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Report Phase 2

February 2011

Appendix 3Market Sounding Summary

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PwC 2

Market Sounding Summary

The following people and organisations have been interviewed for this market sounding:

Category of supplier Potential supplier company Contact Person - NameCivils construction contractors (includingstructures) and project managers, Tunnelling

AF-Gruppen Ivar Galaaen

Veidekke Klaus HansenBAM Rail Ben van Schijndel & Peter van Laarschot

Rolling stock Alstom Transportation Michael AndersonHitachi Rail Hirofumi OjimaBombardier Klas WahlbergSiemens Leif Karlsen

Signalling/systems/communications Invensys Rail Group Pieter RypmaFinancing DnBNOR Markets Audun Iversen & Eline Skramstad

Nordea Hans Jacob Bull-BergBalfour Beatty Capital Ian ScholeyLaing (Equity) Andy PearsonSkanska Marcus Ekelund

Prior to the interviews being conducted all respondents were issued with the document “Market Sounding Brief HSR Study 20101111” (ref. Annex A below) to ensure theyunderstood the project and the nature of questions they would be asked. Furthermore, respondents were informed on the call that their name and the name of the companythey represent would be stated in this report and that specific quotes and views would not be attributed to any single respondent.

Our approach to presenting the results of the market sounding exercise has been to summarise the responses as sound bites under the headings used for the interviews. Thesummary table below also groups common responses in each coloured row. This means that where one row has several entries a number of bidders have made the same point.Where a row has only one entry, this is a matter that was raised by one interviewee only.

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Executive Summary

The discussions with the entities listed above have identified a number of key themes and messages which are presented in this Executive Summary. In some areas, such as therisks which organisations would be willing to take, the responses have been fairly consistent whereas in other areas, such as how the project might be packaged, there have beena variety of different views expressed.

Size

The majority of our interviewees have stated that a “large” project would attract them to participate in delivering HSR in Norway. However, as would be expected, large meansdifferent things for different contractors depending on their area of expertise and the structure of project which they are advocating. For example, a large PPP transaction has amuch higher value than a large project management role. However, there does seem to be some consensus that packages in the range of €100m - €500m would be small enoughto generate interest from a large number of parties whilst at the same time being financeable. Some respondents, especially those advocating a concession structure where onecontract is let for the vast majority of the work, have mentioned contract sizes of up to €3bn. Still, raising finance for a project this size would be a challenge as some of thefunding organisations we have contacted have mentioned maximum deal sizes of around €800m - €1.2bn with maximum financing of about €200m per bank in club deals.

Procuring Organisation

Regardless of whether interviewees preferred for JBV to lead the procurement of HSR infrastructure, a public sector entity outside of the JBV or a private sector contractor, allinterviewees highlighted the importance of there being the right people in the organisation bringing relevant skills, experience and authority to make decisions. Severalinterviewees highlighted that all key stakeholders would need to be represented in the organisation or have clearly delegated power to someone within the organisation so thatdecisions could be made promptly. Only major decisions should be escalated to ministerial level.

At least three interviewees highlighted the Norwegian Road procuring organisation as a model of good practice. They highlighted that it was a small procuring unit with goodknowledge. It had prepared well before launching the procurements and had the capability to implement transactions in a timely manner.

Risk Allocation

None of the interviewees would be willing to take planning, land acquisition or environmental risk. Some interviewees with specific knowledge of the Norwegian market havebeen particularly candid on this point because of previous experience negotiating with many stakeholders for the acquisition of land acquisition. Perhaps not surprisingly, noneof the interviewees would be willing to take revenue risk on this project, and most have favoured an availability payment structure if a PPP-type approach is chosen.

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Packaging of Project

There has been no consistent view on how the procurements should be packaged. Responses have varied from a single package for the whole project (to minimise interface risksfor the public sector) through to multiple contracts so that the public sector can choose the best contractor for each task.

A number of interviewees felt that rolling stock and signalling should be procured together because of the interface risks between the two and simply because a number ofcompanies operate in both areas. Another area where interface risk was highlighted was between track and civil engineering works.

