1 The Voice of European Railways Libor Lochman Deputy Executive Director, CER Prague, 12 March 2009 Interoperability of the Railway Infrastructure Architecture

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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

2


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 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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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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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

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countries






deteriorate




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


1


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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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.”.

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countries






deteriorate




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


2


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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countries






deteriorate




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


3


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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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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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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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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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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Issues of concern Compensation through

commercial revenuesQuality implicationsModal shiftCompetitivenessLow availability of rolling stock

Unavailability of resources to afford interoperable vehicles

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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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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

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Thank you for your

attention!

www.cer.be

Documents

1 The Voice of European Railways Libor Lochman Deputy Executive Director, CER Prague, 12 March 2009 Interoperability of the Railway Infrastructure Architecture