Alternative drives in the rolling stock sector

Viewpoint of a rolling stock leasing company Alternative drives in the rolling stock sector List of contents

1 Alpha ‘ DNA 3

2 Rolling Stock Financing – The Concept of Operating Lease 8

3 Innovative Rolling Stock Solutions 12

4 Conclusion 18

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 2 ‘ DNA What do we do?

We are a rolling stock leasing company for multiple units as well as locomotives (passenger and freight)

Investor in, owner and manager of rolling stock

Largest private rolling stock lessor in Continental Europe

Flexible leasing options, diverse fleet, cross border

Long-term relationships with customers and suppliers

We embrace liberalisation

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 3 Alpha Trains‘ DNA Traction in 17 European countries

Locations: Alpha Trains locomotives (passenger and freight) ▪ (Headquarters) ▪ Cologne (Passenger & Finance) Alpha Trains multiple units ▪ Antwerp (Locomotives) ▪ Madrid (Representative Office) ▪ Paris (Representative Office) Employees: ▪ ~110 employees, including fleet engineers and commercial managers ▪ 11 nationalities

Current Rolling Stock Fleet:

416 363 Multiple Locomotives Units

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 4 Alpha Trains‘ DNA Leasing of multiple units and locomotives in Continental Europe

Spectrum of Continental European Rolling Stock

Passenger transport universe Freight transport universe

Long-distance High Speed coaches Trains (DMU) Alpha Trains - Regional Trains (EMU) Alpha Trains - Electric Locomotives Freight wagons Regional High Speed Alpha Trains - Regional Trains (DMU) coaches Trains (EMU) Alpha Trains - Diesel Locomotives

Talent 2 kW Talent 2 Desiro 6,000 A large and ML TRAXX AC/DC - TRAXX MS diversified asset Flirt portfolio with 5,000 BR 145 increasing share Coradia Kiss of electric Continental 4,000 assets KISS Desiro Euro 4000/4001 Classic 3,000 (c. 78% electric G2000 / ER 20 / Class 66 Talent by NBV) 2,000 Lint G1206 41 RS1 G1000 Seating capacity 1,000 100 200 300 400 600 Shunting and Medium Mainline Cross short distance distance border

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 5 Alpha Trains‘ DNA Fleet Diversity – Multiple Units

Stadler RegioShuttle RS1 DMU 2 EMU Stadler Flirt 3 EMU

DMUs EMUs

Siemens Desiro Classic DMU Bombardier Talent DMU Mainline EMU Double Decker Stadler KISS EMU

Alstom Lint 41 DMU Alstom Coradia Continental EMU Stadler Flirt 1 EMU

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 6 Alpha Trains‘ DNA Fleet Diversity - Locomotives

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 7 Rolling Stock Financing Rolling Stock Financing in the German regional railway markets

Besides purchasing, the most common type of rolling stock financing in the competitive German regional railway market is Operating Lease

▪ The operating company participates in tenders for regional railway concessions and leases trains from an operating lease company (like Alpha Trains) for the duration of the transport contract. ▪ At the end of the concession contract, the train operating company hands the assets back to the leasing company or extends the lease contract (in case the operator is awarded the follow-up contract on the concession). ▪ This a long-term proven concept for rolling stock financing in .

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 8 Rolling Stock Financing Risk management over the asset’s life cycle

Asset life 25–30+ Years

Freight contracts (1 to 5 years) Residual value risk Concession contracts (passenger trains) (up to 15 years)

Risk Management

Leasing Leasing • Liquid assets contract contract • Multi country homologation • Modification cost & speed Leasing Leasing • Standardised rolling stock contract contract • Free market access

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 9 Rolling Stock Financing The advantages of leasing – Financial benefits for the lessee

▪ Less capital intensive ▪ Residual risk remains with the lessor ▪ Benefits in the lessee’s balance sheet ▪ Lease terms compliant to underlying transport contracts ▪ For new build assets, Alpha Trains funds all pre- delivery payments ▪ Calculation and budget security for the lessee ▪ Economies of scale decrease lifecycle costs ▪ Maintenance can be organized through the leasing company

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 10 Rolling Stock Financing Benefits for the PTA (Public Transport Authority)

Financial Strength ▪ Financing of large-scale investments in rolling stock ▪ Investment volumes of up to approx. € 500 million per project ▪ Investment grade rating of Alpha Trains ▪ Track record of more than 15 years ensures reliability

Risk Assumption ▪ Alpha Trains bears remarketing, employment and residual value risk ▪ Financing support of PTAs in the form of reuse guarantees, capital service guarantees etc. is not necessary ▪ Efficient tender procedures, no controlling groups, few interfaces ▪ Enhancing competition due to leasing to private and public railway companies and international transport companies ▪ Alpha Trains enables the development of a functioning market for existing modern rolling stock; in contrast to new-build vehicles they are available also for short-term leasing starting from 1 month and make rail replacement services redundant

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 11 Innovative Rolling Stock Solutions General Conditions in the German Railway Market

• ~40% of all railway lines in Germany are not electrified, especially secondary lines

• 90% of all non-electrified lines in Germany are shorter than 70 km, 53% are shorter than 40 km

• Considerable investments are necessary for the electrification of further lines, profitable only with regard to a corresponding sufficient volume of traffic.

• As a consequence of the German car emissions fraud scandal, there are political efforts to reduce diesel traction and increasingly support alternative drives

In regional railway transport, emission free trains significantly gain in importance

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 12 Innovative Rolling Stock Solutions Tenders / Orders of Innovative Multiple Units

1) Weser-Elbe-Netz concession Type of drive Hydrogen 2 Manufacturer / Asset type Alstom Transport / 14 x iLINT Start of operation Q4/2021 H2 1 2) XMU concession H 2 Type of drive Battery-electric Manufacturer / Asset type / 55 x FLIRT3 Akku Start of operation Q4/2022

3) Taunusnetz concession H2 Type of drive Hydrogen 3 Manufacturer / Asset type Alstom Transport / 27 x iLINT Start of operation Q4/2022

4) Netz 8 Ortenau concession Type of drive Battery-electric 4 Manufacturer / Asset type Siemens Mobility / 20 x Mireo BEMUs Start of operation Q4/2023

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 13 Innovative Rolling Stock Solutions First experience with innovative rolling stock (tenders)

First prototypes are in operation Tenders are adjusted / postponed Subsidies for innovative trains

• Two Alstom iLINT protypes are in test • Emscher-Münsterland (EM) concession • In the budget of the Federal Ministry of operation on the Weser-Elbe concession − Planned concession term: Dec 2021 – Transport and Digital Infrastructure (BMVI), since September 2019, homologated for Dec 2032 52.7 million euros more funding will be regular passenger transport services available for sustainable drives in rail − Operation of hydrogen multiple units was transport until 2022. • Stadler FLIRT Akku was presented in intended October 2018. • The federal government supports the − Due to a lack of economic viability, the investment into 27 iLINTs for the • Siemens’ ÖBB Cityjet eco BEMU achieved tender was discontinued approval for passenger operation in Taunusnetz concession by assuming 40% in August 2019 • Niederrhein-Münsterland (NM) concession of the additional vehicle costs incurred in comparison to diesel multiple units. • Bombardier’s Talent 3 BEMU to be tested − Follow-up concession of EM concession in Germany from late-2019 as well as another diesel concession • Alstom received the first order of its − Currently expected start in Dec 2028 Coradia Continental BEMU in September − Instead of HMUs, the tender now 2019 requires the operation of BEMUs − Infrastructure will be upgraded in order to enable operation of BEMUs (partial electrification, charging points)

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 14 Innovative Rolling Stock Solutions Framework conditions in the Czech railway market

Basic Characteristics of the SŽDC Network

Total length of tracks 9,406 km

Electrified tracks 3,216 km (~34% of total length)

Single line tracks 7,392 km (~79% of total length)

• Less than 35% of the Czech railway lines are electrified. A large increase in the degree of electrification would be associated with high costs. • Electrification usually not economical for railway lines with low demand (share of single track lines very high). • Czech Ministry of Transport supports building up of hydrogen filling stations.

• All in all, framework conditions in the Czech railway market make the use of innovative multiple units a reasonable option (type of innovative depends on the local infrastructure regarding hydrogen tank stations and distance between electrified lines)

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 15 Innovative Rolling Stock Solutions Risks regarding the Financing of innovative multiple units

Assets are not delivered in time Assets offer insufficient reliability Risk of high prices for hydrogen

• Mostly newly developed train • No practical experience with • The economical operation of types, although based on regard to the reliability of hydrogen multiple units existing platforms battery racks and fuel cell depends heavily on the price • Manufacturers do not (yet) systems for hydrogen have extensive experience • Maintenance efforts and costs • High hydrogen prices and or regarding the production of in daily operation still to be limited availability of hydrogen innovative multiple units assessed tank stations could reduce remarketing possibilities

High original prices for BEMUs / Usability depends on local HMUs infrastructure

• In the early market • There have to be certain local introduction, prices for requirements with regard to an innovative multiple units will be economical operation of more expensive compared to BEMUs and HMUs (existing incumbent technologies hydrogen clusters, length of electrified lines)

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 16 Innovative Rolling Stock Solutions Possibilities to Mitigate the Risk of Financing of innovative Rolling Stock

Re-admittance guarantee (innovative rolling stock Longest possible length of transport contract (at least offered in tender fulfil the requirements of the follow-up 10 years) tender of the concession)

Possibilites to mitigate risks of financing of innovative rolling stock

Agreements between the PTAs to align their BEMUs should be designed to enable an operation as requirements for innovative rolling stock in tenders (in a pure EMU / possibility of coupling of HMUs, BEMUs order to improve remarkability of the assets) with traditional DMUs or EMUs

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 17 Conclusion

There is no perfect solution for all infrastructure conditions • For the operation of BEMUs, partially electrified sections and charging points are needed • The operation of HMUs is especially economically viable in regions with long sections of non- electrified lines as well as existing local hydrogen infrastructure

Diesel multiple units are still needed in the transitional period • Modern DMUs are needed to bridge the time gap before the necessary infrastructure is prepared and innovative multiple units are sufficiently tested in daily operation and offer the expected reliability

PTAs have to mitigate risks regarding the financing of innovative rolling stock • Long initial length of transport contract (at least 10 years) • Re-admittance guarantees • Alignment of vehicle requirements in tenders

International Conference - Electromobility on the railway 2020 - 2030, 10.10.2019 18