Life-Cycle Thinking

Most interviewees have indicated that the best way to ensure that life-cycle costs are taken into account is by including maintenance for a period with the build or the design andbuild activities. They argue that this will ensure that the contractor will address properly whole lifecycle cost of the infrastructure. The appropriate time period for maintenancecontracts is felt to be 20 to 30 years. If build and maintain activities are not procured together, some interviewees have suggested a contract could be put in place to ensure thatthe manufacturer of the infrastructure or the rolling stock is still held accountable if maintenance costs are a lot higher than initially estimated. An interesting point put forwardby one interviewee highlighted the potential difficulty in having a single contract for maintenance where structures or tunnels might have a life of 100 years whilst other asset,such as signalling, may have a life of 15 or 20 years.

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Question Response

1. What would attract you toparticipate? (size, state ofpreparation, risk allocation,interfaces, timescales etc)

Large projects (in a Norwegian context this would mean approximately €100 million) are attractive. With projectsthis size an experienced contractor will be able to take advantage of his own capabilities and experience in areassuch as project management, procurement and construction.

Packages have to be large - in the range of €60 - 190 million for civils and tunnels, without permanent way andsystems. The point is that the packages must be of a manageable size and still allow for the contractor to utilize itsexpertise and competence.

The appropriate size of contracts will likely depend on the route chosen for the line and the topography - massbalance (use of materials from the tunnelling to build embankments etc) is vital for a project of this size.

Based on experience from Sweden, the maximum size of a contract would be around €3billion which might equateto around 250-300km of track. If contracts are any bigger and the contractor fails this could lead to a massiveproblem in finding a replacement. Also, be aware that if several large contracts are let at the same time this couldlead to a situation where all potential contractors are engaged in high speed rail projects leading to a shortage ofsuppliers for other projects and therefore artificially increasing construction prices.

In order to develop a new solution or a new design for a train there would need to be an order for at least 300vehicles.

When considering packaging of work, the mass balance (the proportion of excavated mass to how much fillingmass is needed at the same section of the construction) is important from a construction point of view.

From a rolling stock perspective, this project would be of a size that is very interesting even if only one corridorwould be developed.

A reasonable time schedule would contribute to interest levels – e.g. about three years for rolling stock and electrotechnical infrastructure.

The project should be led and managed centrally and not locally and/or contractors should not be involved beforethe exact route is decided upon and permission granted. This is also relevant to environmental approvals.

Local authority involvement in the planning process is potentially unattractive – they may try to carve out theirown deals.

Planning permission/ buying of the land /finalization of routes should all be in place before the ITT (Invitation ToTender) is issued. If this is not the case, the procuring authority should contribute towards bidding costs.

The authorities should buy the land and get planning permission. They should also undertake the land surveys.

The contractor/financiers cannot take revenue/demand risk – this has to lie with the authorities or the operator asthe contractor cannot influence demand. Availability-based payments would be more acceptable.

In the case of a concession based solution – the SPV would not want to take revenue risk. The SPV will accept riskswhich are of a technical nature (e.g. related to construction, operation and availability of the infrastructure).

Would not accept demand risk on High Speed Rail. Interviewee’s organisation has previously taken traffic risk onan early road project, but on that occasion there was a good basis for estimating usage.

In the Norwegian PPP-schemes the revenue risk is transparent and transferred via Norwegian Public RoadAuthority (NPRA). A similar scheme could be applied in the High Speed Rail-project. Contractor would not taketraffic risk, but could accept certain risks surrounding the availability of the infrastructure.

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Question Response

There needs to be strong cross-party political support. As the project is going to take a long time to implement.There needs to be security that a change in government will not impact the project and lead to it being cut back orscrapped.

Would be attracted to participate if the requirements are consistent with EU standards – anything that reducescountry specific requirements is preferable.

The contracting strategy should allow the contractor to use its competence and expertises i.e. design and buildrather than just build.

Turnkey contracts are the favoured approach as they enable the contractor to use his experience and deliverholistic solutions.

If finance is not sought until after the contractor has been chosen, potential financiers are dependent on theprocuring authority for making an appropriate choice of contractor.

The project will be more attractive the greater the proportion of the construction on green-field sites.

If private equity is to be sought as part of the financing package there needs to be transparency from the start as tohow the project will be funded.

