Challenges for New Entrants to the Maintenance and Infra Construction Markets of Swedish Railways Timo Riihimäki – VP International Business, VR Track Oy

The Organization of VR Group

President and CEO Mikael Aro

Corporate Development

Safety

Corporate Communications and the Environment

Internal Auditing

Passenger Services

Logistics Infra-

structure Construction

Russia and International

Business

Corporate Services

Human Resources

Finance and Accounting

Corenet (60%)

Avecra (60%)

Board of Directors

Human resources: Mats Karmefjord

Managing Director Joachim Ytterstene

Market: Magnus Ranneberg

Finance: Roger Åkerblom

Maintenance: Christer Ivarsson

Investment: Peter Johansson

Technical: Stefan Karlsson

Business development:

Veronica Luxemburg

Milestones of VR Track Sweden

2010 2012 2011

ANALYSIS OF

THE OPTIONS

NEW

MANAGEMENT

GROUP

NEW M.D.

APPOINTED

FILIAL TO AB

CERTIFICATES FROM

TRANSPORTSTYRELSEN

COMPANY

BOARD

MITTBANAN &

ÅDALSBANAN

HQ TO

STOCKHOLM

NEW STRATEGY &

OBJECTIVES

2013

CONSTRUCTION

BUSINESS

ORGANISZED

WEAK PROFITABILITY &

OPERATIONS OF THE FILIAL

IMPROVEMENT

IN PROFITABILITY

Vision & Mission of VR Track Sweden AB

To become the railway industry’s

solid frontline services provider in

Sweden by exploiting the technical

know-how with focus on

customers & personnel.

Company’s Mission is to provide

quality railway maintenance- and

BEST-construction services

within the selected geographical

areas in Sweden.

Turnover

Average Personnel

Order-book

200

2 %

> 300 MSEK

Profitability

Key Figures & Facts of VR Track Sweden AB in 2013

Subcontractors 35

>700 MSEK

+

Markets Outlook

• Freight tonne kilometers are estimated to grow 2,7 % per year to 2020

• Passenger kilometers are estimated to grow 1,4 % per year to 2020

• Required rate of replacement of rails, sleepers and ballast will grow at 30 % rate in the near future

• Required rate of replacement of switches and crossings will grow at 200 % rate in the near future (450 MSEK/year)

• Increasing maintenance to avoid further disturbances for traffic at least to 2017

• Stop further ageing of assets by reinvestments

• More design & build projects

• New investments for increased capacity

Plus ten years frame-work

budget for operation and

maintenance of the national

railway network of 64 billion

SEK

The annual construction

and maintenance market

relevant to VR Track is

BSEK class and

increasing

Ten years frame-work investment budget for

constructing roads, railways and waterways of

217 billion SEK

Plus 3,6 BSEK additional

money mainly to

maintenance in 2012-14

The Generic Market Drivers and Constraints

THE

MARKETS

Drivers

Constraints

Government’s clear strategy to invest on public transportation

Climate-smart Transportation

Public pressure; Additional money to improve the punctuality

“From roads to rails” New rolling

stock investments

Passenger/FTK growth prospects

High-Speed train projects

Ageing infrastructure

Punctuality improvement by reduced traffic may restrict traffic to grow

Growing uncertainty in the global economy may have impact on Sweden

Sensitivity on political decisions

Increased track access charges may hold back the development

Increased cost for operations and maintenance leads to less money for re-investments

Drivers

Drivers

Constraints

Constraints

Entering to the markets as new entrant is challenging but not impossible…

The Major Challenges Faced as New Entrant

• The required capital vs. return

• Long-term contractual commitments

• Operational certificates in stand-alone

solution

• Gage

• Severe weather conditions up north

• Poor availability of skilled workers

• Enable the use of skilled resources in

between SWE and FIN

• ERTMS

VR Track Sweden AB to be the first ERTMS Yellow Machine Operator

• Tka7 work-horse for catenary works, snow removals, ballast works etc.

• VR Track as launching customer

• Four Tka7s equipped with ERTMS so far

• Delivery schedule challenges due to certifications

• Machines in full operation Spring 2013

Thank you - time for questions