2013 Management Report and Financial Statements and Financial Report 2013 Management Deutsche Bahn AG 2013 Management Report and Deutsche Bahn AG Bahn Deutsche Financial Statements DB2020 – Our compass, even in challenging times Organizational structure DB Group Deutsche Bahn Group Compliance, Privacy, Infrastructure and CEO and Chairman CFO Legal Affairs and Human Resources Rail Technology Services Group Security Business units DB Mobility Logistics sub-group DB Netze Track Compliance, Privacy, DB Netze Stations CEO and Chairman CFO Legal Affairs and Human Resources Group Security DB Netze Energy Rail Technology Passenger Transport Transport and Logistics Services Business units Group functions DB Bahn Long-Distance DB Schenker Rail DB Services DB Bahn Regional DB Schenker Logistics Service functions DB Arriva DB2020 Strategy Our three dimensions Our four strategic directions Resource preservation/ emissions and Environmental noise reduction Eco-pioneer Cultural change/ employee satisfaction Customer and quality Social Profitable growth Top employer Economic Profitable market leader K Contents 2 CHAIRMAN’S LETTER 7 MANAGEMENT REPORT 73 FINANCIAL STATEMENTS 107 REPORT OF THE SUPERVISORY BOARD K 2 DEUTSCHE BAHN AG 2013 MANAGEMENT REPORT AND FINANCIAL STATEMENTS Chairman’s letter A A DR. RÜDIGER GRUBE CEO AND CHAIRMAN OF THE MANAGEMENT BOARD OF DEUTSCHE BAHN AG K TO OUR stAKEHOLDERS Chairman’s lETTER 3 This year’s Annual Report is marked by a special anniversary: Deutsche Bahn AG pub- lishes its 20th annual balance sheet. The rail reform of 1993 cleared the way for the founding of DB AG. The entire rail system was then newly regulated, and tracks, stations and the traction current grid were opened to competition. Twenty years later some 390 customers use our infra- structure – more than ever before, and more than in any other country in the world. The merger of the Bundesbahn and the Reichsbahn into DB AG was and is a showcase of successful reunification of West and East. The excellent results that we have realized after 20 years of rail reform are primarily due to the efforts of the DB team which has grown together. Fortunately, current trends in mobility are also pointing towards rail. However, the next 20 years will not be automatically successful, as shown by the year 2013, which involved many challenges for us. The difficult economic situation in Europe and the moderate growth of the global economy were noticeable in our transport and logistics business, above all in rail freight transport. Additional burdens for DB Group resulted from increased factor costs, above all for personnel and energy, as well as from above-average storm damage. In this challenging year DB Group was nevertheless successful in keeping our reve- nues above € 39 billion; the same level as in the previous year. Operating profit (EBIT) remained below our expectations at € 2.2 billion, while EBIT growth in the second half of 2013 accelerated again due to the slight economic recovery. Demand in passenger transport for rail in Germany grew again. Despite unusually severe weather, 42 million more passengers traveled on our trains. We expect passenger numbers to grow further in the future. This is also because we were able to win over 70 percent of all tenders for regional transport in Germany in 2013. The basic precondition for further growth in passenger numbers is and will remain the quality of our products, upon which we will place our main focus in the future as well. K !!! 4 DEUTSCHE BAHN AG 2013 MANAGEMENT REPORT AND FINANCIAL STATEMENTS We have also increased the number of our employees and trainees. In 2013, DB Group hired some 11,500 new employees, and took on more than 3,800 trainees and dual degree students in Germany alone. We were thus one of the leading companies in Germany in terms of new hires. In addition to the new future collective wage agreement, in spring 2013 we agreed to raise wages in two stages, a one-time payment as well as an increase in the company pension benefits for about 130,000 workers subject to collective wage agreements. All of these steps highlight our ambitious goal to be one of the largest, safest and most attractive employers in Germany. On the other hand, the conclusion of the collective wage agreements were connected for DB Group with additional costs of about € 220 million more than in the previous year. As one of the largest energy consumers in Germany, we were also affected to a large extent by the increased surcharge from the German Renewable Energy Act. This added costs of almost € 60 million for DB Group in 2013 alone. The weather was another large challenge. The long winter with snow and freezing temperatures until Easter added costs of some € 50 million which burdened the result of DB Group