Analysis of Alternative Financing Possibilities For Bus Operators

Analysis of Alternative Financing Possibilities for Bus Operators
Stockholm, December 2013

1 Summary ............................................................................................................... 2
1.1 Background .................................................................................................... 4
1.2 Assignment .................................................................................................... 5
1.3 Limitation of liability ........................................................................................ 5
2 Swedish public transport market............................................................................ 5
2.1 Overview of the Swedish public transport market ........................................... 5
2.2 Overview of the Swedish market for public transport bus services ................. 6
2.3 Travel by public transport must be doubled by 2020 ...................................... 7
2.4 Regulations and deregulations ....................................................................... 7
2.5 Business model .............................................................................................. 8
2.6 Players ......................................................................................................... 11
2.6.1 RPTA .................................................................................................... 11
2.6.2 Bus manufacturers/suppliers ................................................................. 12
2.6.3 Bus operator ......................................................................................... 13
2.7 Bus operators' profitability and financial situation ......................................... 13
2.7.1 Sales and profitability ............................................................................ 13
2.7.2 Capital structure .................................................................................... 14
3 Financing of bus fleets ........................................................................................ 16
3.1.1 Funders and arrangement of financing .................................................. 16
3.2 Credit risks ................................................................................................... 17
3.2.1 Guarantees ........................................................................................... 20
3.3 Summary of observations ............................................................................. 21
4 Conclusions from the report writers ..................................................................... 24
5 Appendix ............................................................................................................. 26
5.1 Bibliography ................................................................................................. 26
5.2 Interviews ..................................................................................................... 27
Member of Ernst & Young Global Limited

1 Summary
This report was written by EY1, serving as an independent observer working on

assignment from Nobina, the leading bus operator in Sweden and the Nordic
region. The viewpoints presented in the report come primarily from 32
individuals interviewed within the scope of writing this report. The interview
subjects are representatives of the public transport authorities, bus operators,
banks and other funders, bus manufacturers and the industry organization
Svenska Bussbranschens Riksfrbund (BR). The writers of this report also drew
their own conclusions based on discussions with industry representatives and
on the publicly-available material that served as underlying data for the report
(please refer to the Appendix for a listing of sources). Great pains were taken to
provide a view that is as balanced as possible.
The report highlights bus operators' conditions for providing quality and effective
fixed route bus services in Sweden, along with bus operators' abilities to finance
the purchase of bus fleets. It also discusses measures for creating a market
that works better and more efficiently. These measures could possibly even
attract new capital to the industry. At present, venture capital is in short supply,
particularly from banks.
Public transport by bus is primarily run by private operators contracted by
municipal and county-owned public transport authorities. The industry is
characterized by low profitability, which has already knocked out some players.
The financing of bus fleets is normally handled through leasing arrangements.
This gives the funder an advantage in that it is the owner of the bus, thereby
making it easier for the funder to repossess the bus if the operator were to
become insolvent.
Sweden has set an ambitious goal of doubling travel by public transport by the
year 2020. This is a challenge on many levels. From a practical standpoint, it
will require more frequent services and more buses servicing the routes. These
buses must be purchased and will be partly financed through external lenders.
It is therefore important to establish good conditions to enable the private bus
operators to provide quality and efficient services. In some cases, guarantees
are required from the public transport authorities to satisfy the credit terms of
the funders.
The report points out many areas of inefficiency. One example of this is a report
by BR indicating that only 60 percent of the traffic contracts entered into in 2012
follow industry recommendations as to how various cost items are to be
indexed. Only 44 percent of the public transport authorities used the industry-
wide bus standard Buss 2010 [Bus 2010] and approximately 19 percent used
1
For questions related to the report, please contact Lars Blomfeldt, Director at EY,
telephone +46 70-5797470.
)
the functional environmental requirements in the procurements conducted. This
often leads to inefficiency, uncertainty and additional costs for the bus industry.
One consequence of a seemingly overambitious procurement procedure on the
part of the public transport authorities is that Sweden currently has one of the
youngest bus fleets in the world. Although this is good from a quality and
environmental standpoint, it brings with it high costs. At the same time, the
amount of travel is not growing enough to cover this cost increase. From the
funders' perspective, these frequent changes in technology and failure to use
the buses throughout their practical service life cause risk to increase. As a
result, less venture capital is made available and/or borrowing costs are high.
In Sweden, there are about 30 different basic bus models currently in use and
a huge number of special-ordered variants of these models. The bus
manufacturers estimate that this directly increases production costs by about 10
percent (compared to the cost associated with following Buss 2010). At the
same time, this increases both the service cost during the life of the bus and the
residual value risk, since the buses become harder to sell on the second-hand
market. This causes the risks and costs of financing bus purchases to grow.
The strong link between public transport buses in traffic contracts and society's
need for public transport reduce the counterparty risk and residual value risk.
Funders particularly banks seem to give little consideration to this. This can
be seen in the stringent rules for risk and capital coverage requirements. In the
few existing examples of insolvency, the existing buses were taken over by a
new authority to meet transportation needs without interruption.
Different types of limited guarantees from the public transport authorities would
be one way of reducing the risk and the cost of financing bus fleets while at the
same time meeting the obligation to society to maintain public transport.
Reducing the risk would cause desire to finance bus fleets to grow.
)
1.1 Background
In collaboration with the Swedish parliament and government, the public transport
industry has set a common goal of doubling travel by public transport by the year
20202. The presumption is that doubling public transport3 would contribute to achieving
important societal goals as regards the environment, employment, traffic safety and
equality4. Since 2006, travel has increased with an annual average growth of 2.6
percent. With the current growth rate, the goal of doubled travel will not be achieved
until 20345.
Approximately half of public transport is handled via fixed route bus services. Sweden
has transitioned to a system with municipal and county-owned public transport
authorities, where regional public transport authorities (RPTAs) serve as the client and
privately-owned companies operate the contracted bus routes. Many of these
operators suffer profitability problems and the number of companies in the industry is
on the decline. We have noted that the costs of operating public transport bus services
have increased more than the revenues. The low level of bus standardization in
Sweden is one reason for this. Another is stringent environmental requirements and the
fact that Sweden has one of the youngest bus fleets for fixed route services. This
means that the buses are fully depreciated before they have reached the end of their
actual technical and economic service life. This creates uncertainty as regards the
second-hand value of the buses once a traffic contract ends. It also leads to more and
more used buses being used as spare buses. The sometimes skewed contractual
relationship between the public transport authority and the operator also creates
uncertainty. If the goal of doubling travel by public transport is to be achieved (with
fixed route bus services serving as an important component of this), then substantial
new investments in bus fleets are required. To be able to achieve this, the operators
must finance the purchases with external capital from banks and other funders. At
present, many funders have no desire to increase their exposure in the industry as the
risks are too large. Examination of operators' future financial prospects is therefore a
pressing matter.
EY's jumping-off point in this report has been a discussion of what is driving costs in
the industry6 and how this affects public transport and the players who operate it. The
report also discusses various consequences as regards bus fleet financing and
proposes measures that could facilitate financing.
2
With 2006 as base year.
3
Public transport is defined as preplanned, regularly available transportation offered to the
public or to a particular group of people following set rules.
4
http://www.svenskkollektivtrafik.se/fordubbling/Om-Fordubblaprojektet/
5
Local and regional public transport 2012, Transport Analysis, June 28, 2013
6
Travel with public transport bus services
)
1.2 Assignment
Serving as an independent observer, EY was commissioned by Nobina to conduct an
overview analysis of the Swedish market for public transport bus services and to
analyze alternative forms of financing for bus fleets in Sweden. The information for the
analysis was collected from public sources and from interviews of 32 different players
on the market.
1.3 Limitation of liability7

