Florence March, 19th 2012 European Regulation Forum: View from Operator Dr. Axel Sondermann, Veolia Verkehr Regio GmbH / Veolia Transdev Group Veolia Transdev as very international operator

17.9 Revenue breakdown by geography Others (€bn – 2010/2011) Australia Asia 13.8 North America North/ East Europe South Europe UK + Ireland 8.1 7.5 Benelux 6.3 France 5.2 4.1 3.5 2.9 2.6 2.5 2.5 1.8

Sources: annual reports Veolia Transdev as largest non-historical operator

20 2010-2011 Revenue of main international operators (€bn) 18 Breakdown by main businesses €bn 15 13.8

10 8 7.5 6.3 5.2 5 4.1 3.5 2.9 2.6 2.5 2.5 1.8

0

Bus & Coach Regional Rail / Metro Long Distance Rail Non transportation / other revenue

Sources: annual reports - SNCF: only passenger transportation revenue -: incl. Germany revenue - DB Arriva: only passenger transportation revenue -RATP: incl VTD assets (430m€)

International rail operators

Rail Revenues 2010-2011 €bn 15 15 (including regional & long distance rail) 2,5

10.6

10 1

6.4 12,5 0,5

5 9,6 3.5 2.6 5,9 1 2.2 1.8 1 1.2 1.1 2,5 2,7 0.9 0.8 1,8 1,2 1,2 1,1 0,9 0,8 0 SNCF/ DB Arriva Trenitalia NS Abellio FirstGroup MTRC Go Ahead Stagecoach Keolis VTD NX Keolis integrated Pro forma revenue at 56% incl. 100% Arriva Domestic International

Source : Companies last annual reports Our rail market positioning

Market size and 3,6 7.8 0.2 0.7 0.7 0.8 0.3 100% growth and VTD positioning

50%

0,7 . 2010 open market 0.5 0,3? 0.1 0.3 0% 50% 100% addressed by VTD = Germany Sweden NZ France UK/Ireland 14 €bn USA Asian (50M€) Benelux metros . Est. 2011 VTD revenue: 0.9 €bn 2010 open market VTD Est. 2011 revenue

Source: VTD market review 2011

Source: VTD market review 2011 Regional and suburban rail market players

Train kilometres (in million) as of 2011 operated by different groups: Our competitors are regional or international, publicly owned

0 100 200 300 400 500 600

487,0

Veolia We are #2 rail operator in Germany: 34,6 Transdev “The biggest of the small”

Netineria Trenitalia together with the French fund Cube acquired 19,2 (FS Trenitalia) former German Arriva activities in 2011

Joint venture of Hamburger Hochbahn (51%) and INPP BeNEX 13,6 (49%, London based fund)

Albtalbahn is the public regional operator of the tram-train- AVG 13,5 system in Karlsruhe region

Operating mainly in Northrhine-Westfalia under “Eurobahn” Keolis 12,1 brand Business line: Regional rail Germany

Operators 2010 market share on open market – in % of revenue

 Acceleration of tendering process: 5.6 bn€ to be tendered on the 2011-2017 VTD Others period 16% 22%  Mix (50/50) of net and gross contracts

 VTD leadership position with 16% Benex market share (1st private operator) 10%  Rolling stock of competitors has been mainly financed through operating DB leases so far Regio 12% 40%  Appearing trend of collectivities (Based on Arriva 2009 revenue) supporting the fleet investment by transfering public creditworthiness (issue: vehicles increase debt level of operators and of PTAs)

Source: VTD market review 2011 A strong growth development in Germany – so far

2004 2007 2010

2008 • Bayerische Sales 2010 Important elements Regiobahn 681 M€ (3 M km) Sales 2009 2008 589 M€ 2006 Sales 2007 • MittelrheinBahn • Emscher- 514 M€ (2.6 M km) Münsterland (2 M km) 2010 2008 Sales 2004 • Regio- 2007 • Bundeswehr S-Bahn (sub-contracted) 335 M€ • Märkische- (5 M Regiobahn km) 2006 2009 (1 M km) • Los A • Niers-Rhein- 2010 (3 M km) Emscher 2004 • Frankfurt Los E Niebüll • Itzehoe (3 M km) (3 M km) (1 M km) 1 M km • Mitteldeutsche • Sinsheim 2005 • Husum Regiobahn (1 M km) • Harz-Elbe (1 M km) (3 M km) • Fraport (3 M km) • Waren (0.2 M km) 2009 • Netz West (3 M km) • Ostholstein • Acquisition of Verkehrsbetriebe (4 M km) • Pforzheim (2 M km) Westfalen-Süd (5 M km)

8 • PRESENTATION VEOLIA VERKEHR An important fleet

 Vehicles

- 288 railcars (electric and diesel)

- 24 train sets (with electric and diesel locomotives)

- 1,500 buses

- 19 trams

 Railway network

- 2,820 km operated lines

- 34.6 million train-km

9 • PRESENTATION VEOLIA VERKEHR Veolia Transdev in Germany developing with market opening of regional rail Veolia Transdev Operations Degree of market opening per PTA

NVRS 80-85% Mittelrhein Degree of market opening

81% à 100% 61% à 80% 31% à 60% 0% à 30% BEG 45-50% VRS More than 90-95% planned NVBW 55-60% Less than planned Rosenheim

Source : Wettbewerber Report Eisenbahn 2010/2011

10 • PRESENTATION VEOLIA VERKEHR Efficiency increase after market opening

(in Euro/train-km)

10,00 9,50 € € 1,41 € 2,15 € 2,47 € 3,17 € 7,50 € Gain 4,48 € 15% Gain Gain 23% 26% Gain 33% 5,00 € Gain 47%

2,50 €

0 € DBDB averagegemittelt RegionalRE RegionalRE/RB RegionalRB S-BahnenCom- Averagedurchn. express express/regional muter Einsparunggain

Source : Wettbewerber Report Eisenbahn 2009/2010

11 • PRESENTATION VEOLIA VERKEHR Passenger increase after market opening

Development of passengers since market opening

160

150

 Extension of global 140

market – further 130 Total growth expected Activité GL 120 although population is Aérien intérieur decreasing 110 TER

 Regional rail is 100

booming 90 Passagers transportéd (1994 = 100) = (1994 transportéd Passagers Regional  Stagnation of long Long- 80 distance distance (apart from change of services into regional rail année services) Quelle: BMVBS, Verkehr in Zahlen 2007/2008

Ridership increase after competition or re- launch

Nbr of passengers (Index = 100) • Local marketing 300 300 • Own distribution 200 200 channels

100 100 100 100 • New services

• Intermodal hubs Lausitz- NWB1) RBE1) BOB2) bahn • New vehicles

1) Development 2 years after traffic start 2) 1996-2005

13 • PRESENTATION VEOLIA VERKEHR Regional and suburban rail not really tendered yet

• DB still has long-lasting (~10-15 year) contracts, expiring until 2020. However, many already expire until 2015 • Typical operations in the still closed market segment: - Suburban RER-style systems in , , Munich - Regional express services with 10-20 year-old double-deck coaches - Regional express services with 10-20 year-old tilting trains (high- end DMU) - Line services with other ~10-year-old single deck EMU or DMU • Characteristics of old closed-market contracts of DB - Offensive negotiation position for DB, PTA in defensive position - High subsidy level, very high margins (operational profit > 500 M€ p.a., margin >10%) - Until year 2000, many PTA also have funded rolling stock investments (with 50%-75%) - Net contracts, commercial risk is borne by DB - Limited fleet specification, high flexibility to move around trains within DB fleet - Few other contractual obligations (penalty schemes etc.)

• Only ~55% of market has been opened so far, ~45% are still closed

• Closed market operated by DB: revenue still ~4.0 BN€ Regional and suburban rail market opening

Tender volume 2003-2018 (past, recent and expected volume in train km)

PSC = Public Service Contracts

! We expect open market to raise from ~55% to 100% until 2020. Decreasing number of participants in tenders related to size of tenders

<0,5 m 0,5 m à 1 m à 1,5 m à 2,0 m à 3,0 m à 4,0 m à 5,0 m et train- < 1,0 m < 1,5 m < 2 m < 3 m < 4 m < 5 m plus km train-km train-km train-km train-km train-km train-km train-km

Source : Wettbewerber Report Eisenbahn 2009/2010

16 • PRESENTATION VEOLIA VERKEHR Competition level recently on decline Why are there only a very few private operators left? – What can be done to facilitate their activities?

• High capital intensity • Better financing models so that not all vehicles have to be put in • Incongruency between service the operator‘s balance sheet contract and life time of rail fleet (residual values) • Balanced contract chances and risks • Increasingly operational risks (e.g. delayed certification of new • Better revenues sharing and – vehicles, insufficient grip on especially – clearing systems to revenues, …) ensure liquidity • Non-balanced contracts (e.g. • No penalisation for warranties for non-caused infrastructure-related issues damages) • Access issues in specific areas in which historic operator defends competitive advantages (energy, sales, used vehicles)

18 • PRESENTATION VEOLIA VERKEHR Are public investments, particularly in infrastructure at risk? – What can be done to ensure financing? • Infrastructure costs • Mid-/long-term financing contracts for increase steadily infrastructure with effective quality monitoring (CAGR: 2% p.a.) • Assymetric infrastructure regulation while financing is at (exemption of infrastructure „outside risk competition“) - Expected • Price cap-regulation to increase efficiency of review of funds dominant state-owned infrastructure operator to be used for ordering • Ideally ownership unbundling of operations regional train and infrastructure of dominant railway services (2014) undertakings – at least organisational and financial unbundling together with effective - limited length of regulation financing contract for • Demand-oriented prioritisation of infrastructure infrastructure projects maintenance • Tendering of infrastructure management – not („LuFV“) only maintenance but also operations

19 • PRESENTATION VEOLIA VERKEHR What can be done in terms of vehicle financing solutions to promote competition again? • Privately-run companies have – • The EU should still have an interest in all compared to state-owned railways – member states that railway competition a less competitive position in terms of is also attractive for private players debt and financing costs • Private capital needs to be attracted in • So far, competitors financed train this capital intensive business as public fleet to largest extent by operating funds are running shorter lease • Balance-sheet financing can be only • Limited numbers of lessors/ accepted to a limited extent arrangers but more banks are interested to take part as lenders • Therefore, new financing schemes have to be developed rapidly (facilitation by • It becomes more difficult to conclude EU authorities) – more focus on this operation leases which are IFRS issue than on access and organisational compliant since the banks are not regulation! (an own railway package?) willing to take risks and the auditors are more reluctant in accepting • Good schemes transfer public credit operating leases rating also to private operaters (e.g. by financing guarantees) – thus the • The IFRS rules are under revision. competitive position against state-owned The application date and the precise railways is improved scope not yet finally decided

20 • PRESENTATION VEOLIA VERKEHR Thank you for your attention !

21 • PRESENTATION VEOLIA VERKEHR