1
The Voice of European Railways
Libor Lochman Deputy Executive Director, CER
Prague, 12 March 2009
Interoperability of the Railway Infrastructure
Architecture of stable finance support of European railway sector as an important precondition for success of the interoperability implementation
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The Voice of European Railways
Main areas
of CER work
Pro-active shaping of EU
agenda
Own initiatives
Representing European rail sector in EU
CER – function and workMaximising efficiency of EU railway policy
•Members: 72 railway operators & infrastructure companies
•Geographically: entire European area (incl.
Switzerland, Norway, EU accession states and EU aspirants)
•Partnerships with railways beyond Europe
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The Voice of European Railways
* The ERA’s main task is to draft proposals for the Commission on railway interoperability and safety
Representing the EU rail sector towards the EU
CER – working structure
MEMBERS: 72 rail operators and
infrastructure companies
e.g. EIM, UIC, UNIFE, CIT, OSJD, OTIF, AAR,
RŽD etc. and ETF
Council of the EUEuropean
ParliamentEuropean
Commission
World Bank, EIB, UNECE, UNIDROIT
Council of Transport Ministers
Commissioner for Transport
TRAN Committee
European Railway Agency
(ERA) *
EUROPEAN INSTITUTIONS
Other railway organisations
Other internat. organisations
COMPANIES• Freight• Passenger• High-speed• Infrastructure• Integrated • National associations
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The Voice of European Railways
EXAMPLE Dramatic fin-ancial situa-tion in Central and Eastern European
countries
Problems are now acknowledged by European Commission:
> insufficient compensation of public
services> cross subsidies between
freight and passenger prevail > freight track access charges
are too high, government network contributions too low, networks
deteriorate
Pro-active shaping of EU agenda
Total capital of rail sector in CEEC: 1995: 28 bln EURO 2006: 4 bln EURO
Debt of CEEC rail sector:1995: 2,7 bln EURO 2006:10,5 bln EURO
0
5,000
10,000
15,000
20,000
25,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
mill
ion
EU
R
Debt Capital
Source: CER/NERA Financial Database
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The Voice of European Railways
Huge financial deficit
Where we are?
In contravention of Directive 2001/14 many rail and infrastructure companies are underfinanced. Public sector contributions has been insufficient: infrastructure managers cannot meet maintenance and renewal cost rail operators are not sufficiently compensated for public service obligations. As a result, IMs attempt to cover their costs: track access charges are generally high in CEEC the quality of the rail infrastructure network and rolling stock continues to deteriorate rapidly rail transport in Central and Eastern Europe becomes less competitive
6
The Voice of European Railways
EXAMPLE Dramatic fin-ancial situa-tion in Central and Eastern European
countries
Problems are now acknowledged by European Commission:
> insufficient compensation of public
services> cross subsidies between
freight and passenger prevail > freight track access charges
are too high, government network contributions too low, networks
deteriorate
Pro-active shaping of EU agenda
Total capital of rail sector in CEEC: 1995: 28 bln EURO 2006: 4 bln EURO
Debt of CEEC rail sector:1995: 2,7 bln EURO 2006:10,5 bln EURO
0
5,000
10,000
15,000
20,000
25,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
mill
ion
EU
R
Debt Capital
Source: CER/NERA Financial Database
1
The Voice of European Railways
Freight market share target in EU10 of White Paper
Source:ETIF 2007/2008, Eurostat, CER own calculation
EU15 and EU10 Rail Freight Market Share
14.9%
16%
24.5%
29.7%
0%
10%
20%
30%
40%
50%
60%
1970 1980 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
EU15 EU10
35% target
24.5% EU10 rail freight market share in 2010 instead of the 35% target of White Paper.
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The Voice of European Railways
Adequate financing of infrastructure
Background
Based on agreed multi-annual contracts (MACs), infrastructure must be properly financed to allow safe, quality services to customers.
The obligation for Member States to finance infrastructure is stated in Article 6 of Directive 2001/14, where it reads:
”[…] the accounts of an infrastructure manager shall at least balance income from infrastructure charges, surpluses from other commercial activities, and Statefunding on the one hand, and infrastructure expenditures on the other.”.
