2018 ANNUAL REPORT 2018 ANNUAL REPORT MAY 2019 ABOUT SLOVENSKE ŽELEZNICE 4 > Key performance indicators of the Slovenske Železnice Group for 2018 5 Significant events in 2018 6 Significant events after the end of the 2018 financial year 12 > Statement of the Director General 14 > Statement of responsibility of the Management Board 18 > Report of the Supervisory Board 20 > General information 25 > Business model and development policies 28 Implementation of systemic measures 30 Implementation of key internal measures 32 Key stakeholders 34 > Corporate governance statement 36 > Statement regarding non-financial operations 47 TABLE OF CONTENTS BUSINESS REPORT 48 FINANCIAL REPORT 164 > Operating environment 49 1. Consolidated financial statements of the > Performance analysis 50 Slovenske železnice Group 165 Analysis of revenues 54 1.1 Consolidated statement of financial position 165 Analysis of expenses 57 1.2 Consolidated statement of profit or loss 166 > Analysis by activity 58 1.3 Consolidated statement of other Freight transport 58 comprehensive income 166 Fersped 64 1.4 Consolidated statement of cash flows 167 VV-LOG 68 1.5 Consolidated statement of changes in equity 168 Passenger transport 70 2. Notes to the financial statements 170 Traction and Technical Services 81 2.1 Basis for compiling the financial statements 170 PRI management 83 2.2 Significant accounting policies 171 Construction 90 2.3 Notes to the consolidated financial Support activities 92 statements 184 > Analysis of financial position 94 3. Financial risks within the Assets, equity and liabilities 94 Slovenske Železnice Group 214 Financing of non-current investments 96 Interest rate risk 214 > Profit and loss by individual company/activity 98 Currency risk 215 > Collection of statements of financial position of Liquidity risk 218 Group companies as at 31 December 2018 108 Credit risk 219 > Social responsibility 110 4. Capital adequacy management 220 Social responsibility in 2018 110 5. Carrying amount and fair value of financial Employees 111 instruments 221 Traffic safety and regulation 120 > Audit report for the Slovenske Železnice Engagement with the wider environment 121 Group for 2018 222 Environmental responsibility 124 6. Financial statements of > Disclosures by key activity 131 Slovenske Železnice, d. o. o. 225 Quality management system 131 6.1 Statement of financial position 225 Investments 136 6.2 Statement of profit or loss 226 Participation in the international environment 140 6.3 Statement of other comprehensive income 226 Information technology 143 6.4 Statement of cash flows 227 Digitalisation 144 6.5 Statement of changes in equity 228 Research and development 146 6.6 Notes to the financial statements 231 > Management of risks and opportunities 151 7. Financial risks at Slovenske Železnice, d. o. o. 253 > Status and development of corporate Interest rate risk 253 reporting by Slovenske železnice 158 Currency risk 254 > GRI table 159 Liquidity risk 255 Credit risk 257 8. Capital adequacy management 258 9. Carrying amount and fair value of financial instruments 259 > Audit report of Slovenske Železnice, d. o. o. for 2018 260 4 I. ABOUT SLOVENSKE ŽELEZNICE INVESTING IN DEVELOPMENT. NEW ROLLING STOCK FOR A MODERN MOBILITY EXPERIENCE. 2018 ANNUAL REPORT SLOVENSKE ŽELEZNICE 5 > KEY PERFORMANCE INDICATORS OF THE SLOVENSKE ŽELEZNICE GROUP FOR 2018 OPERATING RESULTS (comparison 2012-2018) 2012 2018 EARNINGS BEFORE INTEREST AND TAXES (EBIT) 12,062 36,270 (EUR thousand) NET PROFIT 3,479 29,736 (EUR thousand) NET ROE 2.5 8.7 (%) NET ROA 0.5 4.0 (%) NET FINANCIAL DEBT 378,570 100,468 (EUR thousand) VALUE-ADDED PER EMPLOYEE 35,517 45,176 (in EUR) AVERAGE NO. OF EMPLOYEES 8,543 7,490 GOODS TRANSPORTED 16,181 20,463 (in thousand tonnes) PASSENGERS CARRIED 15,512 13,554 SPECIFIC ELECTRICITY CONSUMPTION FOR TRACTION 21.99 21.17 (kWh/thousand GTKM) SPECIFIC GAS OIL CONSUMPTION 8.37 7.86 (kWh/thousand GTKM) SLOVENSKE ŽELEZNICE ANNUAL REPORT 2018 6 SIGNIFICANT EVENTS IN 2018 March January On 23 March, the Slovenian government and SŽ-Potniški promet, d. o. o. signed Amendments to the Agreement on The Forum Train Europe (FTE) conference on 2018- the discharge of the public service obligation in the inland 2019 timetabling in international transport was held in and cross-border regional transport of passengers by rail Ljubljana. for the period 2017–2031. In accordance with indent 1 of paragraph 2 of Article 15 of the Articles of Association of Slovenske železnice, d. o. o., the Supervisory Board of Slovenske železnice, d. o. o. ap- proved amendments to the business plan in connection with planned transactions between Slovenske Železnice Group companies in 2018, and approved the consolidated text of the business plan of the Slovenske Železnice Group and Slovenske železnice, d. o. o. for 2018, including a fore- cast of operations for the period 2019–2020. Sava Express, a new direct freight