Description of the German rail market

The German passenger rail market is split into Regional and Long Distance. The rail infrastructure in Germany is maintained by DB Netz, subsidiary of Deutsche Bahn (DB). Abellio Germany is currently active in the regional passenger rail market which is still dominated by the state-owned Deutsche Bahn (DB Regio). The German regional rail market has a revenue volume of about €10.5 billion per year and a network covering roughly 670 million train-kilometers per year and has been deregulated since 2003, with responsibility for its organisation assigned to the 16 federal states of Germany. Each state has its own way of managing its regional market. This has led to the creation of 27 regional passenger transport authorities (PTAs), each of which can adopt a different tendering regime, with a substantial flow of potential concessions. There is a constant flow of tenders into the market, and this will continue well into 2019 and 2020. Next year the networks S-Bahn Berlin and amongst others some smaller networks like Raum Karlsruhe 7b, Expresskreuz Niedersachsen/Bremen and Heidekreuz/Weser-Lammetal will come to the market. A start of the RE13 tender process (including cross-border extension from Eindhoven to Düsseldorf) in 2019 is legally possible, since VRR has announced in August 2018 the intention to tender this line with a contract start in December 2025. The tender process may start in August 2019 earliest and Abellio Germany expects a prequalification stage will be the initial stage of the tender.
There were two particular challenges in the German rail market in the past year relating to major railway construction works and new staff tariff agreements.
The Round Table Management of Construction Sites was founded largely on the initiative of Abellio and the Mofair Association. The aim was to develop measures for more traffic, better quality and reliability in order to reduce the impact on passengers during the construction phase as much as possible during the urgently needed modernisation of the German rail network. The final report with measures for improvement was publicly handed over to the Federal Minister for Transport and Digital Infrastructure in June 2018.
In addition, reduction of working hours and scheduling flexibility in new tariff agreements resulted in a need for more employees (mainly train drivers and conductors). Due to low unemployment rates in Germany it is difficult to find sufficient additional employees.
Abellio Germany has finalised mobilisation and started operation of 2 new concessions in December 2018, being the Rhein-Ruhr-Express (RRX) in North Rhine-Westphalia and the Dieselnetz Sachsen-Anhalt (DISA) in Mitteldeutschland. Whereby the start of the RRX contract has been successful, Abellio faces some challenges regarding the DISA concession due to a lack of sufficient train drivers. Measures have already been initiated to stabilise operations.
In Germany, Abellio only has gross contracts with the PTAs, which means that Abellio Germany is paid for its service per train kilometer. The revenue/fare box risk is allocated to the PTA. On top, inflation risk is hedged by appropriate escalation formulas in the contracts with the PTAs. Thus, the risk profile of gross contracts is relatively low.

Abellio Germany rail concessions

In Germany, Abellio continues to operate in 3 regions, together operating 8 concessions. In North Rhine-Westphalia (NRW) it operates with Abellio Rail Nordrhein-Westfalen GmbH 5 rail concessions, being Emscher Ruhrtal-Netz, Ruhr-Sieg-Netz, Der Müngstener, Niederrhein-Netz (NRN) and the Rhein-Ruhr-Express (RRX). In North Rhine-Westphalia and Lower Saxony it operates with WestfalenBahn GmbH the Emsland- und Mittelland-Netz concession. In Mitteldeutschland it runs with Abellio Rail Mitteldeutschland GmbH the Saale-Thüringen-Südharz Netz (STS ) and the Dieselnetz Sachsen-Anhalt (DISA). Abellio also continues mobilising the S-Bahn Rhein-Ruhr and Ruhr-Sieg-Netz 2 concession in NRW as well as in southern Germany (Abellio Rail Baden-Württemberg GmbH) lot 1 of the Stuttgarter Netz (STN) in order to start operating these concessions in 2019. The concessions that are currently being operated are.

The concessions in the mobilisation phase are: