Session 1: Management of Costs and Financing 1 st International Workshop to Push Forward Your Trolleybus System Presentation Salzburg, Austria 20 April

Session 1:Management of Costs and Financing

1st International Workshop to Push Forward Your Trolleybus System

Presentation

Salzburg, Austria20 April 2006

Member of

Arnulf Schuchmann, Managing Partner

© S2R Consulting 2006Page 2

Management of Costs and Financing

Presentation


P:/.../Contribution_Intern_Trolleybus_Salzburg_20042006_

TrolleybusWorkingGroup

Content

Management of Costs and FinancingContent:

General overview of financing regimes/principles

Cost structures and mechanisms

Differences between Trolley and Diesel-bus

Cost modelling and simulation

Summary and conclusion



Presentation




General overview of financing principles/regimes

Subsidies from General Tax Revenues

• most common form of financing public transport infrastructure

• Germany: part of tax imposed on gasoline and oil products (in 2002 about 4%, 1,7 billion €), financing of up to 65% of investments, complementary subsidies from local governments

• Japan: "Railway Development Fund" since 1972, financing of about 36% of construction cost for railway infrastructure; central and local governments also provide a subsidy by reimbursing interest payments above 5% p.a.

Subsidies from earmarked Taxes

• dedicated to investments into public transport infrastructure and to finance operating costs

• Norway: money from toll systems for investments

• France: "Versement Transport" as a special charge on salaries (between 1% and 2,2%); imposition and assignment is managed locally

Financing principles/regimes

for more details consult for example the special edition of Regionale Schienen 2006/I



Presentation





Value Capturing, absorption of enhancement in value

• financial contribution of beneficiaries of public transport (particularly by increase of property value)

• Hongkong: extension of metro line 4

• prerequisites are difficult to establish: identification of real beneficiaries, calculation of real enhancement in value, legal and administrative framework

Government property tax revenues for companies

• Seoul: traffic tax on owners of commercial entities that generate excessive commuting traffic

• Kobe: developers of land in station areas have to bear part of rail construction costs and to allocate land for rail use

• Tokyo: property owners share the costs for walkways connecting stations to nearby buildings





Presentation





Involvement of private investors (PPP)

• London: reinvestment and operations of metro infrastructure for 30 years by private consortia

• Rostock: BOT-model for Warnow-tunnel

• appropriate risk-sharing is essential for successful PPP-models





Presentation




Aim: To objectify the discussions on the most cost effective bus-mode

Comparison of cost structure and mechanisms of trolleybus versus diesel-bus systems

Based on experiences from project work and real figures

• typically mixed systems (trolley- and diesel-bus)

• data from Austria, Germany and Switzerland

• in-depth analysis of cost and performance in order to- identify cost saving potentials

- initiate restructuring processes

- elaborate business strategies

- carry out due diligences for M&A-processes

- certify public subsidies as legally allowed


Cost model was developed

• to evaluate economic effectiveness

• to indicate differences between bus-modes



Presentation




Costs are structured along the value chain

Vehicles/Buses

capital cost (depreciation, interest)

traction energy/diesel, lubricants

maintenance & daily services

Driver

driver costs

training, education

service clothing

Traffic Management

operational management, planning, driving school , ...

depot management, disposition

traffic control

Overhead

commercial processes

human resources

management processes...

Customer Management

marketing & sales

ticket inspection

information & safety

Infrastructure

stations

power supply & catenaries

buildings and depots

Management of subcontracted Driving Services

subcontractor cost

superior management of traffic

intern

al labo

ur

external

labo

ur




Presentation




While most of cost elements are equal, some differ substantially


0

20

40

60

80

100

Diesel-bus Trolleybus

Overhead

Infrastructure

Customer Management

Traffic Management

Vehicles/Buses

Drivers

Total costindex = 100%

26%32%

1% 7%

detailed analysis of different cost elements

evaluation of trade-offs

• capital cost• traction energy/

diesel• maintenance & daily

services



Presentation




0,0

1,0

2,0

3,0

0,1 0,3 0,5 0,7 0,9 1,1 1,3 1,5

0

10

20

30

40

50

60

70

80

8 10 12 14 16 18 20 22 24 26 28 30

Trolleybuses should be used intensively in order to gain economic advantages


Capital cost of vehicles

0

50

100

150


body, interior

engine, technology

Investmentindex =100%

Capital cost

Trolleybus

Diesel-bus(lifetime=14 years)

