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(1)

DSB in a

competitive market

November 2013

(2)

Trends &

Facts

ƒ

Further liberalization

in the EU is to be expected

ƒ

Political ambition to

double public transport

2010-2030

ƒ

Rail is important for every society, but in isolation

not a

good business case

ƒ

Network- and scale

economies are important

(3)

Further liberalization

in the

EU is to be expected

ƒ

EU-legislation is

shaping the liberalisation

of the EU rail

sector

(4)

ƒFree infrastructure and services ƒRatification by mid 2015 ƒSafety regulations ƒInfrastructure access ƒ Liberalization of freight (2007) ƒCommon access to rail safety ƒLiberalization of international passangertraffic and cabotage (2010) ƒLicences ƒInfrastructure fees ƒInteroperability for changes to existing or procurement of new rolling stock

ƒOptions for competition on urban and regionaltraffic ƒDefinition of financing of rail passenger transport (2009)

EU-regulations are shaping the

liberalization of the rail sector

Directive 91/440/EØF Directive 96/48/EF Railway package 1 (infrastructure) Railway package e 2 Railway package 3 2001 2004 2007 2019?

ƒ Separate budgets, accounts and

asset ownership

ƒ Separate accounts for

infrastructureprovides and rail operators

ƒ Access to transeuropean rail network ƒ Complete access to the freightmarket

ƒ Cross borders offerings liberalized since January 2010

ƒ Regulation simplification and free access

to transeuropean railnetwork

ƒ Higher level of unified demands to rolling

stock to ensure international competition and interoperability

ƒ Liberalization to also include national

passenger traffic 2012 2017 Revision (recast) of Railway package 1 TSI requirements Railway package 4

Soruce: AT Kearney; EU Commission; DSB; BCG

Regulation 1370/2007 (PSO regulation) Directives 95/18/EF og 95/19/EF 1996 1991 1995

(5)

Level of implementation varies

1. Model refers to setup of rail operations and infrastructure is organised 2. Infrastructure is in most cases controlled by governement owned company, albeit a private company (Network Rail) in Great Brittain 3. Separation of nfrastructure into seperate company is ongoing 4. Rolling stock owned by Infrastructure provider OSE and not the operator TrainOSE S.A.

Source: BCG "The 2012 European Railway Performance Index; Understanding what drives high performance by European railways" (2012); "Rail Liberalisation Index 2011" IBM Global Business Services 2011); BCG analyse

Fit for

Estonia Latvia Litauania3 Denmark Norway Sweden Finland Austria Slovenia Romania Bulgaria Hungary Slovakiet Chezh Republic Poland Italy France Switzerland Germany Holland Luxembourg Belgium Spain Portugal Great Brittain Ireland Greece4

Model

1

Liberali-sation

transparency

Financiel

Cohesion of

public

transport

Integration with

holdingcompany

X

X

Separated with

operator as

responsible for

maintainance

X

X

Fully separatet

2

X

X

(6)

Political ambition to

double public transport

2010-2030

ƒ

Robust

customer growth in the rail sector is expected

and is supported by

significant infrastructure

investments

ƒ

Public transport will cater for main part

of the future

(7)

Rail operation is important

for every society, but seen

in isolation

not a good

business case

ƒ

Rail operations are

dependant on government subsidies

and is in most cases a natural monopoly

ƒ

Denmark is only large enough to attract

competition for

the tracks

, not on the tracks

ƒ

Cherry picking is easy

, but a minimum of service is

required and

unprofitable routes also needs to be

(8)

Rail operation is dependant on

governments subsidies

1. UK accounting (2010/2011) 2. Subsidy for Holland 2009 3. Passenger income in Denmark is for DSB per passengerkm i 2010 4. Austria og Switzerland excluded due to missing data Note: Subsidy (inclusive infrastructure) og passenger income from 2010 is normalised relative to PPP (baseline = Danmark)