EY presumes that the supplied information is correct. This applies to both written
material and information provided via interviews. Unless specifically contracted, EY
does not verify or investigate the accuracy of data, information of explanations from the
interview subjects in question.
2 Swedish public transport market
2.1 Overview of the Swedish public transport market

Since 2006, travel by public transport has increased with an annual average growth of
2.6 percent (see Figure 1). Bus services account for about half of the total travel by
public transport8.
Figures 1 and 2.
9
Number of public transport trips in Sweden per transport type and Costs and revenue between 2000 and 2012
1 500
40 000
1 250
Number of trips (in millions)
30 000
SEK millions
1 000
20 000
750
10 000
500
0
250
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0 Revenue from operations

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Contribution/capital infusion - municipality

Contribution/capital infusion - county
Contribution/capital infusion - national government
Bus Subway Tram Train Ship Total costs
7
EY's counseling does not include tax or legal counseling. EY is thereby not liable for any tax or legal consequences
resulting from the use of EY's report.
8
9
Local and regional public transport 2012, Transport Analysis, 6/2/2013
)
In 2012, the costs for local and regional public transport services amounted to SEK
36.5 billion, while revenue from operations only amounted to SEK 18 billion (see Figure
2). The remaining SEK 18.5 billion was financed through contributions and public
capital infusions. In other words, approximately half of the total public transport
services were financed through tax money. Since 2006, costs for Swedish public
transport have increased by 22 percent, while revenue from operations has only
increased by 11 percent10.
More than half of all local and regional public transport (measured in number of
passenger transports) in Sweden is performed in Stockholm. Stockholm is also where
the largest growth occurs. The continuing trend of more and more people moving to
densely-populated areas drives development towards increased travel by public
transport since the increasing congestion, poorer accessibility and increased costs for
car traffic in cities (including congestion fees) increase the relative attractiveness of
public transport11.
2.2 Overview of the Swedish market for public transport bus services
While travel by public transport bus services has increased, the number of buses in
service12 has dropped by 6.4 percent over the past 15 years from 14,924 (1998) to
about 14,000 (2013). A gradual transition to increasingly larger buses has made it
possible to transport a greater number of passengers by bus, thereby utilizing existing
resources more efficiently. Of the 14,000 buses operating on the roads, there are
approximately 2,000 different detail specifications for buses13. In short, this means that
about 30 models are ordered when in reality (according to many operators and
manufacturers) only about 10 models are needed to meet the demands of the various
routes. This results in bus manufacturing in very small series, which generates huge
costs. A cost increase is the natural result when the various public transport authorities
ignore the industry-wide bus standard (Buss 2010) in their public transport procurement
process.
In addition, buses are the youngest member of the vehicle fleet in Sweden. As of 2012,
the average age of a bus in service with 6.2 years, compared to 8.2 years in 1998. This
can be compared to the statistics for passenger cars (9.6 years), lightweight trucks (7.7
years) and heavy trucks (10.1 years)14. Even in a European comparison, the Swedish
bus fleet is significantly younger. On average, Swedish bus operators have a higher
cost of capital since the bus fleets are not used for their entire technical and economic
service life15. The low average age of buses in Sweden is the result of factors such as
the public transport authorities' procurement requirements and environmental rules
10
11
Statistics on the bus and coach industry, Svenska Bussbranschens Riksfrbund, March 12, 2013
12
Applies to all bus traffic in Sweden
13
14
Report from Transport Analysis Local and regional public transport 2009 (Statistics 2010:12)
15
Information gathered from interviews with market players
)
related to emissions and the so-called environment zones in which a specific bus type
can operate. Increased environmental requirements and age requirements set for
procurements have also caused an increase in the number of decommissioned buses
since 1998. This has resulted in huge depreciation costs16.
2.3 Travel by public transport must be doubled by 2020

In collaboration with the Swedish parliament and government, the public transport
industry has set a common goal of doubling travel by public transport by the year
202017. Doubling travel by public transport would contribute to achieving pressing
societal goals as regards the environment, employment, traffic safety and equality.
Calculations performed by the public transport industry indicate that doubling travel by
public transport would reduce the carbon dioxide emissions of passenger traffic by
about 20 percent and would generate a socioeconomic gain of about SEK four billion.
To achieve this doubling goal, the industry has agreed on measures such as a new
contract process based on developed forms of collaboration and increased
professionalism18.
2.4 Regulations and deregulations

On January 1, 2012, a new public transport law went into effect that opened up local
and regional public transport to competition. The law brought about three major
changes for public transport: (i) free right of establishment for commercial players; (ii)
permission to operate public transport services across county boundaries without
special permit; and (iii) establishment of regional public transport authorities (RPTAs)
tasked with creating a transport services provision program19.
The RPTAs also decide on the public service obligation, i.e. which transport services
the community is responsible for and thereby can be procured by a public purchaser.
With the new public transport law, commercially initiated transport can be run in parallel
to publicly procured and subsidized transport. Alternatively, commercial transport can
be established for times and stretches where there is no publicly procured transport20.
A decision on public service obligation is implemented by the RPTA or the authorized
body entering into a public transport agreement. The RPTA determines whether
authorization to enter into agreements shall be transferred to limited companies or to
municipalities. According to the EU ordinance, the RPTA must publish a collective
report about the public service obligation within its authorization area once a year. The
16
SIKA's report Fordon 2009 [Vehicles 2009] (March 30, 2010)
17
18
19
20
http://www.brhistoria.se/Kollektivtrafiken/Regleringarochavregleringar.aspx
)
report must provide an account of the selected transport companies and the
remuneration granted to said companies as compensation for this work21.
Almost all public transport bus services are arranged through public procurement22.
According to the Swedish Public Procurement Act, the winning tender must have the
lowest price or must be the most economically advantageous tender. This means that a
tenderer can try to compensate for a higher price by offering higher quality. In recent
years, purchasers have introduced quality evaluations, where a description of
operations is assigned points and is taken into consideration together with the tendered
price23.
2.5 Business model

The business model of bus operators is based on generating stable revenue by signing
long-term agreements/traffic contracts, running efficient public transport services that
comply with the requirements of the traffic contracts and providing good service to
passengers. Long-term contracts are advantageous to both the RPTA and the bus
operator. For a bus operator, it reduces the risk, provided that the contract terms are
reasonable. For the RPTA, it ensures the flow of public transport for a reasonable
amount of time24. A traffic contract normally has a duration of eight years, often with an
option to extend it an additional one to two years.
Figure 3. Business model Regional transport services25
Provides public
transport services
RTPA Contract-based
Bus operator
renumeration
Provides public
Ticket revenue transport services
Passengers
21
Public service obligation, Swedish Public Transport Association, July 2011
22
In some cities, concession agreements may still be in force that limit competition.
23
Nobina's Annual Report 2012
24
P vg mot en mer kostnadseffektiv kollektivtrafik [On the way to more cost-effective public transport], Svenska
Bussbranschens Riksfrbund, March 2013
25
)
The main types of traffic contracts are as follows:
Gross cost contract Remuneration to the bus operator is determined based on
number of kilometers, hours and buses that the production
represents in accordance with the traffic contract (fixed
remuneration). In new procurements, it is becoming more
and more popular to abandon this type of agreement in
favor of incentive agreements.
Net cost contract Remuneration to the bus operator is paid through ticket
revenue along with a fixed remuneration. The purchaser
determines the offering and ticket prices. This type of
agreement is becoming less and less common.
Incentive agreement Remuneration to the bus operator is determined based on a
gross cost contract and the bus operator is paid extra
remuneration if a greater number of travelers use the
transport services. This type of agreement is gaining
popularity on the market.
Payment per passenger Remuneration to the bus operator is determined based on a
tender price quoted by the bus operator whereby the public
transport authority pays remuneration for each traveler that
utilizes the transport services.
A common denominator for the various revenue models is that the change in
remuneration over time follows an index intended to compensate the bus operator
when costs for factors such as fuel and salaries increase. Analysis of index risks and
improving indexing's transparency and representation of actual cost inflation are
deciding factors when it comes to bus operators being able to run profitable traffic
contracts26.
Regardless of contract type and revenue model, the greater part of the revenue is
relatively fixed since fixed price remuneration is a major component of most traffic
contracts. This means that profitability can primarily be improved through cost-related
measures. When it comes to costs, the two greatest items are salaries and fuel. These
are largely driven by external factors that are beyond bus operators' control (salary
levels are specified in collective agreements and external control over fuel pricing). The
operators can, however, have some influence over these factors partly through
effective staffing and partly through driver training and other measures that reduce fuel
consumption. Personnel costs and fuel make up approximately 80 percent of the total
cost for a bus operator. It is therefore important for the operators that the traffic
contracts contain an adequate index adjustment. Two other major cost items are cost
of capital and financing costs related to purchasing bus fleets and operating and
maintaining the buses. For operators, it is important to be able to transfer buses
26
Nobina's Annual Report 2012
)
between different traffic contracts to optimize usage, a method known as fleet
management. The reverse limiting the possibility of transferring buses between
different areas and traffic contracts would make it impossible to optimize bus fleet
usage, which would lead to efficiency losses27.
The costs vary over the course of the traffic contracts, while revenue remains relatively
fixed. This leads to huge variations in profitability during the contract period. The costs
are high at the start of a contract, largely due to huge investments in a bus fleet. As a
result, the composition of the contract portfolio and management of it affects the
collective profitability for individual years. Profitability varies from year to year
depending on how many new contracts are signed28.
The difference in profitability is mainly affected by how efficiently the bus operator can
use its organization and bus fleet in accordance with the existing traffic contracts
entered into with RPTAs. Current traffic contracts often limit bus operators' efficiency. A
number of bus operators feel that the current procurement procedure is far too detailed
and specified29. Everything from choice of seat fabric to which shade of yellow is used
on center poles is specified to give just two examples. Another example is setting a
detail requirement for use of a specific type of fuel rather than following the method
used by Denmark and setting functional requirements, i.e. requirements regarding the
emission of environmentally harmful substances and carbon dioxide30. The public
transport authorities lock in specifications for a number of parameters related to buses,
fuel and transport program. This makes it difficult to create several usage areas for the
operators' bus fleets and complicates purchasing, operation and maintenance. It often
makes costs higher than necessary, which negatively impacts bus operators'
profitability31.
To improve profitability, discussions are underway to develop more standardized
procurements as regards bus specifications. Bus traffic is also undergoing
rationalization (Frdubblad kollektivtrafik 2020 [Doubled public transport 2020]). The
aim of standardizing the buses required for contracted services in regional public
transport is to increase the uniformity of the buses across Sweden and thereby reduce
the collective costs of public transport. The compensation structure is also being
reviewed, including indexing of costs. By using suitable indexes that compensate the
bus operator for cost development, the companies' risks in the contract can be
reduced. This means that the bus operator does not have to cover itself against losses
27
28
29
30
http://www.bussmagasinet.se/2012/01/br-mer-kompetens-i-upphandlingar-funktionskrav-i-stallet-for-detaljkrav/
31
10
)
by submitting a more expensive tender. Indexing shall ensure that contracted business
terms are maintained throughout the entire duration of the contract32.
2.6 Players
Figure 4. The biggest players on the market for public transport bus services.
Bus
manufacturer
Funders
Delivers
Procures buses buses
as specified in and, in some
the contract cases also finances
the bus fleet
Submits a tender
for procurement of
transport services Ticket revenue
RTPA Bus operator Passengers
Delivers public
Signs a contract transport services
and pays
Creates a transport services remuneration Responsible for running the
provision program public transport services
Procures and sets
requirements for public
transport services
The biggest players on the market for public transport bus services are RPTAs
(procure public transport services), the bus operators (provide public transport
services) and the bus manufacturers (deliver the bus fleet as specified in contracts
between the RPTAs and the bus operators). In many cases, the bus manufacturer also
serves as funder of the bus fleet.
2.6.1 RPTA
The RPTA must regularly set goals for regional public transport services in a transport
services provision program. The program must be created after first consulting with
equivalent authorities in adjacent counties. Other affected government authorities,
organizations, public transport operators and representatives of businesses and
32
11
)
travelers must also be consulted. If a single County Council serves as the regional
public transport authority, then municipalities in the county must also be consulted33.
Upon agreement with the county council or a municipality of the county, the RPTA can
procure passenger transport and coordination services for the transport purposes that
the municipalities or county council are required to provide and can coordinate such
transport services. The RPTA must work to ensure that regional public transport
services are available to all passenger groups34.
The RPTA makes decisions on the scope and structure of the procurement process.
Not only do the operators conduct an intense lobbying process, they are given the
opportunity to provide viewpoints in a coordination process. The bus industry has also
designed agreement recommendations for the contracting process and procurements
and has published industry-wide model agreements. However, these are often
disregarded in procurements. In its role as the procuring party, the RPTA sometimes
deviates from these recommendations, which causes great risks for the operator.
RPTAs have followed Buss 2010, which is the industry's recommendations for the
standardization of buses, in only about one-third of the procurements35.
2.6.2 Bus manufacturers/suppliers