"long lifetime"

[1.000 €]

lifetime [years]

Trolleybus

Diesel-bus

"heavy mileage"

[€/km]

accumulated mileage [mill km]



Presentation




Depending on lifetimes trade-offs within vehicle cost are positive for trolleybuses


Vehicle cost - comparison

Vehicle costindex =100%

0

50

100


capital cost

maintenance & daily services

traction energy,diesel

0

10

20

30

40

50

60

70

80

0

10

.00

0

20

.00

0

30

.00

0

40

.00

0

50

.00

0

60

.00

0

70

.00

0

80

.00

0

annual mileage [km]

[1.000 €]

Capital and tractionenergy cost

Trolleybus

Diesel-bus

"intensive use"

the more intensive the use of trolleybuses the cheaper they are

advantage in traction energy dominates above threshold of approx. 55.000 km p.a.



Presentation




Trolleybus systems profit from strong development of diesel-price


Diesel-price development

year

the higher the diesel-price the better economic situation for trolleybuses

decreasing of diesel-price can not be expected in future

0

20

40

60

80

100

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

[€/hl]



Presentation




Infrastructure investment has to be justified by intensive use, also


substation

infrastructure = predominantly fixed costs

vehicle and infra-structure cost are strongly correlated with the utilisation of the system

Initialinvestment

250 K€ p. km

430 K€ p.unit

overhead contactwire system

Total annualcost

17,0 K€ p. km

23,6 K€ p. unit

Share ofcapital

78%

82%

0

50

100

110


vehicles

infrastructure

index =100%

Trolleybusinfrastructure



Presentation




For vehicle maintenance the situation is still not clear


specialized work forces for trolley-buses needed

since less than 100% of maintenance work depend on utilisation, intensive use of buses is meaningful0

50

100

110


maintenance ofvehicles

index =100%

?

According to a new script of VDV (881) the trolleybus needs more maintenance attention than a diesel-bus

Looking at the robust traction technology of trolleybuses this may amaze someone

Real project data draws no clear picture between diesel- and trolleybus



Presentation




Looking at the cost mechanisms the do's and don'ts are getting obvious


[Mill. €]

0

5

10

15

20

25

30

0 20 40 60 80 100 120 140

variable cost

fixed cost

5,10

5,20

5,30

5,40

5,50

5,60

5,70

5,80

75 80 85 90 95 100 105 110 115 120 125

trolleybus with higher proportion of fixed costs than diesel-bus

hence, stronger effect on fixed cost if services are increased

in case of tight schedule and short headways, a trolley-bus can realise its advantages

particularly with regard to fuel prices the economic situation gets better for trolleybuses

service provided [index=100]

service provided [index=100]

total cost [€/km]

"intensive use"



Presentation




Summary and conclusion

Trolleybus systems are not necessarily more expensive than diesel-bus systems

A high utilisation in terms of services provided is essential for competitive unit cost (€/km)

By this the high proportion of fixed costs due to capital costs of vehicles and infrastructure are distributed

Cost advantage of a trolleybus system appears in traction energy in particular

This will continue to be an advantage in future if diesel-prices are increasing further

From ecological point of view the trolleybus is the clear favourite

Additionally experiences show that trolleybus systems generate more revenues due to higher ridership ("railway-bonus")

Do not use diesel-buses driving under an existing overhead wire system (trolleybus infrastructure), because total costs of services will increase

Summary andconclusion



Presentation




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Documents

Session 1: Management of Costs and Financing 1 st International Workshop to Push Forward Your Trolleybus System Presentation Salzburg, Austria 20 April