liberalisation of the railway markets. a challenge to finance railway systems railway days - wbsa,...
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Liberalisation of the railway markets. A challenge to finance railwaysystems
Railway Days - WBSA, Railway Investment Summit8th October 2013, Bucharest (RO)
Gilles PeterhansSecretary General UIP
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Table of contents
UIP: International Union of Wagon Keepers
Regulatory framework: economic terms
Rolling stock: the freight wagon market
Rolling stock: asset financing
Conclusions
Acts as a promotional body for wagon keepers and rail freight;
Represents 14 National Associations and round 200’000 freight wagons;
Supports its members in improving regulatory framework that affects wagon keepers;
Supports its members in the development of technical questions relating specifically to wagons, as well as organisational and economic matters, in order to increase the real quality of rail freight transport services;
Aims at securing a continuous improvement in the safety and reliability of freight wagons;
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UIP: International Union of Wagon Keepers
Role
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Table of content
UIP: International Union of Wagon Keepers
Regulatory Framework: economic terms
Rolling stock: the freight wagon market
Rolling stock: asset financing
Conclusions
Financing railways: the role of Governements
History
1920 - 1925 1930 - 1955 1955 - 1970 1970 - 199019th century 1991
Private capital
Oil shocks• Accumulated deficits (often +2% of GDP)• Concerns about rail freight market
decline
States take over services• Repairing war damages• Rising costs• Strikes
EU policy
…
Competition from road transport begins
Railways under various forms of public ownership
New financing streams• Eurofima• Private lessor
Economic expansions• Divergent national policies• Increase of public
contributions
Government intervention in order to provide appropriate financing Railways decisions mainly driven by government priorities Private investments mainly in freight wagons for dangerous good transports Eurofima to support the railways in renewing and modernizing their equipment
2001 2004 2007 20081991 - 1996
3 railway packages
EU initiatives - Fostering competition
LICENSES
MARKET
SAFETY
INFRASTRUCTURE
INTEROPERABILITY
DIR 91/440/EC: Independence from state Accounting separation Sound finances 1st market opening
DIR 95/19/EC: Track access charges
and capacity allocation: Concept of capacity
allocation body, allocation priorities and principles
Safety requirements @ EU level
DIR 95/18/EC: Concept of license valid
throughout the EU
DIR 96/48/EC: Interoperability of
high speed rail
DIR 2001/12/EC: Unbundling Greater opening to
international freight market
DIR 2001/13/EC: Conditions for granting of
licences
DIR 2001/14/EC: User-changes and allocation
of infrastructure capacities Safety certificate
DIR 2001/16/EC: Interoperability of
conventional rail
First package
DIR 2004/51/EC: Full opening of internat. &
domestic freight services
DIR 2004/49/EC: Definition of safety rules at
European level
DIR 2004/50/EC: Harmonisation and
clarification of interoperability requirements
Second package
DIR 2007/58/EC: Opening of
international passenger transport
DIR 2007/59/EC: Certification of train
drivers
Third package
…
DIR 2008/110/EC: Update of safety rules ECM Art. 14 (a)
DIR 2008/57/EC: Interop conventional
updateDIR
200
4/88
1/EC
: ER
A
DIR 2012/34/EC:
(1) strengthening the power of national regulators
(2) improving the framework for investment in rail
(3) ensuring fair access to rail infrastructure and rail related services
COM 2013/26: Normalisation of the
accounts of RUs
Last mile ?RECAST 1st package 4th package
2013 -20152012
COM 2013/28: Opening of the market for
domestic passenger transport services by rail
COM 2013/29: Opening market for
domestic passenger services by rail
Governance of the rail infrastructure
COM 2013/27: ERA regulation
COM 2013/31: Definition of safety rules at
European level (RECAST)
COM 2013/30:: Harmonisation of
interoperability requirements (RECAST)
EU initiatives – Towards Single Market
LICENSES
MARKET
SAFETY
INFRASTRUCTURE
INTEROPERABILITY
Intermodal level playing field ?–
New TEN-T guidelines
Connecting Europe Facility
Freight corridors 913/2010/EC
+
+
+
Infrastructure
Improve framework
Technical pillar
Table of content
UIP: International Union of Wagon Keepers
Regulatory framework: economic terms
Rolling stock: the freight wagon market
Rolling stock: asset financing
Conclusions
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Freight market growth and changes
Transport policy (objectives and their full implementation) Global economic developments and transport demand Major trends in logistics:
o Deliver customized international transportation across frontierso Demand for products individualisation and added services o Goods structure effect: away from heavy bulk commoditieso Globalisation, automation and information processing: ICT requirements
Market drivers
Freight wagon is one of the most important resources for rail freight transportation to achieve higher economic performance and adapt to modern logistic chains requirements