In Sweden, four suppliers Volvo, Scania, Mercedes-Benz and MAN accounted for
86 percent of the total number of buses in service in 201236. Several small players,
such as Solaris and VDL, have a growing market share.
Contracts with RPTAs often contain highly detailed requirements for the buses. This
results in the bus operators having to special order buses. The buses are
manufactured in small series, which leads to a higher production cost and an increased
risk of poorer quality. The manufacturers indicate that costs could be cut by about 10
percent by cutting down from the 30 bus models generally ordered at present to the 10
models that are actually needed37.
Bus operators choose bus type primarily based on price, financing and maintenance
cost. The ability to obtain financing is becoming an increasingly critical factor for certain
operators when choosing a supplier38.
33
Public Transport Act (2010:1065)
34
35
http://www.bussmagasinet.se/2013/04/folj-branschens-avtalsrekommendationer/
36
37
38
12
)
2.6.3 Bus operator
The industry is dominated by a small number of large companies39 that have close to
50 percent of Sweden's bus fleet. In the mid-size company segment, there are about
ten companies with 100 to 500 buses. Otherwise, the industry consists of a large
number of small companies (often family owned), where several have fewer than ten
buses40.
The trend indicates that the number of bus operators is shrinking. In 2011, there were
161 fixed route bus service operators active in Sweden, of which the five largest bus
operators41 accounted for about 50 percent of the bus market's total sales of
approximately SEK 21 billion (2011)42.
2.7 Bus operators' profitability and financial situation
2.7.1 Sales and profitability

The industry is dominated by five companies Nobina Sverige AB, Keolis Sverige AB,
Veolia Transport Sverige AB, Arriva Sverige AB and Nettbuss Sverige AB. We have
therefore chosen to focus on these in our analysis of the operators' profitability and
financial situation. All of the companies also have other business operations (including
express buses, procured school transport/chartered transport, airport coaches and train
transport). The revenue and costs of these could not be reported separately. They are
instead included in the key figures reported (see Figures 5 and 6)43.
Since 2005, sales have grown steadily for all players except Veolia, while profitability
has fluctuated over the years (see Figures 5 and 6). The bus industry has long been
subject to low profitability. This can be explained in part in that bus operators' ability to
increase revenue has been limited by tough price competition. Previously, gross cost
contracts (fixed price agreements) were dominant and in many cases had low pricing
with little ability to affect revenue. However, the percentage of gross cost contract
services is on the decline44. According to Svenska Bussbranschens Riksfrbund, the
low profitability is an obstacle to the development of bus services and thereby to the
ability to achieve the increased public transport level set by the Swedish government,
parliament and the bus industry as a common goal45.
39
Nobina Sverige AB, Keolis Sverige AB, Veolia Transport Sverige AB, Arriva Sverige AB and Nettbuss Sverige AB
40
Statistics Sweden's statistical database: Enterprises and employees (FDB) by industrial classification SNI 2007. SNI
code 49.311 Urban and suburban road passenger transport
41
Nobina AB, Keolis AB, Veolia AB, Arriva AB and Nettbuss AB
42
43
All of the companies also have other business operations (including school transport/chartered transport, airport
coaches and train transport) with revenue and costs that could not be reported separately but are instead included in the
key figures we have reported.
44
45
http://www.bussmagasinet.se/2013/03/statliga-och-kommunala-bolag-sanker-bussbranschen/
13
)
Figures 5 and 6. Sales and profit margin 2005-201246
5
6
5 0
EBIT margin (%)