Soruce: "EVES-Rail, Economic effects of Vertical Separation in the railway sector" (2012); European Commission (Competition – State Aid); Office of Rail Regulation (UK); UIC 'Railisa' Database; Eurostat; Danmarks Statistik; BCG

Kr. per passenger km

(PPP)

Comparable countries

4

in Western

Europe all receive subsidies

2,5

0,5

1,5

Passenger

1,0

0,82

2,0

2,25

1

1,38

1,39

0,86

D

K

Subsidy

1,97

1,06

0,83

1,11

1,14

1,83

2,17

2

1,17

0,66

2,20

3

0,0

(9)

#

Route

travellers

# of

1

(mill.)

IC & R

trains

(#/day

2

)

Freight

trains

(#/day

2

)

# of

Tracks

Difficulty

level

Odense-Middelfart

7.1

51-100

44

2

Lejre-Vipperød

4.1

24-50

<1

1

Næstved-Vordingborg

1.7

24-50

0

2

Randers-Hobro

2.0

24-50

<1

2

Cherry picking is easy, but a minimum of

service is required and unprofitable routes

also needs to be serviced

1. 2010 2. Weekdays both directions

Source: "Trafikplan for den statslige jernbane 2012-2017" Trafikstyrelsen (2012); DSB; BCG

Level of difficulty of

selected routes

... is dependant on capacity and utilzation

1

3

4

2

Odense

Vipperød

Randers

Hobro

Lejre

Middelfart

Ringsted

Vordingborg

2 4 1 3

Næstved

Copenhagen

Bottlenecks with high level

of dependency increases

compexity, f.i. "Røret"

Kbh-H to Østerport and Ringsted

(10)

Network- and scale

economies

are significant

ƒ

Significant network synergies

in IC and Regional

amounting to 36 train sets and

~

250 mill. kr. p.a.

ƒ

Network synergies achieved

through varying peaks

ƒ

Network synergies for

personnel

estimated at 90-110

mio. kr. for IC, Regional and Øresund

ƒ

Scale economies

estimated at

~

160 mill. kr. compared

(11)

Competition

is mainly

between

state owned

operators

(12)

Industry consolidation mainly by state

owned operators

Consolidation of

rail industry in the EU

... driven by the large state owned operators

0

NS

B

D

S

B

Turnover bill. kr. (2011)

7

Re

n

fe

9

Go

-ah

e

ad

Na

tio

n

a

l E

x

p

re

ss

St

a

g

e

coa

ch

N

S

/A

b

e

lli

o

O

B

B

T

re

n

it

a

lia

V

e

o

lia Tr

an

sd

e

v

F

irst

G

ro

u

p

SN

C

F

/K

e

ol

is

8

D

B

/Arri

v

a

CP

50

100

150

200

250

300

State

owned

operators

Acquisitions

DB

ƒ

Liyell Ltd - UK (2012)

ƒ

Grand Central - UK

(2011)

ƒ

D&G Bus - UK (2011)

ƒ

Arriva - UK (2010)

ƒ

Laing Rail - UK (2007)

ƒ

Pan Bus - DK (2007)

ƒ

Unibus - DK (2007)

1

ƒ

SNCF

ƒ

Syntus - NL (2012)

ƒ

Keolis - FR (2012)

2

ƒ

WestBahn - AT (2011)

3

ƒ

NTV - IT (2008)

4 ƒ

Eurobus - BE (2008)

5

ƒ

City-Trafik - DK (2007)

ƒ

Buslink - SE (2003)

6

ƒ

Via GTI - FR (1999)

ƒ

NS

ƒ

Abellio - DE (2008)

ƒ

Probo Bus - CZ (2008)

ƒ

Travel

London - UK (2009)

