Bruno Auger
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Rail Market : The Rolling Stock Dilemma
Bruno Auger
Rail Director Keolis
Rolling Stock : a segmented market in Europe due
to a lack of standards
Different voltages
Different signalling
systems
Different gauges…
Consequences :
Not a large unified
market, but several small
markets
Negative impact on costs
Second-hand market for
rolling stock is only local
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Different Timescales
The duration of franchise contracts is maximum 15
years
Open access contracts include a guarantee for one
year (or 5 years for framework contracts)
Rolling Stock lifetime is 30 years
The difference involves the risk of residual value:
the trains owner is at risk on a significant part of
the trains initial value, and has to provision this
risk in a way or another
?
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What influences the trains value, at the end of an
operating contract
Norms
Quality of
the trains
Market
Evolution
Cost of
refurbishment
Value at the end
of the contract
Second Hand
market
Conditions
by PTA
Fair rules of competition are necessary to develop
open competition and reduce costs
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Possible financing Parties
The operator
The PTA
A third Party i.e. a ROSCO (Rolling Stock
Company: owns the rolling stock and lease it to the
operator)
All Parties were impacted by the financial crisis
New IFRS norms will have an impact on
consolidation in the operators balance sheet
(operating lease)
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Case study 1 : The British system
- The DfT (Department For
Transport): Regulates the market
and issues some guarantees (ex:
section 54)
- The ROSCOs (Rolling Stock
Companies) :They own the rolling
stock and lease it to the operators
- The operators: Private
companies which operate
franchises and in some cases
maintain the rolling stock (no
longer national operator)
- The trains manufacturers: build
and in some cases maintain the
rolling stock
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Case study 1 (cont’d) : The British system
The aim of railway privatization was to separate
the competition in operations, from competition in
investment
Transfer of the assets from British Rail, the former
national operator, to the ROSCOs
Cascades (transfer of second hand rolling stock
fleets from a franchise to another one) organized
through the ROSCOs
NB:
A new system is being developed : PPP (Public
Private Partnership); this scheme includes the
procurement of rolling stock and its maintenance
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Case Study 2 : a tender in the Netherlands
After a competitive tender on a regional network,
the PTA chose the bidder having proposed to
replace the 10-year old DMUs by new DMUs.
In the tender requirements, no new rolling stock
was required, but the PTA stated that “Newer
rolling stock can indeed in a technical sense in
marketing make a contribution to keeping present
passengers and/or generating passenger growth”.
Almost 3 years after this decision, it seems the
ROSCO has not found a new customer for this used
rolling stock
This risk has an impact on the leasing cost of such
rolling stock, which increases the public transport
cost
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Assessment
The risk of residual value has indeed increased
during the last years :
The European rolling stock market still does not
exist!
Some more question marks on residual value
link to decision by PTA
Cascades less efficient compare to national
system
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Proposals to tackle the risk of residual value:
Reinforcement of the European market : convergence of
standards (TSIs, ERTMS,…) to be achieved to create a
second hand market
As an example, Spain decided to build High Speed
Lines with the European track width
Progressive implementation of European standards
for the railway sub-systems (TSIs: Technical
Specifications of Interoperability)
Multiple-voltage capacity of rolling stock could be
requested
(Unified voltage on networks seems too expensive)
Remark : some projects, like ERTMS, only creates
value if applied on a large scale
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Within national markets : better matching of the
asset lifetime with the operating contract duration
A regulation for investment on the market : each new
Rolling Stocks has got to be approve by national
regulator
The PTA is better place to manage risk concerning the
duration of the asset. There is a need, at the moment,
for some clarity concerning the duration of the asset use
by the PTA
PTA is better place to take life duration risk :
BUT
The PTA needs to be able to change the rolling stock
in case of poor performance
The PTA needs to have tools to put pressure on the
operator(s) during the whole lifetime (30 years)
A cascade mechanism (inter-regional pool) would be
helpful
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Thank you for your attention
Date
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