Scandinavian Rail Development 2013 - Mats Nyblom
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Transcript of Scandinavian Rail Development 2013 - Mats Nyblom
What Does the Future Hold
for Hector Rail? Scandinavian Rail Development Stockholm 16 April 2013
Agenda
• Short about Hector Rail
• Big picture: Effects of market opening
• Hector Rails loco strategy at a brief
• Financing Rolling Stock as a private company
• Rolling Stock Development
• Organisational Development
• The ERTMS challenge
2013-04-18 3
Clear business model
• Independent line-haul traction
between facilities/ terminals of
– industrial shippers
– freight forwarders
– intermodal operators
– passenger traffic operators
– other railway companies.
• Within traction concept, we also
offer:
– Wagons (rented during contract period)
– Shunting
Independent traction provider
• Hector Rail is an
independent traction
provider
– Not owned by any state
– Not connected to any
transport or forwarding
company
– Serves all customers on an
equal basis
4
Operation in four countries
• Customers
– SCA
• Timber
• Bio fuel
– Stora Enso
• Timber
– Scand Fibre Logistics
• Paper
– Samskip Van Dieren Multimodal
• Trailer, Container
– Veolia Transport
• Passenger traffic
– SCA Transforest
• Craft liner
– SCT Transport
• Containers
– DB Schenker Rail Deutschland
• Steel
• 14 000 train km/day
6
Before deregulation
• Geography defined the
organisation
• The organisation
covered the entire value
chain
• Competition didn’t exist
within a certain
geography
7
From now on
• We must define our business concept within the value chain
• Core competences (not geography) define our organisations
• The market/competition will set the value on our competences
Roles in freight transport
Truck feeder Feeder operator
Integrator
Loco owner
Logistic solution provider
Warehouse and
distribution
Operator
Terminal operator
Focused or full service
Focused
• Focus on core business
• No problems that partners
could see you as potential
competitor
• Can always be part of most
competitive solution
(together with partners
which cover other parts of
the value chain)
Full service
• Can have end customer
contact and provide total
solution (this role can,
however, also be held by a
co-ordinator)
• Can create bigger margins
with integrated offer (but
risks to lose as all in-house
parts may not be the most
competitive or optimal)
State ownership increases in the railway
sector
• Incumbents buy New entrants in foreign countries
– DB: PCC, EWS, ECR, (BLS), (Nordcargo) etc
– Trenitalia: TX Logistik
– SNCF: ITL, Veolia Cargo (ex R4C)
• Incumbents becomes “New entrants” outside their home
territory and starts competing with the domestic incumbent
• Consequently private rail operations have decreased in
volume
• State railways has a tendency to strive for “World
domination” with a full service concept
States – Are they the best owners?
• What could be the reason for a state to be an owner of a railway
company?
– A State can be the right owner for domestic monopolies
• State owned railways tends to strive for a full service concept with risk
for lack of (internal) competition
• States are not the right owners in a competitive market
– Risk for expecting to small returns in the business which makes the
business sector less attractive to professional investors
– Worst case: State subsidies
• Why should tax payers (risk to) subsidize an international freight company?
Example State Railway; history
Example State Railway; projection
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-1000
-500
0
500
1000
1500
2000
2500
3000
3500
2001 2003 2005 2007 2009 2011 2013 2015
MS
EK
LT debt
Equity
Solidity
Required solidity
600 MSEK new share issue >600 MSEK capital gains from divestment
Previous structure in Sweden
• Full service concept with a big number of focused services
• Full service concept created through internal (no competition) purchase of focused services
– Reduces true competitiveness of the service
• Try to attract customers through networks and political means
– Reduces market for the focused services
Wagon load
4,0
NTR
0,9
Logistics*
0,8
Traction
4,5
Road
0,4
Waggons
0,4
Road
0,4
On the way to a more rational future
structure?
