A successful Intermodal Rail Corridor

A successful Intermodal Rail Corridor Hamburg South East European Countries Key Factors and Best Practices Madrid, 12 th November 2009 Innovative Logistics Consultancy Solutions for Your Success

Content 1. Key success Factors of Railway Supply Chains 2. Volumes and Volume Balance 3. Points of Consolidation 4. Integrated Rail-Roading 5. Impact of Liberalization 6. Summary 2

1. Key success Factors of Railway Supply Chains Introduction Railways grew traditionally in conventional business Intermodalism in Europe started not with the first Container arriving in Bremen in the late 50 s Only Eckelmann, the owner of a bulk port area in Hamburg (Eurokai), started investing in port facilities to handle containers in the early 60 s, while anybody around him was smiling: What a crazy guy! Eurokai, today Eurogate, became the largest container terminal operator in Europe Rail started 6 years later in 1967 to transport the first containers The rail share of containers compared to road was far less than 10% overall in Europe Only with the upcoming Liberalization in the central European States in the early 90 s, private activities and competition, the modal split grew in favor of rail There are 4 key factors for success in rail transport: Volume Consolidation Supply chain orientation - Competition 3

Content 1. Key success Factors of Railway Supply Chains 2. Volumes and Volume Balance 3. Points of Consolidation 4. Integrated Rail-Roading 5. Impact of Liberalization 6. Summary 4

2. Volumes and Volume Balance Rail is competitive transporting 1.000 tons or >70 TEUs is competitive transporting with regular frequency (5 days a week) needs constant high utilization because of the high share of fixed costs needs outbalanced flows to cover costs and to keep frequency needs more planning activities than road creates higher supply chain complexity needs smart order management JIT should not degenerate to the stupidity to order in time! needs consolidation of volumes to create the necessary mass of transport has plenty of market opportunities (corridors) to gain business Success to gain volumes is a question of consequent management 5

Modal Split in 2007 2. Volumes and Volume Balance Dominant role of road in Spain Road got the image to be flexible and cheap Infrastructural limitations (gauge, energy, train length, incline, etc.) Road [%] Rail [%] Waterways [%] Total Source: Eurostat Spain 3,9 0 96,1 3,9 0 100 Germany 65,7 21,9 12,4 100 12,4 21,9 65,7 Road Rail Waterways 96,1 Huge potential for rail transport not used at all 6

Growth Factor Hinterland Connectivity Bremen/Hamburg port operators started in early 1990 s with private rail operations Open access to all railway companies leads to early competition with German state railway and as consequence increased service quality Drastic reduction of rail prices is one consequence Transport flows strictly concentrated on a few number of Hubs in the Hinterland Strong improvement of rail competitiveness compared to road [TEU] 12.000.000 10.000.000 8.000.000 6.000.000 4.000.000 2.000.000 2. Volumes and Volume Balance 0 1995 1997 1999 2001 2003 2005 2007 Rotterdam Antwerpen Hamburg Hamburg achieves higher and continuous growth in container business because of its attractive hinterland connections 7

2. Volumes and Volume Balance Hinterland of Hamburg The development is driven by development of container traffic While container volume doubled, rail volume grew 4 times! Trains per Day Port Hamburg Italy Germany Scandinavia Eastern Europe 400 300 200 100 0 + 186 Trains + 90 % 296 122 86 98 Trains 2005 Trains 2015 Conventional Container Consequent management of rail activities grew the business 8

2. Volumes and Volume Balance European Intermodal Network Dominant role of volumes in North/South direction Almost no rail activities of south European ports on rail Except of the Betuwe Line all corridors use existing rail infrastructure Inland Terminals Sea Ports Madrid Source: UIR, Kombiconsult To gain rail volumes is not mainly a question of infrastructure! 9

Optimal Connection between Port and Hinterland Content 1. Key success Factors of Railway Supply Chains 2. Volumes and Volume Balance 3. Points of Consolidation 4. Integrated Rail-Roading 5. Impact of Liberalization 6. Summary 10

3. Points of Consolidation Corridors need Consolidation Points Container hinterland transportation is the ideal example for rail corridors Corridors needs a high level entrance and exit - terminals Terminals and their surrounding markets are consolidation points along the rail corridors Sea ports with well integrated intermodal terminals Transshipment terminals for rearranging of containers Hinterland hubs and satellites for local supply Corridors are defined as the link between strong economic areas 11

Hinterland Terminal Types 3. Points of Consolidation Different terminal functions lead to different requirements to the terminal layouts Inland ports can also provide the move from barge to road/rail (trimodal) Sea Port Satellite Regional Hub / Hinterland Hub Transshipment Terminal Function Serving local shippers Interim storage for surrounding companies Serving local shippers Interim storage for surrounding companies Serving of the region Interim storage Sorting and distribution of containers Short term buffering Focus Move Sea/Rail & Sea/Road Move Rail/Road Move Rail/Road Move Rail/Rail Volume > 500.000 TEU 50.000 TEU > 100.000 TEU > 250.000TEU Equipment STS-Cranes RMG Reachstacker RMG / Reachstacker RMG 12