There needs to be a clear source of funding with a risk allocation that is attractive. If using private finance, the period from provision of finance to commencing of repayments should be around

three years. Longer periods will make raising finance difficult or expensive. Early engagement with suppliers and constructors should enable them to use existing banking relationships to get

the best financing terms available. High Speed Rail is a little bit like hydro assets - in the Norwegian market banks are willing to lend for 20-30 years.

Financing provisions need to be realistic and appropriate provisions need to be made for refinancing. Banks could lend for up to 35 years Regarding financial market conditions and the potential reluctance to provide finance after the recent turmoil in

the markets, banks in the Nordic region are in better shape that their European and US counterparts. They aremuch more likely to provide finance but terms and conditions are more expensive than they were two years ago.

Regarding size of lending that is possible from a Norwegian bank: for a PPP probably about €200 million perbank. This is what was seen in the Karolinska deal in Sweden.

2. What would make you considercarefully your participation? (asabove)

The project should be attractive however it is organized as long as prices are fair – take care about over aggressivebidding compromising later work.

It is important that market is able to absorb the pr0ject. As the project is very large it will have to attract foreigncontractors and resources in addition to Norwegian skills.

It is not a good idea to split single lines geographically – this will add complexity and interface risk. There areenough big companies around for there not to be a worry about lack of competition at the procurement stage.

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Question Response

If specifications are not detailed and clear, the cost of bidding will be very high. For large contract lets contractorswould like to have some/ all of their bid costs met.

Would be very concerned about undefined sources of funding or lack of clarity around organisation of HSR at timeof procurement.

A big challenge will related to interfaces, in particular with the existing network. There needs to be clarity overwhat access rights the maintainer of the high speed rail infrastructure will have over other lines.

Great interest in who will be the procuring authority. JBV is trying to build its competencies but it needs to dobetter (more resources and skills, dedicated focus etc) to lead a procurement the size of HSR.

Great interest in how powers might be delegated to construction companies. If the lead contractor is responsiblefor coordination across the project, what will be the legal mechanisms to execute the responsibility? Not providingcontrol mechanisms to go with responsibilities will be a problem for bidders.

Would be concerned if contracts are not developed using Norwegian norms. An example was the Olympicconstructions at Lillehammer (Norway), where the contracts were based on offshore installation contracts andproved not to be suitable for regular construction.

Tailor made solutions combined with low project volume could make the project less attractive.

Unbalanced contractual conditions make the project less attractive.

3. What would in your opinion be thetop 3 risks in procuring andconstructing the HSR?

Uncertainty over public financing could frustrate obtaining private finance or push up costs. This is a real concernbecause appropriations of public finance for infrastructure are done annually in Norway. The public sector needsto be able to commit funds to ensure sufficient funding to complete the project over a 10-15 year period

Political Risks – if there is a change, to a government that does not support High Speed Rail, this could lead to ascaling back or cancellation of the project – therefore the project needs to have widespread political support beforeinitiation.

There is a risk that the bidding process gets delayed and drawn out which increases bidding costs while the targetdate for start of services remains the same. This increases the chance of lower quality infrastructure or othercompromises.

If JBV does most of the planning and design there is a risk that JBV will absorb too much of the available relevantengineering capacity from the market. There is, however, currently sufficient competence and expertise amongNorwegian contractors to handle such a project.

If systems are specified by the procuring authority, there is less uncertainty (and less to compete about) and thecost creep is likely to be smaller.

The amount of tunnelling is important in terms of uncertainty and on time delivery. Large volumes of tunnelling

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Question Responseare likely to reduce the appetite of project financiers as equity providers’ cash is tied up for a longer period (asconstruction phase is longer) before earning any returns.

The amount of upgraded line in relation to new lines is important as upgrade is higher risk (more constraintssurrounding construction and operation) which may lead to a lower appetite for the project in the market.

Delays due to failure to obtain or use right of ways.

Would ideally like to interface with only one Operator – or as few as possible.

Signalling solutions should be properly addressed early in the project. If there is not a standalone contract forsignalling, then at the bidding stage consortia should have to name their signalling contractor and not just have acost allocated for signalling as this causes risks later in the projects around costs and quality of signallingequipment.

