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
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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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
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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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
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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General overview of financing principles/regimes
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
Financing principles/regimes
for more details consult for example the special edition of Regionale Schienen 2006/I
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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General overview of financing principles/regimes
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
Financing principles/regimes
for more details consult for example the special edition of Regionale Schienen 2006/I
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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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 structures and mechanisms
Cost model was developed
• to evaluate economic effectiveness
• to indicate differences between bus-modes
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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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
Cost structures and mechanisms
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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While most of cost elements are equal, some differ substantially
Cost structures and mechanisms
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
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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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
Cost structures and mechanisms
Capital cost of vehicles
0
50
100
150
Diesel-bus Trolleybus
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]
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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Depending on lifetimes trade-offs within vehicle cost are positive for trolleybuses
Cost structures and mechanisms
Vehicle cost - comparison
Vehicle costindex =100%
0
50
100
Diesel-bus Trolleybus
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.
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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Trolleybus systems profit from strong development of diesel-price
Cost structures and mechanisms
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]
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Management of Costs and Financing
Presentation
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Infrastructure investment has to be justified by intensive use, also
Cost structures and mechanisms
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
Diesel-bus Trolleybus
vehicles
infrastructure
index =100%
Trolleybusinfrastructure
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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For vehicle maintenance the situation is still not clear
Cost structures and mechanisms
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
Diesel-bus Trolleybus
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
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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Looking at the cost mechanisms the do's and don'ts are getting obvious
Cost structures and mechanisms
[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"
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Management of Costs and Financing
Presentation
Salzburg, Austria20 April 2006
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TrolleybusWorkingGroup
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
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Management of Costs and Financing
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