Sales (SEK billion)
4
-5
3
2
-10
1
0 -15
2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012
Nobina Sverige AB Keolis Sverige AB Nobina Sverige AB
Keolis Sverige AB
Veolia Transport Sverige AB Arriva Sverige AB Veolia Transport Sverige AB
Nettbuss Sverige AB Arriva Sverige AB
Nettbuss Sverige AB
Of the five largest bus operators, only Norbina has had a positive profit margin in
recent years. However, prior to 2008 even Nobina wrestled with major profitability
problems. Many of the major players have operated at a loss for several years and one
of the major players, Veolia, is selling its operations in the Nordic region as a result of
the losses47. Certain foreign players, such as Arriva and Keolis, have particularly strong
owners that are state-owned in whole or in part. The credit risk for these players is
therefore very small. Even though Swedish operations have low margins, these
companies have been able to obtain competitive financing.
2.7.2 Capital structure

The largest asset of the five largest bus operators is the bus fleet. On average, it
accounted for 59 percent of the balance sheet total for 2012. The low profitability of the
five largest bus operators negatively impacted the debt/equity ratio and acid-test ratio
during the years 2005 to 2012 (see Figures 7 and 8).
46
Annual reports 2005-2012 for the indicated companies
47
Veolia's Annual Report 2012
14
)
Figures 7 and 8. Debt/equity ratio and acid-test ratio 2005-201248
40 200
180
35
160
30
Debt to equity ratio (%)
140
Acid-test ratio (%)
25 120
20 100
80
15
60
10
40
5 20
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012
Nobina Sverige AB Keolis Sverige AB
Nobina Sverige AB Keolis Sverige AB
Veolia Transport Sverige AB Arriva Sverige AB
Veolia Transport Sverige AB Arriva Sverige AB
Nettbuss Sverige AB Nettbuss Sverige AB
48
Annual reports 2005-2012 for the indicated companies
15
)
3 Financing of bus fleets
This part of the report is primarily based on 32 interviews (Appendix 5.2) with
representatives of the public transport authorities, bus operators, banks and other
funders, manufacturers/suppliers and one industry organization. To ensure that
everyone spoke as openly and frankly as possible, a pledge was made that no one
would be quoted and that it would not be possible to determine which organization was
the source of the information. EY has naturally respected that pledge and has striven to
express the opinions in as balanced a manner as possible. The statements and
conclusions provided in the report come primarily from information collected in the
interviews. The writers of this report also aimed to take the analysis one step further in
certain cases to be able to draw conclusions on different conditions.
3.1.1 Funders and arrangement of financing

The majority of the financing operator companies use to purchase the bus fleets comes
from equity, inter-group loans or external loans from banks. Thus, most of the bus
fleets are purchased and are listed on the companies' balance sheets as an asset.
Compared to loan financing, leasing financing accounts for approximately 40 percent of
acquisitions and brings with it the advantage of reducing the credit risk since the funder
is the legal owner of the bus. The lessee or bus operator company has usufruct during
the leasing period and makes periodic lease payments during the course of the lease.
At the end of the leasing period, the bus is returned to the lessor company or is
purchased by the lessee at a fixed value.
The organizations primarily active in financing are Swedish and foreign banks, bus
manufacturers and other financial institutions, including niche players that can act as
intermediaries or as direct funders.
Over the past five years, Sweden and foreign banks have become more restrictive in
their financing of bus fleets because the industry has shown weak profitability while the
public transport authorities are perceived as setting their requirements extremely high.
For this reason, leasing financing is being sought from other players to an increasing
degree since the banks see relatively high counterparty risks on the part of the operator
companies. Since the banks will continue to be governed by high capital coverage
rules/Basel Accords, it is important that the credit risk is low and that the transaction is
structured in a manner that makes the capital coverage need as low as possible. Banks
often set more stringent requirements for sureties or guarantees than other financial
players on the market and are often perceived as inflexible and tough in their credit
assessment. However, banks have the greatest lending capacity. It is therefore
essential to the industry that banks continue to finance bus fleets. When they do decide
in favor of lending, it is generally at a lower price than other players.
Bus manufacturers or suppliers have often established their own financing companies
to support their operations since financing is often required to enable the purchase.
Manufacturers are a major financial player and generally use different forms of leasing.
The manufacturers can make a competent assessment of the various risks, particularly
16
)
risks associated with their in-house developed technology. For example, it is extremely
common for a supplier (regardless of whether it is the primary funder of the bus fleet or
not) to guarantee the residual value in conjunction with a sale. This means that a
residual value is set and a repurchase guarantee is provided that both apply at the end
of the leasing period. Manufacturers are forced to provide this guarantee as there is no
established second-hand market for buses with an economic service life that is about
six years longer than the typical length of the traffic contracts for which the buses were
purchased. Banks almost always require a residual value guarantee.
However, the core business of the manufacturers is not financing, it is the manufacture
and sale of vehicles. A problem for many manufacturers is that they have built up
enormous credit exposure, both in absolute figures and as a concentration for a
specific segment of customers. As a result, suppliers must compensate for tied-up
capital or exposure costs by charging a higher sales price. In the long-term, it is hardly
sustainable for manufacturers to continue building up enormous exposure. This will
make the purchase of bus fleets more complicated and more expensive.
To expand the possibility of offering financing, manufacturers can team up with
different financing companies and develop adapted financing solutions, commonly
leasing solutions. A number of different financial solutions are available on the market.
Most often, the manufacturer refers the customer to a collaborative partner that offers
financing. Another alternative is for the manufacturer to draw up a financing agreement
with the customer and then transfer this financing agreement to its collaborative
partner. Both Swedish banks and international bank institutions can often establish this
type of partnership with manufacturers.
In addition to banks and manufacturers, there are niche financing companies. These
are often owned by global industrial companies, specialized leasing companies or
lending institutions with deep knowledge of customer financing. In that they trade on
the second-hand market with various types of assets (in this case, buses), they can
often take residual value risks that banks cannot. They may also have a different view
of credit risks compared to traditional banks. Some of these financial institutions have
global organizations, enabling them to find buyers for buses abroad at good prices.
In summary, you could say that more players and more capital will be needed to
finance future bus fleet purchases. In addition, more transactions will likely be
structured, i.e. adapted to satisfy the funder's security requirements in the deal. One
alternative is for public transport authorities to be required to provide various forms of
pledges, such as guarantees, to support the operators' ability to purchase buses.
3.2 Credit risks

When the credit risks of bus operators are evaluated, it is considered a strength that
the various traffic contracts are signed with municipal and county-owned public
transport authorities. These authorities have a legal obligation to ensure the provision
of public transport services and the utmost guarantee of payment is the extremely high
credit score of the municipalities and county councils. The fact that the traffic contracts
17
)
have a long duration (normally eight-ten years) means that the revenue streams of the
bus operators are stable and can be assessed over a long period of time. This is often
viewed in comparison to the highly competitive atmosphere with subsequent price
pressing and clear profitability problems for many operators.
The normal credit rating of a bus operator is based on operations, profitability and the
company's assets, liabilities and other obligations. Based on factors such as the
assessed competence of executive management, the strength of the owners, who the
owners are and whether there are intra-group guarantees, the credit rating is adjusted
to assign a counterparty risk value to the bus operator. If a funder considers a bus
operator to have a relatively high counterparty risk, requirements are often set for
financing. Requirements can be different types of guarantees or restructuring of the
transaction to minimize the risk.
A certain degree of political risk, i.e. that procurement for the traffic contract will be
handled by a politically-motivated organization and that changes may be made based
on a new political agenda, is perceived by many as being a very real risk. Although the
conditions in existing traffic contracts are fixed during the entire term, political power
shifts cause long-term changes in how operations are run. It can have negative
financial consequences for the operators, whose principal assets (the buses) have a
service life of at least 15 years. The political risk can also stem from ignorance on the
part of the public transport authority (officials and the political board) and the fact that
the requirements set in a procurement are not adapted to the environment in which the
bus operators work. This risk is often perceived to be greater with public transport
authorities in smaller regions, where procurement of transport services does not
happen frequently. For example, only 44 percent of the traffic contracts procured in
2012 followed the specifications in Buss 2010. The remaining 56 percent of the
procurements ignored the standard. This resulted in a clear risk of the cost for
purchasing buses being higher than if the standard had been followed. It also reduced
the flexibility of using the buses in other transport services areas. This, in turn, probably
increased financing costs and reduced the buses' value on the second-hand market,
i.e. it increased the residual value risk. The operators probably raised the price in their
tenders (or did not tender at all) to compensate for the increased cost and risk. In the
end, it is the travelers and taxpayers who bear the costs.
The operators' balance sheets are often considered difficult to assess since some of
the assets consist of older bus fleets. If it were to become necessary to sell these
buses, there is no functioning second-hand market. Rapid shifts in technology, mainly
related to powertrains, and increasingly stringent environmental requirements set for
procurements make it impossible for funders to know whether there is a market for a
used bus when the contract period ends. This means that a young used bus is
significantly more attractive on the second-hand market than an older bus. The funder
also faces risks during the course of the contract, if the bus operator were to become
insolvent. In such cases, the funder must sell off the collateral, i.e. the buses used on
the routes in accordance with the traffic contract. Will the public transport authority
want to continue using the same buses (there have been actual cases where the public
transport authority chose to continue using the existing buses) or will the funder be
18
)
forced to sell the buses on an uncertain second-hand market? If the sale proceeds do
not cover the outstanding credit, then the funder suffers a credit loss. Although it is
likely that the public transport authority will want to continue using the existing buses in
according to the traffic contract, this is not automatically the case. This produces an
uncertainty that the funder must take into consideration in his credit rating. The low
level of standardization increases the difficulty in finding a buyer for a highly specified
bus in Sweden. Bus operators can usually find a buyer for a used bus in the Baltic
States and Eastern Europe, i.e. in neighboring countries with reasonable transportation
costs. However, nowadays such countries are following the strict regulations in force in
the EU to an increasing degree. As a result, fewer used buses are going to these
countries. This means that the price and the second-hand market for older buses are
difficult to assess.
As mentioned previously, the funder faces risk both in situations where the bus
operator has become insolvent and the funder must sell off the collateral on the
second-hand market and at the end of the leasing period, i.e. in the residual value of a
bus procured for a traffic contract that still has a number years left in its technical and
economic service life. The latter is the reason that many funders require a residual
value guarantee or a repurchase obligation for when the leasing period comes to an
end. The question is whether the funders base their risk analysis a little too much on
the so-called object risk, i.e. the buses' value on a second-hand market during the
contract period, and do not give enough consideration to the fact that the bus operators
provide services that serve an important societal function and are prescribed by law.
The operations are run on assignment of public transport authorities that are owned by
a municipality or county, i.e. a party with the highest credit rating.
In an insolvency situation, according to both the bus operators and the manufacturers it
is not possible to produce a large number of buses in a short time to service the routes
that must be serviced by law. The opinion is that actual conditions though not legally
binding should play a greater role in assessing credit, i.e. the funders should trust
that the existing buses will be used for contracted routes, even if the bus operator were
to become insolvent.
This situation is strengthened by the fact that public transport authorities have largely
demanded that the contracted buses meet certain detail specifications that are
sometimes unique for the traffic contract in question. Funders feel that they need actual