• The different focused service
parts becomes own companies
• Service co-ordinators create
customer solutions
• Wagon load system provider
will be a concept owner and
buying focused services in
competion from suppliers
– Similiar to forwarder –
trucker on the road
• Creates a dynamic market
with focused service
providers in competition
Wagon load
4,0 NTR
0,9
Logistics
0,8
Wagons
0,4
Truckers
Separated
Traction providers
Private
Wagon companies
Done Done
Remains
Remains
Integrated
A dynamic railway market in Europe
• State owned full service providers can limit the development to a dynamic railway business in Europe
• It would be more dynamic to convert to focused service in competition in combination with co-ordinators and concept owners
• The state ownership is in itself an obstacle for a more dynamic market, since it reduces the interest for private investors
– Accept to low returns on the investment
– Political agendas
Conclusion:
Focus on your part of the value chain
• To be successful in the future market you have to define
and focus on your part in the value chain
– For Hector Rail: Traction provider
• Reduced state ownership in the railway business would
improve vitality in the sector
Hector Rails fleet strategy in brief
• Hector Rail takes long term responsibility for its locos
– Try to acquire or create locos with unique capabilities
– Have a mix between old and new locos
– Use operational leases to a limited extent
– Find optimal financing solutions
– Purchase most competitive maintenance solution
Productivity in many ways
• Cost efficient traction can be realised through
– Effective purchasing
• Prices, fleet sizes
– Efficient financing
• Interest rates
• Leverage
• Amortisation
– Efficient maintenance
• Cost / km
• Low down time / High availability
– Careful design of operation
• High utilisation of tractive effort
• High mileage
Fleet development
Loco fleet (September 2011)
Class Hector Rail 141 Hector Rail 142 Hector Rail 161 Hector Rail 241 Hector Rail 242 Hector Rail 441 Hector Rail 941 Hector Rail 942
Axle config Bo'Bo' Bo'Bo' Co'Co' Bo'Bo' Bo'Bo' Bo'Bo' B'B' B'B'
Number 3 12 *)
6 **)
12 5 2 2 2
Weight ton 86 84 129 84 85 86 90 88
Axle load ton 21,5 20,9 21,5 21 21,2 21,5 22,5 22
Power kW 6400 4000 5400 5600 6400 (7000) 6400 2700 1180
Tractive Effort kN 275 225 420 300 300 300 300 295
Max speed km/h 160 (230) 150 120 140 230 140 120 100
Approval SE SE SE, NO SE, DK, DE, NO SE, DE, AT SE SE, NO (DK, DE) SE
Year of manufacturing 1996 1972-75 1967 2007-2011 2000-2002 2005 2005 1995
*) thereof 11 in operation
**) Thereof three in operation
Old versus new locos
New
• High investment costs
• High availability
• Cross border operations
Old
• Lower investment costs
• Lower availability
• Single country operation
Hector Rail invests in Passenger Coaches
• Hector Rail has purchased
42 previous DB Bm235
coaches
– Designed for 200 km/h
• Purpose: To provide full
high speed train sets for
passenger operators in
Sweden
Financing locos as a private company
• Hector Rail has all our locos on the
balance sheet
• Financing this kind of equipment is a
difficult challenge
• As a private company the financier
demands profitability
• Over time financing has been more and
more complex
– Especially for older locos
– Increased demands on banks
• Hector Rail uses a big palette for
financing
– Leases, loans etc
– Four different banks
Organisational challenge:
Grow quickly and perform well
ETCS – pure horror?
• ERTMS/ETCS might jeopardise a
huge share of railway operations
• ERTMS/ETCS might discriminate
smaller operators and thereby
jeopardise market opening
• To avoid horror: ERTMS/ETCS
implementation plan must reflect
interests of all involved parties
Background to financing challenge
• ERTMS decided when railways were integrated and publicly owned
– ERTMS creates no tangible customer benefits
– Infrastructure benefits may in some cases offset rolling stock conversion costs
– Governments, owning both the IM and RU could also apply political motives to ERTMS
investments
• Problems now for separated RUs
– RUs don’t get any benefits from ERTMS (i.e. requires equity financing)
– Governments are unwilling to support RUs
– Thus, many RUs cannot finance rolling stock conversion
• Most private RUs will go bankrupt
• Therefore, financing solutions needed for rolling stock conversions to ERTMS
Toll Bridge Financing structure
Gives
directive
Repayment
Loan
Administer payments
“Toll” payment
Special
Purpose
Body
National
government Concept • Railway operators pay for the on board equipment
o Not up front, but over time when using the equipment o Similar to how to finance a new bridge through tolls
Train owners
Infrastr. mgr.
Operators
Equity
contribution