train, began running between Slovenia and Serbia. That new product, which was developed at the initiative of Slovenske železnice, provides customers reliable rail transport from Ljubljana, and in transit through Slovenia (Austria, Italy, Germany The evaluation of bids began following the acceptance of and the Czech Republic) to Belgrade and in transit to oth- two binding bids for a strategic partnership in the freight er countries in the region. transport segment. February At our initiative, a meeting was held between the direc- tors of SŽ-Tovorni promet, d. o. o., HŽ Cargo d. o. o., Serbia Cargo, Belgrade, Željeznice Republike Srpske, a. d., Make- donski železnici transport, a. d., Skopje, Macedonia and AD Montecargo. The managing directors of railway freight operators signed a memorandum of understanding. Un- der that memorandum, they agreed that they will strive to work together for the development of new, high-quality services for customers, which will have a positive effect on the development of the region, and for a shift from road to rail. Remzija Cinac resigned from the position of Workers’ Director at SŽ-Potniški promet, d. o. o. on 1 February. Albert Pavlič resigned from the position of Workers’ Di- rector of Slovenske železnice, d. o. o. on 5 March. Nina Avbelj Lekić was appointed to that position on 21 March. 2018 ANNUAL REPORT SLOVENSKE ŽELEZNICE 7 April The Supervisory Board of Slovenske železnice, d. o. o. appointed Zlatko Ratej as new member of the audit Silvo Berdajs resigned from his position as member of committee. the supervisory boards of Slovenske železnice, d. o. o., SŽ-Infrastruktura, d. o. o. and SŽ-ŽGP Ljubljana, d. d. on Gorazd Podbevšek was appointed representative of 11 April 2018. SŽ-Potniški promet, d. o. o. with special power-of-attor- ney on 22 May 2018. The National Assembly adopted the new Railway Safe- ty Act and the Act Amending the Railway Transport Act A project was launched to introduce an integrated busi- (ZZelP-K) on 17 April 2018. ness information system in the transport and logistics activity. The aim of the project is to improve operations SŽ-Potniški promet, d. o. o. signed an agreement on the through the comprehensive management of transport purchase of new trains with Stadler on 17 April. The total processes using upgraded information support. value of the ordered trains (10 single-deck, multi-system electric trains, 10 double-deck, single-system electric A project was also launched in passenger transport to trains and five diesel passenger trains) is EUR 169 mil- introduce Zlatka, an annual pass for passengers over lion, excluding VAT. the age of 65. The pass grants unlimited journeys on second-class trains operating on the Slovenian railway network at a very affordable price. The works councils of companies linked through cap- ital investments and the Works Council of Slovenske železnice, d. o. o. adopted a resolution appointing Zlatko Ratej to the position of member and employee represent- June ative of the Supervisory Board of Slovenske železnice, d. o. o., effective 24 April 2018. In its role as founder of Slovenske železnice, d. o. o., SDH, d. d. was briefed on the annual report of Slovenske The Works Council of SŽ-ŽGP Ljubljana, d. d. appointed železnice, d. o. o. and the Slovenske Železnice Group for Stanislav Debeljak to the position of member of the afore- 2017, adopted a resolution on the use of distributable mentioned company’s Supervisory Board on 24 April 2018, profit as at 31 December 2017, conferred official approval while the Works Council of SŽ-Infrastruktura, d. o. o. ap- on the members of the Management Board and Supervi- pointed Matjaž Hribar to serve as employee representative sory Board of Slovenske železnice, d. o. o., and approved on that company’s Supervisory Board on 25 April 2018. amendments to and the final version of the new Articles of Association of Slovenske železnice, d. o. o. May Additional trains were introduced between Maribor and G The Supervisory Board of Slovenske železnice, d. o. o. con- Pliberk in the Koroška region to promote a tourism link 102-51 firmed the audited annual report of Slovenske železnice, along the Drava cycling route and ensure a safe and sus- d. o. o. and the Slovenske Železnice Group for 2017.g tainable means of travel for commuters. SLOVENSKE ŽELEZNICE ANNUAL REPORT 2018 8 A new range of travel services on Saturdays, Sundays under the public service obligation were defined for the and holidays was launched on 1 June: the IZLETka pass, period 1 January 2018 to 31 December 2018. which facilitates three days of unlimited travel, in second class, on all trains throughout Slovenia. The Supervisory Board of Slovenske železnice, d. o. o. was briefed on the Strategic Development Plan of SŽ-Pot- niški promet, d. o. o. until 2031. The passenger timetable was amended on 19 July due to the start of construction on the Celje–Rimske Toplice line.