Dutch target rail growth

INTRO: The Dutch government is investing heavily in expansion of capacity on the rail network to accommodate traffic growth. With bidding for rights to run high-speed services due to resume in April, Chris Jackson asked Transport Minister Tineke Netelenbos how she sees the Netherlands railways developing over the next few years

REJECTION in November by Transport Minister Tineke Netelenbos of Netherlands Railways’ proposals to operate high-speed services on HSL- Zuid is just one more high-profile development in a rapidly changing rail market. Since NS was granted a measure of commercial freedom in 1995, the Dutch rail network has undergone almost constant change. It has seen restructuring of infrastructure management, the start of open access competition from third party freight operators, and experiments with competitive passenger services by Lovers Rail - which collapsed spectacularly last year.

When she took over the Transport portfolio in September 1998, Mrs Netelenbos inherited various experiments in rail deregulation and competition. Since then she has looked at alternative strategies, including competitive tendering, flotation of NS, and harnessing private funding for infrastructure investment. She has now come to the conclusion that hands-on government control of rail policy may be essential to achieve social objectives, which may preclude giving the railways more independence.

Passenger and freight traffic continue to grow steadily, yet the Netherlands remains a black spot for road congestion. Thus rail investment is tightly focused on increasing capacity and shifting traffic from other modes.

’In 1995 rail had a 9·7% share of the passenger market, equivalent to 16·7 billion passenger-km. In the three following years passenger-km increased by 3·3%, 6·5% and 2·7% respectively. In the 15 years between 1995 and 2010 we anticipate total growth of between 29 and 37%.

’By contrast, rail has a very small share of the Dutch freight market, compared to other European countries, as the high density of the inland waterways network gives this mode a great advantage. Rail tonnage has started to rise substantially in recent years, from 19·6 million tonnes in 1995 and 1996 to 22·9 million in 1997 and 25·4 million in 1998. We expect rail’s market share of freight tonnage will increase from 2·5 to 3·5% by 2010.’

Infrastructure separation

Given the EU’s efforts to revitalise international rail freight through competition, including the separation of infrastructure management from operation, how far does Mrs Netelenbos intend to transfer control away from NS?

’At the moment infrastructure management (Railinfrabeheer), operator licensing and capacity management (Railned) and Traffic Control (Verkeersleiding) are separate bodies within the NS holding group, although the government is responsible for policy making in these areas. By 2001 these bodies will be organisationally, legally and financially separated from NS, which should guarantee neutral and non discriminatory access to the network.’

There have been suggestions that NS could be floated on the stock market around 2003-04. This would probably require the company to be given a long operating concession with a strong and protected revenue stream. Several subsidiaries, such as NedTrain and NS Technical Research, are being restructured as stand-alone operations, able to compete for business throughout Europe. So is the minister still considering full privatisation?

’Although the government still owns all the shares of the NS Group, in 1995 NS was given a relatively high degree of independence in managing its business. Examples include setting its own investment strategy, raising finance, and adjusting staffing levels. NS also has some freedom in setting fares and service patterns.

’At the moment the government does not envisage selling off any part of the NS holding. Bringing in private investors could have positive benefits, but it could only be done if the market conditions are clear and positive enough. This would include, for instance, completing the separation of the infrastructure management units.’

Investing in infrastructure

State investment in the rail network continues at a very high level. What are the main objectives, and how much of the funding will be raised from the private sector?

’A key target of our transport policy is to increase the quality and capacity of the rail network, both to generate additional passenger and freight traffic and to accommodate this growth. We anticipate that growth will be concentrated on the main international passenger and freight routes, on important national corridors and in metropolitan areas, especially the Randstad.

’In 1998 the government agreed a 10-year investment plan which set new priorities for infrastructure development and financing. Rail investment includes new links, extra tracks, station improvements, and urban light rail lines. Key projects include HSL-Zuid linking Amsterdam, Schiphol Airport, Rotterdam and the Belgian border, the Betuwe freight corridor from Rotterdam to Arnhem and the German border near Emmerich, the next phase of the Flevo line from Lelystad to Zwolle, and a few "shortcut links" to carry direct trains to and from Schiphol.

’Additional tracks are planned on major routes serving the metropolitan areas within the Randstad. This includes extra tracks between Amsterdam and Utrecht to carry high-speed services to and from Germany. They will also carry domestic inter-city services, releasing capacity for more frequent local trains. We are also looking at harnessing new technology such as the BB21 train control system (RG 9.99 p587) to create extra capacity on the existing network.

’Further investment is targeted on upgrading stations, opening new ones, and creating better interchanges. This is closely integrated with town planning around stations, especially those to be served by high-speed trains or in other big cities. There may be scope for more public-private partnerships to finance and manage these schemes.

’At the same time, other projects are starting to increase the capacity and quality of local public transport and better integrate it with the national rail network. Examples include metro, tram and bus improvements in the Amsterdam-Schiphol region, Rotterdam, Den Haag and Utrecht, notably the new north-south metro line in Amsterdam, and extension of the east-west metro in Rotterdam.

’An important element is the expansion of light rail. Six projects have been selected, including parts of the planned ’Randstadrail’ network linking Den Haag to Rotterdam, the ’Randstadspoor’ lines around Utrecht, a new line from Leiden to Katwijk aan Zee, and conversion of the existing railway between Gouda and Alphen aan den Rijn.

’Total investment in rail infrastructure in 1999-2010 will be around 32bn guilders. Of this, 60% is reserved for mega-projects such as HSL-Zuid and the Betuwe route. We expect that it will be possible to attract a few billion guilders of private investment, but exactly how much is still subject to discussion. Some funding will come through track access charges, which will be introduced this year and gradually increased until 2005, when the operators will pay a total of 300m guilders a year for infrastructure maintenance.

’A new high-speed link serving the northern part of the Netherlands is currently being studied as part of a national transport plan for 2010-20. Private promoters have suggested that a maglev link between Amsterdam and Groningen could be largely funded by the private sector.’

Competition and open access

Mrs Netelenbos expects to present a new railways bill to Parliament shortly, liberalising access to the national network. In the light of the Lovers experience, how far is she prepared to allow direct competition in the future?

’The railways bill will lay down new responsibilities for infrastructure management and the railway undertaking. We have already introduced third party access allowing direct competition between freight operators, but we have decided that competition in the passenger sector will be restricted to a tendering procedure.

’For domestic traffic, we plan to introduce a series of concessions, which will give the winning bidder an exclusive right to run passenger services on its designated routes for a limited period - typically six years on regional lines. The government is currently negotiating with NS over the terms of the concession to operate the core network. Concessions for regional routes will be decentralised to the provinces, and we have already identified 33 regional services which are being to put out to tender by 2003.

’The government lays down conditions for the concessions (a minimum level of service, and a principal fare structure). Operators such as Syntus bid for a given level of subsidy to run an agreed schedule of services, and are permitted to keep the money generated from ticket sales. Mutual acceptance of tickets between railway operators is a condition of the agreement between the various regional governments and the rail operators, and this forms an integral part of the concession terms.

’It is not our intention that the national or regional governments should participate in the rolling stock market. However, they can make the granting of a concession dependent on quality factors such as the age and comfort of the rolling stock, which may influence investment decisions by the operators bidding for the concession.’

Freight goes international

The face of rail freight changed fundamentally with the merger of NS Cargo and DB Cargo to form Railion, which took effect on January 1. But to what extent does Mrs Netelenbos expect other operators to apply for rights to operate freight trains on the Dutch network?

’I have confidence in the future development of international and domestic rail freight. The merger of NS Cargo and DB Cargo into Railion complies with my wish that NS Cargo should find a strong partner. It also mirrors developments elsewhere in Europe, such as the co-operation agreement between SBB in Switzerland and FS Cargo in Italy. Railion plans to provide integral European rail transport and logistic services, which I consider an important condition for the necessary modal shift.

’An essential starting point for shifting freight from other modes is that the price/quality ratio of rail transport improves. In the 1999-2000 timetable, NS Cargo and DB Cargo have already started to improve connecting train paths. New operators must have a fair chance to compete, so we will ensure neutral management of the rail infrastructure and capacity allocation. ACTS and Short Lines have been running freight trains in the Netherlands since 1998, and I expect them - and other companies - to obtain a larger market share over the next few years.’

Having rejected open competition for passenger services, the government has yet to find an acceptable formula for running international high-speed services on HSL-Zuid. Entrepreneurs such as Virgin, Vivendi and even Swedish State Railways have all expressed interest in the concession. But fast domestic inter-city trains on the route could put a new operator into direct competition with NS.

’After rejection of the NS bid, the government decided to invite public tenders for a long-term concession to run both national and international high-speed services. We are currently preparing these tenders and holding discussions with the market. This should be completed next month, allowing prequalification of bidding consortia to take place in April and May. The formal bidding will run from June to October, and we hope to select a preferred bidder for detailed negotiations to start in November.

’The exact timing will be decided in April, after we have considered the feedback from the market. This dialogue will also be used to discuss the draft qualification criteria for forming consortia. Each of the main phases in the tender procedure will be concluded with a Go/No Go decision by the Dutch cabinet. There is no direct relationship between the tendering for the operating concessions and the ongoing process to attract private sector investment to fund construction of the line.’

Track access charges

NS Reizigers

guilders

2000 30m

2001 60m

2002 90m

2003 120m

2004 160m

2005 200m

Regional passengers

exempt until 2007

Freight