already at the beginning of the year. Then came the devastating floods in spring and summer. Floodwaters on the Elbe, Saale and Danube affected many of our colleagues personally, and in certain regions paralyzed rail transport. Alto- gether the floods caused economic damage forDB Group of over € 100 million. Par- ticularly the weeks-long closure of the high-speed line Berlin–Hanover led to significant lost revenues. The hurricane-force storms Xaver and Christian were also not expected, and caused massive cuts in train service in the second half of the year. But there were also positive highlights! The new flagship of ourI CE fleet rolled out. The first four ICE 3 trains from the 407 series were delivered to us at the end of 2013. The entire ICE 2 fleet had previously undergone a new design. Over half of the IC fleet was also already modernized. And in regional transport, in 2013 a further 134 trains of the type Talent 2 have started operating and offer a noticeably more comfortable journey. Furthermore, even more trains and over 100 train stations have been equipped with WiFi, where our customers now receive 30 complementary minutes of Internet access. K !!! !!! TO OUR stAKEHOLDERS Chairman’s lETTER 5 There was also visible progress in infrastructure development: with the city tunnel in Leipzig, six new train stations and the S-Bahn (metro) Mitteldeutschland all became operational. The first tunnels were begun for Stuttgart 21 and the new line construction Wendlingen–Ulm. We also completed the modernization of 247 medium and smaller train stations throughout Germany. Nevertheless, the assurance of stable operations in the rail network will require significantly higher public sector capital expenditures, particularly to maintain the existing infrastructure over the long term. The eco-power campaign in long-distance transport was a further milestone in 2013. Three-quarters of all long-distance trips were operated with 100 percent of the electricity coming from renewable energy sources. We were able to meet not only our customers’ demands but also our own aspiration of being an eco-pioneer. In 2013 we were able to increase the share of renewable energy in traction current to about 35 percent. We have there- ­­by already met the goal we had set for ourselves for 2020. Again in 2013, we were able to expand our international mobility and logistics network as well. With the acqui- sition of the East European business of Veolia Transdev by DB Arriva, the joint venture with Etihad Rail for rail freight transport in the Arabian Peninsula and with new logistics centers in Singapore, Finland, the Czech Republic, the Netherlands and Switzerland, the course has been set for further profitable growth. We were still able to make enormous progress despite a difficult year: we won more passengers, more tenders for regional transport, significantly more new hires and considerably more eco-power in traction current. K !!! 6 DEUTSCHE BAHN AG 2013 MANAGEMENT REPORT AND FINANCIAL STATEMENTS Even in volatile times we adhered strictly to our DB 2020 strategy for holistic and sustainable success of our company. We have set our sights firmly on our three goals: to become a profitable market leader focused on customers and quality, a top employer and an eco-pioneer. This is demonstrated by the many improvements which you will be able to read about in this Annual Report. In the interests of our customers, our employees and our envi- ronment we are firmly resolved to follow further the path of the German rail reform and carry the successes of the past 20 years into the future. Not all of this is in the hands of our company, as the balance sheet for 2013 clearly shows. However, Deutsche Bahn is very well prepared for this journey. Dr. Rüdiger Grube CEO and Chairman of the Management Board of Deutsche Bahn AG Management report 8 OVERVIEW A 43 SOCIAL 67 MANAGEMENT BOARD REPORT 43 Development of the number ON RELATIONSHIPS 9 DB GROUP of employees WITH AFFILIATED comPANIES 9 DB Group structure 43 Implementation of the HR2020 11 Business model program 67 EVENTS AFTER THE BALANCE 14 Corporate strategy and management SHEET DATE 19 Sustainability management 50 ENVIRONMENTAL 67 Cartel proceedings due to 20 Social responsibility 50 Environmental management ticket sales 22 Sponsoring 50 Reduction of emissions 68 Placement of four bond issues 54 Noise reduction 68 Business activities in Malta 23 bUSINESS AND OVERALL 55 Material and resource and Gozo sold coNDITIONS efficiency 68 Regulations regarding infrastructure 23 Economic environment 55 Reduced water consumption financing are still pending 26 Developments in the 56 Conservation measures 68 Additional settlement agreement relevant markets implemented with ThyssenKrupp takes effect 32 Political environment