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Challenges and vision of company future development within a competitive market

Challenges and vision of company future development within a competitive market. ČD, a.s ., Jiří Havlíček EFRTC General meeting, 22/06/2012. Railway transport represents one of the key and accessible mode of transport. c ca 450 000. c ca 135 000. +5 %.

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Challenges and vision of company future development within a competitive market

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  1. Challenges and vision ofcompanyfuturedevelopmentwithin a competitive market ČD, a.s., Jiří Havlíček EFRTC General meeting, 22/06/2012

  2. Railway transport represents one of the key and accessible mode of transport cca 450 000 cca 135 000 +5 % 2 • In 2011 ČD carried 166 mil. travellers / year, means cca 450 000 daily • In 2011 ČD carried within integrated transport systems cca 49 mil. people, means cca 135 000 daily • Increase of revenues from tickets cca 5% compared to 2010

  3. Passenger transport – ČD, a. s. • Regional • Operatedunder long term agreementswitheach of the 14 regions, including the city of Prague • Long-distance • Consists of interregional and international railtransportationactivities • Operatedunder long term agreementswith the state • Commercial • Non-regulatedpassengertransportationoperations • Includes „high-speed“ operations – SuperCityPendolino 3

  4. Renewal of rolling stock fleet is ine of the key preconditions od ČD competitiveness Rolling stock investments Signed contracts (mil. CZK) New and modernized Rolling stock New Modernization 4

  5. Competition on Czech railway market Fair competition is desirable, motivates to the bid of higher quality 5

  6. Oneofthe major preconditionsisharmonizationofconditionswithroad transport • Imbalance between railway and road infrastructure development • Each train pays for use of any type of infrastructure, in road sector only selected group of cars pay on selected network • Higher requirements set in legislation for railway business 6

  7. One of the major goals is finalization ofcorridor lines modenizationwithfutureconstructionofhigh speed lines and convergency of infrastructure priorities • Czech railways are under-invested and overallmodernizationrunsslowly and withdelays to originaltimeplans and in comparisonwithneighbouringcountries • Insufficientparametersof modernized corridors limit competitive business (maximum speed up to 160 km/h on limited part of network) • Capacity issues around municipalities • Strategy of infrastructure development must reflectmarket needs and plans of „order parties“ 7

  8. Slow speed implies low interest in railways service • Examples of travel time by train, high speed line and bus on selected lines:

  9. Railway systemis very closely linked, sensitivelyreacting on anyfailures • ČD, a.s. • Railway transport passenger operator • Railwaystations • SŽDC, state • organization • Infrastructureoperation • Infrastructuremaintenance and development • Allocationofcapacityfor operators ČD - Cargo, a.s. Current state in the Czech Republic RISKS State • Inhomogeneous and potentiallyconflictingstrategies • Missingeconomicmotivationforinvestments in theprojectsofoperators´interest • Global optimum ofrailway system not achieved, synergies not used, increaseofcostsofrailwaysystem 9

  10. Potential solution might be an integrated railway holding with four subsidiaries Organizationalstructureoverview • Three main arguments in favor of the proposed organizational structure: • Considerable cost savings due to synergies and increased efficiency • Coordination of priorities between rail operator and infrastructure manager • Best practice option used by the most successful companies in therail industry Railway holding Regulator Passenger transport Station & Service Freighttransport Infra-structure Sharedservices 10

  11. ČD has already commenced the steps towards holding structure implementation „Holding model“ management (implementation of joint policies, methodologies etc.) Shared service centres for prioriti areas within ČD Group (IT, accountance, investments, treasury, purchasing) Preparation of Passenger transport subsidiary company Preparation of „Stations and service“ subsidiary company 11

  12. T CzechRailways put a strongemphasis on theoptimizationoftherailway station management Currentprojects Optimization and standardization of services in stations along with the fee and the new categorization • Introduction of station fee • Sale of non-essential railway station buildings to municipalities • Sale of other dispensable real estate property in the railway stations • Revitalisation of the Prague Main Station revitalisation in cooperation with Grandi Stazioni • Revitalisation of the station buildings through differentiated funding 12

  13. Categorization has beenupdatedrecentlybased on these threeparameters 1 • NUMBER OF PASSENGERS • Reflects the volume of necessary services Categorization reflects the traffic importance of individual stations 2 • POSSIBILITY TO CHANGE TRAINS • Reflects the time passengers usually spend in stationsand the volume of necessary services 3 • REGIONAL VS. LONG-DISTANCE • Reflects number of passengers and the volume of necessary services 13

  14. The station fee is in preparation, being intensively discussed with the Ministry of Transport • Elementary services will further be completed with a range of additional services. However, these will not be granted for each category of stations (e.g. Bicycle depository, lost and found etc.) • Legislation changes are expected to be necessary to start the station fee • Exact date of fee introduction hasnot been set yet 14

  15. ČD optimizes the property portfolio also by the sale of dispensable (non-core) real estate property Process VOLUME OF non-core PROPERTY • The sale process will be supported by a consorcium of companies (real estate agents, management consulting, investment banks) • Because of the enormous volume of property, ČD intends to sell it in large „packages“ • Part of the property will be probably sold to the infrastructure manager (SŽDC – state organisation) • Ca 4600 buildings • Ca 62 mil. m2 plots EXPECTED EFFECTS • Cash income • Decrease of maintenance and renovation cost • Higher work efficiency 15

  16. ThePragueMain Station isbeingsuccessfullyrevitalisedin cooperationwith Grandi Stazioni • Main features of this revitalization: • Enlargement of underpasses • New Passenger service center • New luggage depository • Rennovation of the facade 16

  17. The challenge is to find sufficient financing for the renovation of the core assets • ČD is trying to obtain European funding for the rennovation of railway st. • Currently a notification process is running to confirm this subsidy will not account for a inadequate state aid • Regional operational programs • Programming period 2009-2013 • 600 m CZK • Renovation of station buildings 17

  18. Thank you for your attention HavlicekJ@gr.cd.cz

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