Third party risk, i.e. the financial strength and technical capability of the party performing the construction.

Contractors’ competence, experience and capacity.

Risk allocation between the private and public sectors, but also between the partners within the project.

Climate and topography/geography could be a big issue but risk should be manageable. Operation of railway in a Norwegian context is a challenge during winter. NSB has plenty of experience. Technical solutions not being properly developed or issues adequately described – this is a particular issue in

Norway because of the dramatic changes in temperature.

The route and acquisition of land is a great risk and not a risk a contractor would assume. Legislative process not properly developed which would lead to unclear legal requirements – this risk could

crystallize in activities such as land acquisition, environmental matters or noise criteria.

Risk concerning the ground condition.

Is there enough demand (passenger numbers) to sustain a High Speed Railway in Norway? This is however not aproblem if contractors are not taking demand risk.

That weighting of price in the evaluation criteria is weighted highly compared to professional ability andtechnology.

4. What would be good ways to inducelife cycle cost (“LCC”) thinking?

Taking LCC costs into account at the beginning can make the investment appear more expensive and erodepolitical support (and introduce political risk). An alternative is that JBV or someone with knowledge of theclimate should decide the systems and level of quality (use 150 years of experience in JBV to decide what the best

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Question ResponseLCC-balance is).

If maintenance is included in a build and maintain contract, the maintenance should be for at least 25 years so thecontractor is incentivized to do the LCC assessment and choose appropriate systems and levels of quality.

Maintenance period has to be in excess of 25 years to ensure that the contractor has an incentive to addressproperly the longevity and maintenance costs of the infrastructure.

Maintenance activities have to be packaged with construction. The contract has to be greater than 15/20 years asthis is generally the time period of one maintenance cycle.

Maintenance contracts of up to 40 years may be possible as long as there are cost and works review clauses every 5years or so. Break and renegotiation clauses should not be too easy to trigger – i.e. they should provide protectionto both the customer and the contractor.

Long term maintenance agreements with a long term commitment to be a part owner seem to be a powerful meansto get LCC properly addressed.

Building and maintenance have to be combined or there needs to be some sort of penalty on the constructor ifmaintenance costs end up being a lot higher than they estimated.

If systems are specified by the procuring entity, there is less uncertainty (and less to compete about) and the costcreep is likely to be smaller.

The signalling provider will not do all maintenance – they will train operators to do the 1st line maintenance as itwould not be economically viable for the signalling provider to do this work. The signalling provider would have tobe involved on more major maintenance activities.

PPP-type structures make projects very predictable for the builder, but not necessarily any cheaper than moretraditional structures.

There is a question as to whether something that has a lifecycle of 110 years (tunnels/structures) should be in apackage with something which has a 15 year lifecycle (signalling systems).

Transparent LCC (maintenance and energy consumption) provision by bidders.

Involvement of supplier in the maintenance of rolling stock.

5. What delivery activities - fromplanning through to commencementof operations - do you believe shouldbe packaged together? Why?

The procuring entity should determine which technical norms should be applied to ensure consistency across allcontracts along the route (e.g. signalling system should be decided centrally).

There is not a large technical risk in the interface between rail and signalling but there would be a risk if theprocess is not project managed properly and this risk increases in size if working on a brown field site instead of agreen field site.

The traditional way in Norway is to build tunnels and structures section by section under different contracts, andthen all tracks should be delivered in one contract, all systems in one contract and all signals in one contract. JBV

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Question Responsenormally manages and handles the interface risk. Flytoget was built in the traditional way but with an externalproject management organisation – this worked well.

Would prefer the contract to include “everything” – would make it more interesting and would potentially alsoenable the project to take advantage of relevant competence of the large international construction companies.

Rolling stock and depots should be procured together and the infrastructure should be kept separate. If rollingstock and infrastructure are developed together this may put off some consortia because of the size of the packageand may also result in sub-optimal combinations.

The procuring authority should assume the interface risk between the infrastructure and the rolling stock. Civil works should be in one contract and Electro/ Mechanical works in another contract. Rolling stock could be

included in the E/M but this could cause issues with the Operator not being happy with decisions/ solutions. Itmay therefore be appropriate that the rolling stock is procured separately.