1. Acquired by Arriva 2. SNCF becomes majority shareholder with 70% 3. SNCF acquires 26% of Westbahns parent company.

4. SNCF acquires 20% of NTV 5. SNCF becomes majority shareholder 6. Acquires 70% 7. Includes all income 8. SNCF owns 70% of Keolis 9. 2010 Turnover Source: Deutsche Bahn; Arriva; Keolis; Railgazette; Fundinguniverse; Abellio; Renfe; CapitalIQ; Bloomberg; DSB annual report 2011; BCG analysis

Veolia

Environnement

put up share

(50% ) for sale

(13)

“Healthy DSB”

– preparing

for fair competition

ƒ

The transformation journey

ƒ

Status

(14)

“Top 25%

in Europe”

Economy in balance ƒ IFO 13/Savings ƒ Pricestructure ƒ Benchmarking ƒ Segment/line results ƒ One DSB

Trains you can rely on

ƒ Trafficinformation/One app ƒ Punctuality/reliability ƒ IC4/2

ƒ Rejsekort

On target, every time

ƒ Managing the DSB way ƒ A common approach ƒ IC4/2 delivery/settlement Preparation tracks ƒ New contract ƒ Future trains ƒ Infrastrukturprojects ƒ IT-infrastruktur EBITDA Net Result Train km-cost Punctuality F&R S-tog Customers DK I alt Customer satisfaction F&R S-tog Image DSB S-tog Index EBITDA Net Result Train km-cost Punctuality F&R S-tog Customers DK I alt Customer satisfaction F&R S-tog Image DSB S-tog

2011

2014

2025/30

“Split and out

of balance”

“Healthy DSB”

Less DSB

Deserves a new

contract

More DSB

The transformation journey

Source: DSB 1.693 -694 158 kr. 90,6% 94,8% 165 mio. 219 mio. 7,7/6,6 7,8/7,2 54/51 60 140/140 2.650 350 142 kr. 94% 95% 180 mio. 186 mio. 8,0/7,0 8,0/7,5 +60 +60

(15)

DSB in a

competitive

market

ƒ

One company –

one strategy

ƒ

Customer focus

and expectation management

ƒ

Top quartile

amongst comparable operators in Europe

ƒ

DSB as a business

- able and willing to compare on

(16)

One company –

one strategy

ƒ

Focus on core

– train operations in Denmark

ƒ

“The greater context”

ƒ

Basic story

ƒ

Common value set

ƒ

Cohesion – not only DSB, but in public transport

ƒ

“The common approach”

ƒ

One strategy for DSB

(17)

Customer focus

ƒ

Customer Value Proposition

ƒ

Safe

ƒ

Punctual

ƒ

Easy

ƒ

Convenient

ƒ

Polite

ƒ

Expectation Management

(18)

Danes are the most satisfied with train

operations, but expect improvements

through liberalization

Danes are generally

satisfied with train

operations...

... but still want

liberalisation ...

... with an expectation

of better conditions

4

Improved

management

66%

17%

1

Lower prices

77%

12%

2

Impr. punctuality

74%

12%

3

Frequency

67%

16%

5

Service quality

66%

60%

19%

6

Comfort &

Cleanliness

60%

22%

7

Increased security

42%

28%

Positiv

Negativ

76%

20%

DK

75%

18%

DE

71%

21%

UK

71%

21%

EU

66%

27%

FR

46%

52%

NL

Positive

Negative

67

%

64%

21%

DK

67

%

45%

34%

DE

67

%

55%

27%

UK

67

%

46%

36%

EU

67

%

59%

22%

FR

64%

23%

NL

Positive

Negative

Source: "Rail Competition, Special Eurobarometer 388" European Commission (2012); BCG

DK

Could be an indication of missing

(19)

Top quartile

in Europe

ƒ

Benchmarking

(20)

DSB as

a business

ƒ

Comparable terms

for relevant parts of the business,

i.e. benchmarking of train operations excluding

historically determined costs such as special terms for

civil servants, rail museum, stations and other

functions performed for the sector

ƒ

Result oriented culture

characterized by customer

focus, openness and transparency

(21)

2

1

References

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