OECD, International Transport Forum (ITF) Roundtable: Efficiency in Railway Operations and Infrastructure Management Paris, 18-19 November 2014 Case study ProRail: understanding the drivers of Railway (in)efficiency Jan Swier, ProRail
Who is Jan Swier? • Jan Swier, 63 years • Married and five children • Civil Engineer • Expert in asset management • Career: • bridge engineering • maintenance contractor • staff manager • advisor 2
Theme of the presentation Separation Transport-Track Costs & Earnings Transport Cost drivers Infra (In)efficiency drivers 3
Railways in the Netherlands Together with Switzerland we have the most densely used network in Europe Line; 3063 km Track: 7033 km Stations: 404 Punctuality: 94% (<5’) Passengers: 1,1 mio/day Freight: (net ton): 0,1 mio/day € 32.000 mio Value rail infra: € 1.200 mio/yr M&R costs infra: € 2.500 mio/yr Earnings Transport: 4
Rail Transport Costs & Revenues increased fast because of changing conditions and circumstances Development of rail transport costs in the Netherlands (1938-2013) Nominal costs Rail Infra-costs Mio Euro’s/year Users Charge TOC’s PSO- subsidy TOC’s - Price level 2013 NS declared unprofitable Separation TOC-earnings Nominal costs 5 5
The institutional triangle was born as a consequence of increasing government involvement Government Passengers & shippers - Competition Authority - Transport Safety Board Train Operating ProRail Vervoerders Companies Vervoerders - Network Statement Vervoerders Vervoerders - Access Agreement - Access Charges ( € 270) Institutional triangle Contractors, Contractors, Engineering Engineering Agencies, etc. Agencies, etc. Euro’s (€ ) in millions 6
Full vertical separation created a clear division of roles, money flows and responsibilities A subsidy is “Who pays decides” “Commercial Poison” . Euro’s (€ ) in millions One infra Manager Multiple TOC’s (>15) Means of production Product Subsidy Revenues Costs Profit Infra Performance & LCC Transport profitability (Very) Long Term focus Short/Medium Term focus 7
Quality & Utilization improved after separation Increase punctuality (<3’) Increase utilization Separation 2005; ProRai BV Separation 2014 1995 2013 1995 1946 Less technical infra failures Full vertical separation created positive optimization circumstances: • three views)* and contributions Oursourcing Maintenance on one common goal: improving customer satisfaction, • an open debate about the best Separation solution ProRail BV • “ Who pays decides ” )* • TOC’s: transport costs, revenues and profit 1994 1998 2005 2013 • Asset Manager: infra life cycle costs & performance • Government: national transport policy & public interest 8
Separation had a “purifying” effect on rail asset financing and reporting; full transparency to the taxpayer Depreciation …. based on construction value ……based on renewal value Holding Full vertical separation ProRail BV ProRail Separation Trains-Track Depreciation costs Stewardship costs Nominal costs Stations Organization costs AM, Traffic Control & Project Maintenance Capacity Mngt. Financial costs Only AM Process Maintenance 9 (Only Infra)
Railway Business in Europe is complex because of multiple users and costs are higher as revenues and 3.000.000 Costs & Income TOC’s & IM are in balance 2.500.000 Railway Business Model: Euro/km line/year Average modelled situation NL Infra • Realization of 95 lines 2.000.000 • TOC-costs are modelled, based Costs & on known quantities and yearly Earnings 1.500.000 costs TOC’s in balance • Total infra-costs = Infra + Users Charge. Both are based on Government subsidy 1.000.000 realization. Profit TOC’s Passengers 500.000 Freight TU/km line (Passenger km and Net ton km) 10 10
Social benefits are a part of the rail transport business € 1.650.000 Social benefits: • travel time savings by reducing € 1.250.000 traffic jams; € 1.150.000 • less accidents; Line average NL • (possible) less air pollution; • (possible) less landscape damage; • (possible) lower production costs; • (possible) economic stimulus. Average line use Rail Transport in the Netherlands is abundantly profitable because of high utilization/earnings and considerable social benefits 19 November 2014 11