The track and civil engineering should be packaged together to avoid sub-grade problems.

If the Rolling Stock provider is different to the Signalling Provider then the signalling company will need access torolling stock manufacturer at an early stage to make sure there is enough space/capacity in the trains for theirequipment.

Providers of private finance must understand what they are financing - separate packages leads to interface risk(which will need to be managed by the procuring authority), while packages that are too big effect transparency.Avoid making the procurement too complex and do not put too many elements together. Design, construction andmaintenance of infrastructure could be packaged together, but keep a separate contract for rolling stock andmaintenance of rolling stock.

Visibility of risk is what should drive packaging decisions. Keep the structure simple so responsibility is clear andeveryone knows what activities are in each package.

There should be a number of small contracts to ensure that the procuring authority can get the best contractor foreach element and so that there are enough companies that are interested in the procurement. There are alsolimited advantages to be gained from packaging the signalling and rolling stock together – the interface risks arenot massive as where there is a fault it should be easy to see where the fault lies.

The earlier a contractor is involved in the project the better. As a result of this, planning and delivery should bepackaged together.

Construction and maintenance of the rolling stock should be procured together as should construction andmaintenance of the signalling.

The contract should be as large as possible with rolling stock in the same contract as the infrastructure – thisreduces interface risk. Once it is proven that the rolling stock and other infrastructure are compatible the contracts

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Question Responsecan be split up e.g. for maintenance.

6. What do you see as the key buildingblocks for successfully delivering newrail infrastructure?

Competence

Signalling and partly Power Supply (Catenary Systems) are the most critical factors for successful delivery andoperation.

Local presence.

7. What do you see as a goodorganisational model for the deliveryof a project of this nature(organisation of the procuring/supervision agency and organisationof the contractors)?

Best to let a public/governmental organisation reporting to the MTC handle the project management. Whether it isa public company fully owned by the government is not important for project planning. It is important with regardto financing.

If the client is looking for step change in the way that projects are delivered a new organisation should beestablished otherwise people will employ old ideas from their old organisations.

The most important thing is that the delivery vehicle has buy-in from all the stakeholders and is able to bindeveryone together.

The entity itself is not important – what is important is that all the people that are stakeholders/have power areeither within the organisation making decisions or have clearly delegated their power to someone within thatorganisation.

A private company could handle this if it was bidding for the whole project and was taking responsibility for thecost.

It is easier for financiers to deal with a single EPC-contractor. The larger the project however the more difficult itbecomes for one company to take the full risk of an EPC.

The problem with a private sector delivery partner is that the public sector always has to take responsibility ifsomething goes wrong, so the public sector may as well be involved from the start.

The decision over the appropriate procuring authority is linked to which entity will own the infrastructure. With aprivate model and financing it should be the borrower that should do the procurement, with defined qualitystandards (set out by the authorities).

The advantage of a PPP is that there is a model which allows for flexibility with broader and sensible guidelines(output specs have been working). On rolling stock one might want to be more specific.

A state owned public company that funds itself with private loans is one possible structure.

The NPRA’s PPP (in Norway) is an example of a good organisational model for the delivery of a project. Theauthority started from scratch and built competence and finished the projects in a very short time. Thecompetence of the authority made the structures from a financial point of view very bankable.

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Question Response

There is a fine line between a bankable structure and a structure still aggressive enough to get the most out of acompetition. In a large high speed rail project the structure needs to be simple and create enthusiasm.

In order for new PPP projects to be realized there will be need for high level political backing.

It is important that JBV has a project organisation that can handle the contracts from the very beginning. Theyhave to build up an entire organisation which acts as project owner. The more responsibility JBV outsources theless of an organisation it needs

A government owned and run specially formed company should be set up outside of the structure that alreadyexists – this is because if you want this done properly there need to be people dedicated to deliver the project andthey must not be distracted by other requirements.

There should be an independent public entity in charge of the procurement as the project will likely require easyaccess to government. It would likely be difficult to motivate a private company to deliver this project. The newstructure needs to report directly to the Ministry. However the organisation also needs to have powers set up earlyto ensure that they only need to go back to the Ministry on major issues.