guarantees (de jure), signed by the public transport authorities, to be able to factor in
this situation in the systems used when calculating capital coverage.
It is nonetheless interesting to consider how insolvency situations have been handled
historically, i.e. what happens with the buses operated under a traffic contract. There
are only a few examples from the Nordic market. One example is Vnersborgs
Linjetrafik (VL), which became insolvent in 2010. At the time, the company operated
under a traffic contract with partner company Buss i Vst. When VL declared
bankruptcy, Buss i Vst established a new, wholly-owned company named Buss i Vst
Trafik AB, which took over the traffic contract, personnel and a vehicle fleet of about
100 buses. Some of the buses were owned by VL and the others were leased from
external funders. During the bankruptcy process, the buses owned by VL were
19
)
purchased from the bankruptcy estate. The contracts for the leased buses were also
taken over. Thus, the funder had no credit loss and did not lose out on any lease
payments in connection with the bankruptcy. Another example is the Danish company
Iversen, which went bankrupt in July 2009. The traffic contracts handled by Iversen
were taken over by three different operator companies Concordia Bus (Nobina), THM
Sydtrafik and THM BAT. As in the Swedish example, all buses linked to the traffic
contracts were taken over by the respective operator companies. Similarly, this case of
bankruptcy did not lead to lost leasing payments, delays or any credit loss on the part
of the funder. The Danish company Combus (our third example) never went bankrupt,
but sold its operations to Arriva in 2001 after a number of losses. Underlying
agreements, including traffic contracts and financing agreements, were honored in full
by the new operator. In all three cases, it was considered practical and economically
advantageous for the new bus operators to take over the buses purchased for use in
the traffic contracts. The practical issue was mainly that it was not possible to obtain
the large number of buses required for the intended routes in such a short time. The
public transport authorities, operator companies and funders had a common interest in
this.
3.2.1 Guarantees
As mentioned earlier, different types of sureties and guarantees are often required for
financing to be granted. Additional sureties usually in the form of parent company
guarantees are often required for direct business loans and leasing financing of
buses from banks. There have also been cases where pledges have been required in
the public transport operator's revenue accounts. This is due to the low profitability in
the bus industry and the generally low level of capitalization in bus operator companies.
There have sometimes been instances of a public transport authority providing a
payment guarantee for the bus operator's running payment obligations (lease
payments). Payment guarantees and residual value guarantees reduce the
counterparty risk on the part of the bus operator. If the funder is subjected to lower risk,
the financing can be priced at a lower rate since the lower risk is associated with a
lower capital coverage cost. Stockholms Lokaltrafik (SL) calculated that this type of
structure would produce financial cost savings totaling SEK 400-700 thousand per
bus49, or about 15-20 percent of the purchase price of the bus. Public transport
authorities have traditionally been restrictive in providing such guarantees. Generally,
they have only been used in certain special procurements of special buses.
An option is an agreement structure whereby the public transport authority commits to
a continuous residual value obligation. In simple terms, this means that the public
transport authority continually guarantees the buyout of the buses if the contractual
relationship between the bus operator and the leasing funder were to end prematurely.
A funder thereby ensures full repayment of the outstanding value of the credit from a
49
SL, Finansiering av miljbussar [Financing of eco-friendly buses] November 30, 2010 by Gunnel Forsberg
20
)
party with an extremely good credit rating, even though there is a risk of losing out on
future interest revenue in the underlying transaction. This would provide adequate
protection for the funder and thereby significantly reduce the risk premium.
Funders have shown great interest in a leasing structure where the public transport
authority is part of a step-in or takeover clause regarding leasing financing. With this
type of arrangement, in the event of the bus operator's insolvency, the public transport
authority commits to taking over responsibility for lease payments in accordance with
the lease agreement in exchange for the buses (owned by the funder) continuing to
service the routes for which they were contracted. Funders feel that a step-in
guarantee of this nature would greatly reduce the counterparty risk, i.e. the risk that is
most difficult to assess during a credit assessment, and thereby reduce the risk and
cost of financing. Funders indicate that an annual price reduction of one or two
percentage points in reduced risk premium would apply if the counterparty risk is
hedged by means of a step-in or takeover guarantee. On the part of the public
transport authority, such a clause could also be interpreted as a right (not just an
obligation) to take over the buses in the event the operator becomes insolvent. An
obvious advantage of this is that the public transport authority has an obligation by law
to ensure that public transport services are provided and the right to ensure that such
services are uninterrupted. Another advantage is a reduction in the credit risk, which
means that more operators can participate in the tendering process and that the
number of potential funders increases. This leads to an improvement in pricing and the
quality of the tenders submitted.
One challenge with a step-in or takeover clause is that the bus operators want to retain
their operational flexibility by being able to use their buses efficiently and optimally,
even across different areas and traffic contracts (referred to as fleet management). In
an industry characterized by low profitability, this is an important component to be able
to optimize operations and reduce costs. If a step-in or takeover clause were to be
introduced something that is highly likely to have significantly positive effects on the
financing of bus fleets then a system would have to be found to enable continued use
of fleet management. It would mean, for example, that the guarantor (the public
transport authority in our example) must accept that parts of the bus fleet it guarantees
might sometimes service other regions than that the buses were purchased for.
3.3 Summary of observations

