effects

Incomes Costs

Traffic Intensity

Inco

mes

& C

osts

Subsidy

ProfitProfit

Railway subsidy turns to profit

Compania Naţională de Căi FerateNational Railway Company

“CFR” S.A.

Thank Thank youyou ! ! Bucharest, October 6th, 2015