8. Are there any rail infrastructureprocurement projects that you wouldhighlight as being a model approach?Why?

The three Norwegian PPP road projects have all been successful. The Norwegian road PPP projects have worked well – there was a small procuring unit with good knowledge and

competence to implement the transactions.

The best example is Gardermobanen (The Airport Express Train) because there were highly skilled people on theproject. However, this project focused too much on the completion date and this is reflected in the maintenancecosts.

It is important that the end date to some extent is flexible in order to allow for unforeseen events and someflexibility to avoid, for example, large cost overruns.

High speed rail in Sweden worked well in similar geographical conditions. The E4 in Sweden (40-50 km of road) was built on time and budget. The contractor was responsible for the

concrete constructions, where as the builder had the risk for the soil conditions and mass balance.

The Finnish rail PPP would probably be a good model. It delivered a new rail line (100km, 200kph) in acomparable environment to Norway.

The South African High Speed Rail worked well. This project used private finance as a mechanism to ensure therewere limited cost over-runs and that the timetable was adhered to.

Ski-Langangen (NOK 1.1 billion) is a good project, where the contractor has utilizes both its capacity andcompetence to undertake planning and project management.

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Question Response

9. What is your view on how earlycontracts should be let i.e. how muchplanning and specifying should theprocuring Authority do?

The procuring authority should specify in detail areas in which it has a clear view and where there are large(interface) risks as this allows the contractor to know what it has to do in important areas and stops it going downthe wrong route. However, in areas which are not so critical the contractor should be allowed to have freedom todifferentiate the solutions itself.

Contractors should be involved at an early stage so they can help define the best solution – i.e. they should not begiven a fully worked up specification by the procuring authority – instead contractors should be allowed to beinnovative so they are competing on something more than just price.

The more open the specification from the government the better – there should be dialogue between the customerand the contractor, but the contractor should be given the opportunity to innovate as much as possible. In order toovercome potential problems over the quality of the outcome that the customer will eventually receive, thecontractor should have a long term interest in the project. Therefore maintenance has to be included in thecontract. Also, the procuring authority should specify speed constraints and passenger growth projections.

There should be maximum design flexibility for the contractor on the project. There should only be an outlinespecification from the procuring authority. The input from the contractor should be from the design stageonwards.

The procuring authority should make sure that the specification of the tracks is the same as for the rest of Europeand, as train orders are likely to be small, try and go for an “off the shelf” train design.

Need to be sufficiently flexible to take into account and allow for LCC thinking. This will benefit financiers and theoverall success of the project.

The contractor would prefer not to be involved too heavily in the project until most of the political risk is sortedout or eliminated. Political risk in this context is risk associated with political decisions, such as regarding landuse, regulation, appropriations etc.

It is important that the evaluation criteria do not only consider price. The contractors should also be required toprequalify, and their capacity and competence should be evaluated.

For Rolling Stock and electro technical infrastructure a functional high level specification is preferred.

10. Other issues In Norway there is a history of low costs being presented, in order to get political backing, followed by significantcost overruns.

The concession length should be in excess of 25 years so that equity providers have a chance to recover their lossesif something goes wrong early in the contract.

Government grants are not necessarily beneficial to a potential private sector investor as they can result in costoverruns being borne by a smaller sum of equity. Also under this scenario bid costs will constitute a higher

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Question Responseproportion of equity. If government wants to support the project they should for these reasons consider doing sovia long term support or guarantees.

NPRA has been very professional in the way they handled the PPP-projects, NPRA is seen as an exemplar of howmajor infrastructure procurement should be done because it has not over-specified.

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Annex A - High Speed Rail Study – Market SoundingBrief to respondents

Introduction

The Norwegian Government has requested the Norwegian National Rail Administration to facilitate a study inconnection with the possible development of a High Speed Rail (HSR) network in Norway. The aim of thestudy is to build on the studies that have already been undertaken, reconcile the different views that havebeen expressed and determine the best approach for Norway. One strand of work currently being under takenis to identify important issues and key success factors regarding Commercial and Contractual strategies andorganisational issues.In connection with this strand of work limited market studies are being undertaken and you are invited toparticipate.This brief summarizes the background for the study, the purpose of the market sounding, the structure of thecurrent rail system in Norway and the scope of a possible HSR system in Norway at this stage.The market sounding documents consist of this brief and the attached list of issues for discussion. The issueswill be discussed by phone.