3. Points of Consolidation Example of a Sea Terminal as an Entry Gate Guarantee short and flexible delivery from waterside to hinterland Guarantee fast transfer of cargo Enable high train frequency reducing connections to hinterland hubs About 500m back reach 30 m As better rail is integrated in port operations, as more attractive are rail connections compared to Road 13

3. Points of Consolidation Eurokombi as Entry Gate to Europe Mayor terminal in Hamburg 140 Ha area 21 STS-cranes at the berth ~3 Mio. TEU in 2008 Provides an integrated rail terminal for hinterland connection 5 Tracks 4 RMG 2 Reach stackers Modern layout, modern infrastructure meets feasible volumes Good connection to the rail net = rail share 20%! 14

3. Points of Consolidation Example of a Hinterland Hub Communicating modules Focus on hub function for regional volumes Provides storage area for interim storage Good access for trucks for moves from rail to road 52 m 9m 3 m 12m 7m 9m 3m 9m Module wise layout for a volume oriented development 15

3. Points of Consolidation Example of a Transshipment Terminal Transshipment Modul with high number of tracks for rail/rail moves Access Modul to serve from road to rail and v.v. External area for value added services can be served by reachstackers Transshipment-Module 52 m 9m 3 m 12m 7m 9m 3m 9m Can be developed step by step: local terminal hub - transshipment 16

3. Points of Consolidation Nuremberg as Gate Way to Eastern Europe Nuremberg is a hinterland hub with additional transshipment shares Ideal consolidation point for volumes from Hamburg/Bremerhaven to move to Austria, Italy and Eastern Europe Success factors Geographical position at the rail corridor to South and East Europe Feasible rail infrastructure in all directions Modern terminal layout with efficient processes Transparent tariff policy an discrimination free access for all rail companies Good management develops a successful terminal from a ideal starting point 17

3. Points of Consolidation KTL Kombiterminal Ludwigshafen Success Factors: Module wise construction referring to the volume development Communicating Modules Details: 2 Modules 8 Tracks 4 communicating cranes External area for trailers' Integrated warehouse concept Integrated and extendable concept based on the logistics needs Start 2000 = 70.000TEU/2009 = 350.000TEU/2015 = 800.000TEU! 18

4. Integrated Rail-Roading Max train length differs from country to country Spain actual still 450m, but activities to increase Germany 700m Spain Germany France Poland Average Speed* 30 km/h 40 km/h 35 km/h 25 km/h Track class / Maximum axle load D4-22,5 t D4-22,5 t D4-22,5 t C3-20 t Max train length ~450m 700m 750m 600m Gauge UIR / Iberian Standard UIR UIR UIR / Russian Broad Gauge *all trains, not only intermodal trains Quality of infrastructure is not a Key Success factor as far as train length of min. 600m could be provided and 20

the Constraint Gauge 4. Integrated Rail-Roading is managed properly 21

Constraints Maximum Train Length Impact of train length on cost calculation parameters Container trains on a distance of 400km 1 roundtrip/day 250 trains/year 4. Integrated Rail-Roading Loco: 1 Vossloh Euro 4000 (0,4 bln EUR/year) Wagons: 2 wagon sets with 80`-Container wagons (30 EUR/day) Diesel cost: 0,78 EUR/l Access charge: 0,17 EUR/km Loco driver cost: 20 EUR/h Based on the above shown parameters calculations for trains with 400m, 600m and 700m length will be done 22

Constraints Maximum Train Length Impact of train length on cost calculation results 4. Integrated Rail-Roading Scenario 400m Scenario 600m Scenario 700m Planning parameters Maximum train length [m] 400 600 700 Distance [km] 400 400 400 Average speed [km/h] 50 50 50 Transit time [h] 8 8 8 Train rotations/day 1 1 1 Train rotations/week 5 5 5 Weeks/year 50 50 50 Train rotations/year 250 250 250 Assets Loco type Vossloh Euro 4000 Vossloh Euro 4000 Vossloh Euro 4000 Number of locos 1 1 1 Wagon type SGGRSS 80 AAE SGGRSS 80 AAE SGGRSS 80 AAE Number of wagons/train 14 21 25 Number of wagon sets 2 2 2 Number of wagons total (incl. 10 % reserves) 31 46 55 Gross weight per train [t] 823,20 1.234,80 1.470,00 Train length [m] 396,82 583,72 690,52 TEU/train 56 84 100 Volume allocation Planned capacity [TEU] 14.000 21.000 25.000 Cost allocation Total loco cost/year [EUR] 400.000 400.000 400.000 Total wagon cost/year [EUR] 339.450 503.700 602.250 Fuel cost/year [EUR] 780.000 858.000 904.800 Total loco driver cost/year [EUR] 100.000 100.000 100.000 Total access charges/year [EUR] 34.000 34.000 34.000 Total cost of concept [EUR] 1.653.450 1.895.700 2.041.050 Costs per TEU rotation[eur] 118,10 90,27 81,64 Impact on costs per TEU rotation [%] -23,57-30,87 Economies of scale for longer trains result in cost reduction of 24% for 600m trains or 31% for 700m trains compared to 400m trains. 23

4. Integrated Rail-Roading Successful operator - BoxXpress Private rail operator founded in 2000 Focus on hinterland connections from the big German sea ports In 2007 BoxXpress handled 385.000 TEU via Rail Shareholders: 1.ERS Railways B.V., subsidiary of MAERSK LINE, (Shipper) 2.Eurogate Intermodal GmbH, subsidiary of EUROGATE Group (port operator) 3. TX Logistik AG: 51% Trenitalia (railway company) One-stop-shop is a Key success factor 24

Organization Structure along the Supply Chain 4. Integrated Rail-Roading Port operations (Rail Handling Terminal operations in the Hinterland Train operations Fleet management (locos and wagons) Local road distribution Tracking and tracing Empty container management Maintenance Sea Port Terminal Main Line Hinterland Hub Final Road Haulage Supply chain management along the whole transport 25

Impact of Liberalization on Rail Transport 5. Impact of Liberalization New players mean alternatives for the industries (for example in cases of strikes) New alliances and structures of cooperation Increased competition leads to increased quality and productivity Horizontal competition increased even vertical competitiveness Competition reduced the costs, pricing more competitive compared to Road Establishing liberalization offers great chances for the Rail industry 27

Rail Liberalisation Index 2007 5. Impact of Liberalization In most countries external railway carriers are already licensed and involved in freight transport. The liberalisation is advanced in Great Britain, Germany, Sweden and the Netherlands. The market opening in Luxembourg, France, Greece and Ireland is delayed. Source: IBM Global Business Services, Rail Liberalisation Index 2007 All the countries examined have been gradually opening their rail markets since the last survey in 2004. 28

5. Impact of Liberalization Liberalization is in Progress Providing non-discrimination access to all parties is obliged due to the EU-Directives Due to this, even all private rail infrastructure providers have to guarantee open access Infrastructure fees needs to be non-discriminatory and competitive Advanced On Schedule Delayed Source: IBM Global Business Services, Rail Liberalization Index 2007 Hamburg Rotterdam Antwerp Duisburg Non-discriminating Access Competition on the network Separation of network and operations Where liberalization is realized - rail gained market share! 29

5. Impact of Liberalization Benefits of Liberalization Market share of new railway companies and development of rail volumes 80 70 60 50 40 30 20 10 0-10 UK NL CH A D B I F Source: European Commission, Eurostat Share of new railway companies Growth between 1995-2004 in billion tkm There is significant correlation between grade of Liberalization and Growth. 30

The German Experience Traffic Performance in Rail Transport in Germany (in bln tkm) 120 5. Impact of Liberalization 100 80 5,9 8,8 13,7 17,5 22,5 24,5 CAGR 2003-2008: 32,9 % CAGR 2003-2008: 2,9 % CAGR 2003-2008 total: 6,3 % 60 40 79,2 83,1 81,7 89,5 92,1 91,2 20 0 2003 2004 2005 2006 2007 2008 Source: TransCare based on Deutsche Bahn Competition Report private rail carriers Deutsche Bahn Group Liberalization causes a new market situation 31

5. Impact of Liberalization The German Experience Development Average Price Level at Deutsche Bahn Group (in -ct/tkm) 4,50 4,30 4,10-13,69% 3,90 +5,34% 3,70 3,50 2003 2004 2005 2006 2007 2008 nominal real Source: TransCare based on Deutsche Bahn Annual Reports 2003-2008 with decreasing prices and 32

5. Impact of Liberalization The German Experience Development productivity at Deutsche Bahn Group (in EUR/Capita) 180 160 140 +26,62% 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 Source: TransCare based on Deutsche Bahn Annual Reports 2003-2008 the challenge to increase productivity. 33

The lack of intermodal Transports in Spain is House-made Ports are not providing integrated rail terminals for intermodal handling Road market is not interested in rail Railways are not really in competition lack of private operators Industry does not care as far as road delivers Nobody is taking consequently the initiative There are great chances for rail transport in Spain! Small share of rail in transportation Reasonable volumes Long distances Huge investments in infrastructure Interest of big European players in Spanish market 6. Summary Significant increase of intermodalism is possible 35

Thank you for your attention! 36