8
The Voice of European Railways
EXAMPLE Dramatic fin-ancial situa-tion in Central and Eastern European
countries
Problems are now acknowledged by European Commission:
> insufficient compensation of public
services> cross subsidies between
freight and passenger prevail > freight track access charges
are too high, government network contributions too low, networks
deteriorate
Pro-active shaping of EU agenda
Total capital of rail sector in CEEC: 1995: 28 bln EURO 2006: 4 bln EURO
Debt of CEEC rail sector:1995: 2,7 bln EURO 2006:10,5 bln EURO
0
5,000
10,000
15,000
20,000
25,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
mill
ion
EU
R
Debt Capital
Source: CER/NERA Financial Database
2
The Voice of European Railways
EU12 Infrastructure Financing Gap: MAINTENANCE
Average Running Expenditures (in EUR per track length)Purchasing Power Parity (PPP) adjusted
70,318
85,400 84,182
54,987 53,542 53,981
15,331
31,85830,201
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2005 2006 2007
EU15 EU12 EU12 financing gap
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The Voice of European Railways
EXAMPLE Dramatic fin-ancial situa-tion in Central and Eastern European
countries
Problems are now acknowledged by European Commission:
> insufficient compensation of public
services> cross subsidies between
freight and passenger prevail > freight track access charges
are too high, government network contributions too low, networks
deteriorate
Pro-active shaping of EU agenda
Total capital of rail sector in CEEC: 1995: 28 bln EURO 2006: 4 bln EURO
Debt of CEEC rail sector:1995: 2,7 bln EURO 2006:10,5 bln EURO
0
5,000
10,000
15,000
20,000
25,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
mill
ion
EU
R
Debt Capital
Source: CER/NERA Financial Database
3
The Voice of European Railways
EU12 Infrastructure Financing Gap: RENEWALS
Average Investment in Existing Infrastructure (in EUR per track length) Purchasing Power Parity (PPP) adjusted
51,99051,040
54,918
27,87825,719
30,966
24,11225,320
23,951
0
10,000
20,000
30,000
40,000
50,000
60,000
2005 2006 2007
EU15 EU12 EU12 financing gap
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The Voice of European Railways
Adequate financing of infrastructure
Alarming facts
Average running expenditures per km track length almost 60% higher in EU15 than in EU12;
Average investment in existing rail infrastructure (rehabilitation) almost 80% higher in EU15 than in EU12
Average investments in new infrastructure is about 53 times larger in EU 15 than in EU 12
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The Voice of European Railways
Adequate financing of infrastructure
Issues of concern
Application of high access charges to compensate for insufficient public supportAbsence of medium & long-term planningDelay compensationsDownward spiral of decline
- the lack of reliability and the declining quality of services - the lack of liquidity forces infrastructure companies to finance their needs -Access to capital markets for renewal or new rail infrastructure investments difficult
Lack of resources for modern interoperable subsystems
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The Voice of European Railways
Adequate financing of infrastructure
Solution?Maintenance governments must: carefully determine budget priorities agree with infrastructure managers on thelevel and scope of maintenance activities.
Resources for maintenance have to be balanced with money for new projects, such as interoperable TEN-T corridors.
Fiscal capacity and indebtedness necessary to finance large projects
!
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The Voice of European Railways
Adequate compensation of public service obligations
Background
Public service obligations must be properly compensated, including a reasonable profit.
The obligation for public authorities to compensate public service requirements is clearly stated in Article 6 of Regulation 1191/69 (still in force) and reiterated in Regulation 1370/2007.
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The Voice of European Railways
Adequate compensation of public service obligations
Issues of concern Compensation through
commercial revenuesQuality implicationsModal shiftCompetitivenessLow availability of rolling stock
Unavailability of resources to afford interoperable vehicles
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The Voice of European Railways
Adequate compensation of public service obligations
Solution? Number of measures should apply:
Transposition of Public
service regulation
Long term contracts
Innovative financing (leasing)
PPP & EU co-financing
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The Voice of European Railways
What to do?
Conclusions
Whilst basic EU legislation exists, an adequate financing is still lacking !!!
The financial burden appears to be increasing in many railway undertakings and infrastructure managers throughout
the EU
Completion of a sustainable financial architecture is therefore a matter of supreme importance to
create a competitive and interoperable European rail system