European wagon fleet: based on GCU and keepers’ head office
25‘463
11‘113
3‘355
39‘548
37‘484
158‘658
25
19‘332
89‘7146‘215
12‘832
35‘130
3‘936
2‘8204‘183
1‘428
3‘816
985
79‘384
13‘608
9‘077
3‘350
25‘142
471
Total: 587‘069 wagons
European wagon fleet and market developments
SCI Verkehr: Freight Wagons - Global Market Trends 2013 Boston Consulting Group: World Rail Market Study 2012 Eurostat data, UIC data, National Vehicle Registry data
Other available data sources
Source: ERA EcoEv Unit: NSA questionnaire
Procurement rates expect to be very low in the coming 5 years New procurements mainly to replace old wagons Incumbents (former state railways) still in a fleet downsizing process Market share of freight wagon lessors (independent keepers) is rising sharply
Market trends
European wagon fleet and market developments
Adequate economic returns and availability of financing sources Additional customers needs and pessimism-bias (tendency to be under optimistic) Improvement in RU productivity Fleet renewal rate and replacement needs (incl. policy driven) Efficiency gains through wagon management systems and operational systems
Drivers influencing procurement strategies
Table of content
UIP: International Union of Wagon Keepers
Regulatory framework: economic terms
Rolling stock: the freight wagon market
Rolling stock: asset financing
Conclusions
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Financing freight wagons: the sources
Sources of finance
Own cash flow Debt or equity from a State or an agency thereof Grants or loans from supranational organisations (EIB) Leasing or debt finance from private sector
Private SectorMarkets
Bonds and Private
Placement
Fonds, SPV and
Investors
SpecializedBanks
Interest - Lenders
Financial market conditions (interest rates, spreads, refinancing costs)
Creditworthiness and probability of default
Loan-to-Asset-Value and collaterals (intrinsic value)
Underlying contracts/concession
Available asset securitisation
Country and foreign exchange risks
Long disbursement and repayment (loan) periods (15 – 20 years)
Relative constant returns (recurring revenue streams)
High transaction volumes
More attractive than alternative assets (diversification), more value than corporate
Pledge of assets and political support seen as comparative advantage
Financing freight wagons: risks vs returns
Cost drivers - Borrowers
Attracting private investments is possible but...
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Financing freight wagons: as long as…
Private investment will only be attracted for projects with revenue streams that are isolated from risks over which investors have little control
o Independent regulatory authorities are essential to attract large scale private investments
o Separate government’s sovereign functions of regulation from management and operation of railways
o Policy makers to provide a stable regulatory framework and avoid over-regulation
o Stakeholders to focus on fields with competitive advantage, improve productivity and service quality (in particular reliability, price and customer orientation)
Ensure value for money
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Table of contents
UIP: International Union of Wagon Keepers
Regulatory framework: economic terms
Rolling stock: the freight wagon market
Rolling stock: asset financing
Conclusions
Liberalisation aims at providing efficency in a Single Market.
Liberalisation is a challenge but also an opportunity in financing the railway system.
Still many problems to attract private investments: low margins, low returns, decreasing volumes.
Conclusions
A real revitalisation in today’s rail freight market and a better modal split for railways needs new realities!!
+
+
–
EU initiatives - Liberalisation
Structural changes are not enough to foster performance, efficiency and ensure more private investments:
Ensure regulatory stabilityEnsure fair intramodal competition (freight vs passenger)Ensure fair market conditions between transport modesRemove remaining technical and administrative barriersReduce regulatory burden and barriers to entry
UIP welcomed and fully supports the 4th Railway Package and its objectives
4th railway package – Expectations
More interoperability, “interoperable” Safety & strengthened role for ERA mya bost investments:
Schengen for rail vehicles and railways
Same exams and same pass marks over Europe
Reduction of time to market and costs to market
Reduction of risks when launching new products
Clear framework of roles & responsibilities
Clear framework to limit national and protective rules
Boost innovation
Boost market access
Boost productivity
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UIP – External Working Structure
Environment
Members: 14 national associations
UIP
UIC, CER, ERFA, UNIFE, UIRR, EIM, UITP, EPTTOLA, ESC,
CLECAT, ETF,...
OTIF, UNIDROIT, RSRD2, national associations, etc.
Council of the EUEuropean
Parliament
Council of Transport Ministers
TRAN Committee
European Railway Agency (ERA) *
EUROPEAN INSTITUTIONS
Other int. associations
Other organisations
MEMBERS• keepers• workshops• shippers• manufacturers• NoBo• ...
ERA Administrative Board
European Commission
Commissioner for Transport
RISC: Member States
* ERA draft recommendations for EU COMMISSION on safety and interoperability