Business (in)efficiency can be measured as the ratio Earnings (= Performance) /Costs Efficient = effective = business like = competent Railways = economical Train Operation Rail Infrastructure Subsidy + Access Charge Earnings + PSO Subsidy Costs )** + Back log )*** Costs )* + Access Charge PSO = Public Service Obligation )** Traffic Control, M&R )*** Back log = % main track with )* Only Train Operation & Capacity Mngt speed restriction * M&R-costs Infra not real estate and stations € 2400 + € 200 € 1000 + € 300 = 1,08 = 0,98 € 2100 + € 300 € 1300 + € 50 Efficiency Train Operation Efficiency Rail Infrastructure Euro’s (€ ) in millions Euro’s (€ ) in millions Train Operators Government ( € 2400 + € 300) + € 1200 = 1,04 ( € 3400 + € 300) + € 52 = 0,72 = 0,32 Efficiency Railways Efficiency Railways Public Service Value 12
Drivers behind (in)efficiency are understood by analyzing differences & analogous between companies 2-4 trains/day >200 trains/day 1 track 2 tracks+ >5000 ton/train 70-1000 ton/train >2000 m/train 40-600 m/train 13
TOC-costs per line differ substantial because of differences in train length, -type and -intensity 100-200 seats/train 400-1100 seats/train Regional Intercity Freight Intensity 1 or 2 trains/hr/direction 4 trains/hr/direction Depending need Intensity Trains Short, simple Long, comfortable Long, simple Trains Demand Low / Medium Medium / High High load per train Demand Distance Short / Medium Medium / Long Long Distance Personnel Train driver Train driver + conductor(s) Train driver Personnel Speed 100 km/hr 140 km/hr 100 km/hr Speed 19 November 2014 14
Infra costs per line differ substantial because of differences in utilization and complexity +/- € 200.000 /km line +/- € 500.000 /km line > € 1.000.000 /km line Regional line Intercity main line Yards • • • Single track Double (or more) track Complex layout: many switches • • • Simple layout More complex layout Complex signaling • • • Simple signaling Double/single track signaling Complex catenary • • • No catenary Catenary Complex traffic control • • • 100 km/hr 140-200 km/hr Complex surrounding • • • 17-20 ton axle load 22,5 ton axle load Low(er) speed 19 November 2014 15
Modelling maintenance cost drivers revealed the impact of the conditions Average situation NL (2013) Maintenance cost model: • Prediction of M-costs for projects, tenders,…. • Applicable for networks, lines, contract area’s • High reliability (R²=0,9) • Also applicable to understand cost Complexity differences between countries/continents Utilization 16
The big infra-cost gap between US-Netherlands are because of difference in usage & complexity LCC comparison rail infrastructure; the Netherlands - US (INDICATIVE) NL 120 Differen rence in conditi itions: s: 0 LCC Cost Index 4 100 9 • No catenar ary Usage & Complexity 11 • < switche itches (-60%) %) LCC index 80 7 4 4 • < signal als s (-80%) %) 5 5 60 • > day work (90%) %) 9 19 100 17 10 USA • > effec ective ive workin ing g time me 40 11 • > tonkm, , < train inkm km 12 20 Quality 19 0 More diesel refuel installations More daywork (90% versus 65%) More effective working hrs(7/5) Higher utilization in the US Operational excellence (estimated) More (complex) marshalling yards LCC rail infrastructure NL No catenary Less complex traffic control Less (complex) level crossings 80% less signals Purchasing Power (estimated) Scale advantages (estimated) Cargo related specs (estimated) LCC rail infrastructure US 60% less switches Lower material costs Differences 17
Maximizing asset efficiency depends of the skills and quality of the organization to manage all risks • Amount of assets • Utilization • Technical condition • Effective working Time • Day/Night/Weekend work • Worksite conditions • Legislation Conditions • Social Agreements • History / Culture Circumstances • Society / Economy • Political focus • Stakeholder focus • Way of Separation ‘ • Capacity Performance Costs Risks • Functionality • Quality (RAMSHE)*) • Image • Risk Mngt. • LCC Mngt. • Contract Mngt. • Quality Mngt. • Information Mngt. • Knowledge Mngt Activities • Maintenance • Renewal • Inspections • Measurements • Stewardship “The mechanism behind Asset Management” 18 18
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