Background to the HSR-study

The Ministry of Transport and Communication (MTC) has requested an investigation into whether it issensible to develop HSR in Norway and how this should be planned for during the next 3-13 years (in theNational Transport Plan 2014-2023).Studies have been performed previously for the same purpose, but as the methodology applied for this workhas not been consistent or in accordance with generally acknowledged principles for this kind of work inNorway, a new, more thorough study is now being undertaken.The study is being completed in three phases:

Phase 1 – Summary of the conclusions, strengths and weaknesses of studies that have been

commissioned previously. This phase is complete.

Phase 2 – Studies in the areas of market, rail planning, safety and technical issues, financial and

socio-economic issues, commercial and contractual strategies and environmental issues, to develop

an analytical framework and foundation for doing the detailed analysis for all potential routes for

HSR along the relevant corridors. This phase is due for completion in February 2011.

Phase 3 – Detailed analysis for all potential routes along the relevant corridors. The phase is planned

to be finalized in the fall of 2011.

The focus of the study is long distance passenger rail transport in Norway and the following corridors havebeen identified as potential HSR routes:

I. Oslo – Trondheim

II. Oslo – Bergen

III. Oslo – Kristiansand – Stavanger

IV. Oslo – Göteborg

V. Oslo – Stockholm

VI. Bergen – Haugesund/Stavanger (in conjunction with routes II. and III.)

Ref. illustration of the possible corridors below:

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Figure 1, Illustration of possible corridors fo

The Phase III work will evaluate four scenarios or salong the corridors:

A. Continuance of the existing rail policy and

B. A more aggressive development of existin

C. Development of HSR that is partly in base

D. Primarily separate HSR lines.

A brief summary of the rail system in Norway and tAppendix A.This market sounding will be focus primarily on ississues relevant for the other scenarios are also of in

Purpose of the market sounding

The purpose of the Market Sounding now being unviews of what will be important, from an organisatisuccessfully HSR in Norway. Specifically, through tthat would make the project more or less attractivewhether there is sufficient interest among the diffeproject – there still too many unknowns to get a mekey issues that would make the project unattractivethe ultimate design of any HSR project.In connection with this preliminary Market Soundiare being contacted for their views:

Civils construction contractors (including

Tunnelling

Rolling stock

Signalling/systems/communications

Financing

It is proposed that these preliminary Market Soundquestions to be covered is provided in Appendix B.

Gö

Stockholm

16

r HSR

olutions for the future long distance rail system in Norway

rail plan

g rail infrastructure, within and outside the Inter City area

d on existing rail infrastructure and IC-strategy

he issues being investigated in Phase 2 is provided in

ues relevant to the delivery of Scenarios C and D, butterest.

dertaken is to gain an understanding of relevant suppliers’onal, contractual and commercial perspective, to deliverhe Market Soundings we wish to identify important issuesto relevant parties. At this stage the aim is not to assess

rent parties in the market to underpin the launch of such aaningful response. It is however important to identify anyto the different parties so that they can be addressed in

ng two or three parties under each of the headings below

structures) and project managers

ings are conducted by telephone. A list of the specific

teborg

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Appendix ANorwegian Rail

Historically the activities of investing in and maintaining rail infrastructure and rail operations wereperformed by the NSB (Norwegian State Railway) until 1996 when the activities were split. Since then theNorwegian National Rail Administration (NRA), which is still an administrative body, has been responsiblefor investment in and maintenance of the rail infrastructure. NSB runs passenger and freight rail operations,as well as other transport activity. NSB became a limited company wholly owned by the Ministry of Transportand Communications in 2002.

