International Railway Journal - July 2008 - (Page 60)

The last word DB on track for partial flotation in November Hartmut Mehdorn, CEO of German Rail (DB), spoke at the annual conference of Britain’s Rail Freight Group in London on June 4, where he set out his views on the future development of rail transport in Europe and for DB as it gears up to partial privatisation. David Briginshaw was there to record what Mehdorn had to say. Photo: DB AG/Nicole Maskus B EFORE Mehdorn addressed the delegates, I was able to ask him about the planned flotation of DB and its implications, now that the German parliament had given its blessing to the sale of a 24.9% stake in DB’s operating division, DB Mobility & Logistics. “We are on target for flotation by the end of the year,” Mehdorn told IRJ. “We must do it by then because national elections will take place in 2009, and then the knife will come down. “Privatisation will allow us to increase investment - we need a lot of new trains and information systems, for example.” DB invested ƒ6.32 billion in 2007, 4% less than in 2006. The German government expects the flotation, which is due to take place in November, to raise between ƒ5 billion and ƒ8 billion, with two-thirds of the proceeds going to DB. Russian Railways (RZD) has said recently that it is interested in buying shares in DB, so I asked Mehdorn whether this is a concern: “We must not be worried about the colour of the money being invested, but people in Germany are always worried about such things, whether it is the Russians or US hedge funds,” he told me. I also asked whether privatisation would change DB’s strategy. “Privatisation will strengthen our strategy of expansion, not change it,” he said. He explained later that DB’s infrastructure division, now called DB Networks, will continue to belong to DB, but the government will be responsible for investment, as now. Mehdorn refuted my suggestion that there could be a conflict of interest between the privatised and nonprivatised parts of DB. “We will have the same management, and no conflict of interest,” he said. Mehdorn started his presentation by reiterating his belief in integrated railways: “I am a big, big believer in an integrated railway company. At DB, we have one rail system, one leading company, and everything out of one hand.” liberalisation is very healthy. We enjoy competition even if we lose, but sometimes we win. “Efficiency has improved as a result of competition,” Mehdorn continued. “We had to learn how to cope with competition and defend ourselves.” And, as Mehdorn admits, it forced DB to improve the quality of its services. Mehdorn sees major growth for railfreight on long-distance corridors in Europe. He pointed to the development of services to Istanbul, and the recent trial in which a freight train travelled from Beijing to Hamburg in 12 days, half the “I believe liberalisation is very healthy. We enjoy competition even if we lose, but sometimes we win.” Hartmut Mehdorn He pointed to the continuing improvement in DB’s financial performance. “We have increased revenue by one-third in the last four years to ƒ31.3 billion in 2007. Earnings before interest, taxes and special items has developed in parallel to ƒ2.37 billion [10.6% more than in 2006], and we have tripled the productivity of our staff.” Mehdorn explained how DB had had to adapt to the rapidly changing scene in Europe. “We now have more than 350 railway companies operating in Germany, some are in niche markets where we never wanted to go. I believe time of sending freight by ship. This ties in with DB’s strategy of acquiring operators in other countries, such as Transfesa in Spain, and Britain’s largest railfreight operator EWS with its successful French subsidiary, Euro Cargo Rail. Mehdorn said that DB could never have gone into France as DB, because of potential opposition from the strong unions in France, but Euro Cargo Rail has already given DB a 10% market share in France. Transfesa is now being integrated into EWS which will spearhead DB’s railfreight activities in Britain, France, Belgium, and the Iberian Peninsula. “We don’t want to Germanise these networks, we want to meet the needs of our customers,” he told delegates. Mehdorn pointed out that DB’s freight strategy is not purely rail oriented. “We don’t believe we could be successful with rail alone - nobody will bring their freight to our trains; we need to be a onestop solution which is why we are investing in road transport. We are the biggest freight forwarding company in Europe on trucks, but we are also in airfreight. We have to engage our train business as a strong railway backbone, but as part of a logistics chain.” But Mehdorn says there needs to be a level playing field between the modes, as rail operators face big disadvantages regarding taxation and legislation. “The regulators are keen to regulate rail, but not the other modes,” he said. He deplored the fact that train operators fight one another too much to the detriment of the whole industry. He also wants to see greater efforts to solve crossborder difficulties. “We have problems at many borders, where trains are held hostage, such as Germany - Poland, and Poland - Belarus,” Mehdorn said. Nevertheless, he believes railfreight has tremendous potential. “Rail is by far the best solution for reducing CO2 emissions, although there are some problems we must overcome such as noise.” IRJ 60 IRJ July 2008

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International Railway Journal - July 2008 Contents This Month News Transit News Market News/Technology News News Analysis Conference Report Korean Railways Face a Bright Future Korean Exports Surge Ahead Ready to Roll in China Velaro Shows Eastern Promise Are You Sitting Comfortably? Compin Meets New Challenges The Fabric of Society Grinding Out a Result Rendezvous Full Contact List The Last Word

International Railway Journal - July 2008

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