Annual Report 2016
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ATPHA@mnns Alpha Trains Group S.à r.l. (as Security Group Agent) Investor Report Full Year 2016 Table of Gontents 1. General overview... ..3 2. Business update ..5 3. Significant announcements/publications ..9 4. Significant changes to the board of directors or senior management 11 5. Capital expenditure 12 6. Financing.. 13 7. Acquisitions or disposals ............ 17 8. Current hedging position..... 18 9. Ratios 19 1 . r.]rjrfl *l¡rì çy çi"'¡trç;;ttt1 {.ì r<t tt ¡t t}V e I v i ert/ Alpha Trains' Security Group (also referred hereafter to as "Group", "Alpha Trains", or "AT") delivered robust performance and high levels of utilisation through the year 2016. Revenue for the year 2016 was €175.4m, representing a marginal outperformance vs budget. EBITDA for the same period was €165.9m, representing an EBITDA margin of 95%. Net operating cash flow after investing was negative €134.4m for the period due to the acquisition of the Red Motion fleet. Net operating cash flow (before investing) was €146.9m for 2016. Total Cash balance at end of the period was €97.9m (including Maintenance Reserve balance of €45.9m). Asset utilisationl was consistently high at an average of g7% throughout the year 2016. On a vehicle basis, utilisation was on average 98% in this reporting period. This asset utilisation average results of a Group Passenger utilisation rate of 100% and a Group Cargo utilisation rate of 94%. (asset basis) Alpha Trains 6roup Asset Ut¡lisation Year Ênd 1offi 969; 93% 90% 80% 70% 9J .J -"t' -".* J ,.."" .,."" oon" -r'- {gn'o "-- "/ Cãfgo Pa5renger Cargo & Pax -Group -Grgup -Grrup I Assets are defined as locomot¡ves ànd passenger trainsets where each passenger trainset represents one asset. Vehicles are defined as locomotives and passenger units with each passênger trainset being counted as the number of carriages. Alpha Trains Group S.à r.l. lnvestor Report, Year 2016 Page 3 of 20 The following chart shows the Security Group's lease maturity profile as of 31 December 2016. Alpha Trains Lease Maturity Prof¡!e 30o/o 25/o 20% L5% t0% 5% V/o < 1\iear 1-2 yearc 2-3 years 3-5 years 5- 10 years > 10 years The diversified maturity profile of Alpha Trains' lease contracts across its fleet portfolio (passenger and locomotives business) underpins the future utilisation. The increase of lease maturities in the 10+ bucket in comparison to the previous lnvestor Report is a result of the acquisition of the new EMIL and STS fleets (hereafter also referred to as the Limestone project). Alpha Trains Group S.à r.l. lnvestor Report, Year 2016 Page 4 of 20 At the beginning of 2016 Alpha Trains signed lease contracts for two large Electric Multiple Unit (EMU) fleets from its portfolio with existing customer Keolis. The first contract, TWN2 (Teutoburger-Wald-Netz), is for a passenger concession from December 2017 to December 2032 including a fleet of 19 existing Alpha Trains Fl¡rt1 EMU train sets (5 S-car and 14 3-car) currently operated by Alpha Trains customer Westfalenbahn on the TWN concession (from December 2007 to December 2017) and an additional 8 new build Flirt3 (financed outside the Security Group). The second contract, HWN2 (Hellweg-Netz), is for a passenger concession from December 2018 to December 2030 which Keolis will operate with a fleet of 23 existing Alpha Trains 4-car Flirtl assets and an additional 5 new build Flirt3 EMUs (financed outside the Security Group). The remaining 2 existing 4-car Flirtl EMUs from the original HWNl fleet have also been contracted with Keolis and a lease contract for a 12year period (from December 2018 to December 2030) was signed in July 2016. All 44 assets will undergo a moderate refurbishment and modernisation program in 201812019, the costs of which will be rentalised and will be amortised over the contracted lease periods. With this remarketing success, Alpha Trains has already secured a contracted 100% utilisation of the electric passenger fleet for the next 5 years. A big and important project in 2016 was the project "Red Motion", the acquisition of a fleet of 89 used DMUs and EMUs train sets together with the attached lease contracts. The "Red Motion" trains are being used in three large concessions in Germany, 26 Alstom Lint 41 DMUs in the DieselnetzAugsburg concession, 28 Alstom Lint4l DMUs in the Niers-Rhein-Emscher concession and 35 Alstom Coradia Continental EMUs in the Regio S-Bahn Bremen/Niedersachsen concession. All concessions are currently being operated by Transdev subsidiaries. Another important project in 2016 was the Dieselnetz Nordwestsachsen (DNWS) concession, which started in June 2016 and will run until December 2025.|n June 2015 the PTA ZVNL awarded a contractto Alpha Trains forthe provision of 10 used DMUs forthis concession. Subsequently ZVN L put the operation of the concession out to tender and Transdev Regio Ost was the successful winner. Alpha Trains had to organise a refurbishment of the offered DMUs (5 single-car Regio Shuttles RS1 + 5 3-car Bombardier Talent) and needed to ensure a handover of the refurbished trains between March and June 2016 in accordance with the contracted schedule. All units were duly delivered to Transdev and the DNWS concession started successfully on 11 June 2016. At the same time Alpha Trains was able to support existing customer NEB (Niederbarnimer Betriebsgesellschaft mbH) with an urgent demand for vehicles, caused by the unavailability of NEB's newly ordered DMUs from the Polish manufacturer Pesa at concession start date in December 2015. Alpha Trains used every available DNWS DMU (i.e.units waiting for refurbishment or following refurbishment) for short term leases to NEB until we were obliged to hand over the assets to Transdev for the DNWS concession. ln doing so Alpha Trains fully optimised fleet utilisation and income generation and was able to further strengthen the customer relationship with NEB. ln December 2016 the decision about the future operator of the Emscher-Münsterland-Netz concession was taken by the responsible PTAs. For the period between December 2018 to December 2021 NordWestBahn ("NWB") will continue to operate this concession. Alpha Trains is leasing a total of eight Bombardier Talent 3-car DMUs to NWB. With this new lease contract Alpha Trains has already secured a contracted 100% utilisation of the dieseldriven passengerfleetfor the next 3 years. Alpha Trains Group S.à r.l. lnvestor Report, Year 2016 Page 5 of 20 The remarketing of the Dieselnetz Augsburg fleet - currently contracted until December 2019 - also started in 2016. Due to delays in the tender process of the concession the decision about the future operator for a period of 2 to 3 years only will be taken by mid-2017. ln December 2016 Project Limestone - the integration of the 63 Alpha Trains EMIL S.à r.l. (EMIL) and Alpha Trains STS S.à r.l. (STS) Electric Multiple Units (EMUs) into the Security Group - has been concluded successfully. All EMIL and STS EMUs were delivered in 2015 and are in daily operation since December 2015 without any major issues. ln 2016 three incidents with Alpha Trains'vehicles occurred which need to be reported. Firstly, one 3-car Talent DMU caught fire and burnt out completely. All passengers and the train driver were able to leave the train early enough to avoid injury. An independent expert determined the asset to be a total loss and Alpha Trains received the insurance proceeds in May 2016. Secondly, a tragic accident involving two Stadler Flirt EMUs occurred. Reportedly caused by a series of spurious actions on the part of the DB Netz traffic controller, two Flirt EMUs (one 3-car and one 6-car) simultaneously entered a single line track on the E-Netz Rosenheim network. ln a curve close to Bad Aibling station the two EMUs suffered a head-on collision resulting in 12 fatalities and 89 injuries. The two trains are heavily damaged and it is planned that these two trains will be replaced by the lessee Transdev with newly built Stadler Flirt EMUs by the end of 2017. This event does not alter the lease rate payments to us. Thirdly, one Siemens Desiro DMU - operated by RegioJet in the Slovak Republic - was involved in a level crossing accident with a lorry. Due to the impact the DMU derailed and was heavily damaged. Four peòple were seriously injured, 36 people were slightly injured. lt is doubtful that the train can be repaired at reasonable cost, hence a total loss with insurance proceeds is the most probable outcome. Alpha Trains Group S.à r.l. lnvestor Report, Year 2016 Page 6 of 20 2016 was a very good year for the Alpha Trains locomotives business. The average utilization for the fleet was 94% (same as in 2015) thanks to the high utilization levels achieved for both the diesel fleet, which achieved 92% (90% in 2015) and the electric fleet, which achieved 97% (98% in 2015). These utilization rates are remarkable given the large number of heavy maintenance events thatthe fleet undenryent during 2016 and the remarketing events (please see the section on Asset deliveries and re-deliveries for more details). During 2016, Alpha Trains sold 3 G2000 locomotives on an opportunistic basis in the French market and purchased 16 new build locomotives with long quality leases already signed and active as soon as the assets will be delivered. .1 ) )r1,t During 2016, the "Western-Southern" sales region of Alpha Trains continued the high performance which was experienced during 2015. This resulted in very high utilization rates in almost all countries of the region (France, Belgium, Luxembourg, ltaly, Spain and Portugal) and subsequent high financial performance.