There are two other passenger rail operators in addition to NSB. Flytoget (the Airport Express train) , alimited company fully owned by the Ministry of Transport and Communications, has run passenger railoperations between the capital of Oslo and the country’s main airport since 1999. The line operates partly onseparate double tracks and partly on tracks shared with other rail traffic going north from Oslo at speeds up to210 km/h. The rail infrastructure for Flytoget is owned by the NRA. In 2006, NSB Gjøvikbanen, a wholly-owned subsidiary of NSB Group, won a 10 year concession to operate the line between Oslo and the town ofGjøvik 120 km north of Oslo in an open tender competition.Since 2007 the rail infrastructure has been open to both Norwegian and foreign freight traffic operators andthere are 11 different freight operators doing business on Norwegian Rail.All rail operators pay access charges to the NRA for use of the Rail Infrastructure.The rail industry in Norway is supervised by the Norwegian Railway Authority (Statens Jernbanetilsyn).

HSR in Norway

At this Phase 2 of the HSR-study many aspects of a potential HSR system are still subject to evaluation. As aresult it is too early to provide specific recommendations regarding commercial and contractual strategies.The focus for the market sounding is therefore on understanding which issues, variables and potentialchallenges are of particular importance and concern to potential suppliers.

The sections below describe the emerging thinking in certain areas.

What will be developed and procured (technical standard)?The procurement will be of rail infrastructure and rolling stock for one or more of the corridors. Whichcorridor(s), as well as the specific routes within each corridor, will be decided based on the results of Phase 3of the study.At this stage, the incumbent rail operator NSB is envisaged to be the operator of the HSR after construction.

The packaging of different parts of the procurement will be packaged (e.g. planning, design, construction oftrack, tunnelling, bridges, provision of rolling stock) will be the subject of investigation in Phase 2 and 3.

It is open whether there will be double or single track and the speed of the HSR is subject to assessments inthe ongoing study, based on travel time requirements and stopping pattern analysis. The mix of freight trafficand passenger traffic is also under consideration.There is a request from the MTC that there is flexibility regarding the technology used throughout theprocurement to ensure that state of the art technology can be applied to the extent sensible.

How is it going to be financed?All sources of finance are in principle of interest, including public grants from central authorities, grants fromlocal authorities, private sources such as loans, marketable securities, and equity.

How is it going to be funded?All types of funding are being assessed as part of the Study’s Phase 2 and 3, ranging from user payment (ticketrevenue and cargo charges), public grants from central and local authorities, income from propertydevelopment in connection with stations, fees from enterprises in the perimeter of stations etc. It is a statedobjective for the Study to identify the proportion of investment, maintenance, and operation of the HSR couldbe funded through commercial revenues/profit.

Studies have so far indicated that significant parts of the development will have to be funded through publicsources. The extent to which public funding will need to be provided is part of the mandate for Phase 3 of thestudy.

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How is it going to be organised?The organisation of the HSR is also subject to assessment through the study being undertaken, and will to alarge extent be a consequence of a series of other parameters regarding ownership and commercial andcontractual strategy.

Risk allocationDifferent models of sharing risk between private sector and public sector are of interest. Of particular interestis how to minimize cost creep without increasing the risk to the public sector.

Sources for the Brief

a) Mandate from the MTC

b) Technical Specification for the Study from the Project

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Appendix BSpecific questions

1. What would attract you to participate? (size, state of preparation, risk allocation, interfaces,

timescales etc)

2. What would make you consider carefully your participation? (as above)

3. What would in your opinion be the top 3 risks in procuring and constructing the HSR?

4. What would be good ways to induce life cycle cost thinking?

5. What delivery activities - from planning through to commencement of operations - do you believe

should be packaged together? Why?

6. What do you see as the key building blocks for successfully delivering new rail infrastructure?

7. What do you see as a good organisational model for the delivery of a project of this nature?

- organisation of the procuring/ supervision agency

- organisation of the contractors (e.g. joint venture, consortium, lead contractor and sub-

contractors…)

8. Are there any rail infrastructure procurement projects that you would highlight as being a model

approach? Why?

9. What is your view on how early contracts should be let i.e. how much planning and specifying should

the procuring Authority do?

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© 2011 PwC. All rights reserved. "PwC" refers to the network of member firms ofPricewaterhouseCoopers International Limited (PwCIL), PwC’s operations in Norway lies withinthe firms PricewaterhouseCoopers AS and Advokatfirmaet PricewaterhouseCoopers AS.