The goal of doubling travel by public transport by 2020 is a huge challenge especially
as regards financing since a much larger number of buses will be needed in the future
compared to today (assuming that the buses maintain their relative percentage of use
compared to the other modes of transport operating in the public transport system). It is
therefore important to review the rules and customs that apply in the industry, where
operators tend to have a low level of profitability and the number of operator companies
is on the decline. Since taxpayer funds account for about half of the SEK 36 billion that
public transport costs each year (the rest is funded through ticket sales), this is
ultimately a political matter.
21
)
Sweden is at the top of international comparisons of public transport when it comes to
bus quality, particularly as regards environmental aspects. The Swedish bus fleet is
also one of the youngest in Europe, which is certainly a good thing. But from a regional
and municipal perspective, where different expenditure categories are compared (such
as school, healthcare, nursing care and transport services), it is imperative to look at
what drives different costs. From that perspective, we can ask ourselves whether we
can afford not to use older buses to their full economic service life. The cost, in terms of
both cost of capital and financing costs, is extremely high and could even work against
the goal of doubling travel by public transport. If you ask travelers (i.e. the ones whose
choice of traveling by public transport will be used to gauge whether the goal is
achieved), the environmental goal comes in fifth in their order of priority. Aspects such
as frequency of services, how quickly the bus makes its way to the stops and the
environment inside the bus are more important than the environmental emissions
profile of the bus. If aspects that travelers consider more important are forsaken due to
the costs of switching to new buses, this could result in fewer people choosing to travel
by public transport. If the travelers who decide against travel by public transport travel
by car instead, the ultimate effect of introducing eco-friendly buses is the opposite of
that intended. In other words, the total emissions will ironically be greater. This is an
example of how political decisions could actually lead to suboptimization and
counteract the effects they are meant to achieve. This could be counteracted by
politicians being forced to deliver some type of cost-benefit analysis.
Operators generally would like clearer functional requirements instead of specification
requirements in a procurement. Since the operators clearly have a greater interest in
efficiency than the public transport authorities and are often more knowledgeable about
optimizing transport services, this would likely lead to greater efficiency. This would
also contribute to standardization of bus fleets since it in the operators' interest to
minimize the cost given the absolute requirement level set by the public transport
authority. Minimizing the manufacturing cost would have positive effects on the ability
to finance, the cost of financing, residual value risk, etc. The alternative the public
transport authorities following industry agreements (Buss 2010) to a greater degree
and using the standardized contract package that was developed would also lead to
major cost savings. You could question the benefit of a public transport authority
having viewpoints on which upholstery is used on the bus seats or what shade of
yellow is used for the bus' center pole. These may seem like small costs in the bigger
picture, but they add up. For example, one representative of a manufacturer described
how he spent countless hours with a large number of employees and consultants for a
public transport authority to discuss two shades of yellow that the report writers could
not distinguish between. Because it is the public transport authority who sets the rules
of the procurement, according to the source you have to put on a poker face and try to
give the impression that you are taking the discussion seriously. At the same time, he
questioned the actual benefit to society. It is even more serious when the entire
procurement process must be repeated because too few operators choose to submit a
tender because the public transport authority's requirement specification does not work
in practice or the risks are too great. In both cases, it increases the risk, drives costs up
and leads to inefficiency.
22
)
In many cases, it seems to be a matter of ignorance, where the administrators of the
contracting unit or the politically appointed board ultimately making the decisions are
not aware of the industry-wide agreements or simply abandon them for other reasons.
This can be seen most clearly in public transport authorities of smaller regions, where
procurement for a traffic contract occurs very rarely, sometimes at an interval of up to
ten years. There are cases where industry practice has been completely ignored in
favor of doing what they did last time. The consequence is that the lessons learned in
the industry through the years are not applied. A national coordinator, e.g. an employee
of the Swedish Association of Local Authorities and Regions (SKL), would be able to
provide support to public transport authorities who handle procurements less
frequently. Apart from this, it would be good from a social perspective for the larger
public transport authorities (who are professional and handle procurements regularly)
to follow the set industry standard more closely. Even though there will always be a
need for local solutions to some degree, major departure from industry-wide
agreements are problematic particularly for the operators, but also for funders. These
problems should be taken into consideration to a greater extent. A related problem
cited by both operators and funders is that larger public transport authorities are often
less responsive, partly due to their size and partly due to the one-sided relationship that
often exists. They do not take into account issues highlighted in the consultation
process leading up to procurement and set requirements that make things difficult for
the operators. To some extent, it seems like the public transport authorities' intention is
to create a balanced agreement. Negotiation of the final traffic contract is outsourced
to an external law firm, which has the goal of optimizing the outcome for its client. This
results in a win-lose solution instead of finding a consensual solution or a win-win
solution (even though this may have been the public transport authority's intention at
the start of negotiations). The risk of such a suboptimal solution increases when the
public transport authority is a big player.
To cover any risks found in the tender documentation, the operators must either price
their tenders sufficiently high to cover the risks or refrain from tendering at all. In either
case, this could lead to more expensive tenders for the contracting public transport
authority. During the interviews, but operators and funders requested better
understanding or rather responsiveness to the consequences a specific
requirement may have. One example is the fines that are charged when access to
services is poor. The public transport authorities also seem better able to take on force
majure risks, which they sometimes completely reject liability for.
When it comes to financing, a deadlock situation often arises. The funder cannot
accept the de facto situation that the buses that have been contracted will almost
certainly be used by a new operator and in a new traffic contract if the existing operator
were to become insolvent. Even if the funders accept this idea, they cannot assimilate
this factor in the systems that calculate credit risks. Bus operators wish that funders
would have this holistic view of the contracted transport services so they could offer
better and cheaper financing.
Regardless of where emphasis should be placed and it is not part of EY's assignment
to assess this we can conclude that this uncertainty for both funders and operators
23
)
leads to high costs for the system as a whole. These costs could be avoided if the
public transport authorities clarified their intention to provide for long-term use of the
contracted buses. In the end, it is the passengers and taxpayers who pay for public
transport. Since the public transport authorities are meant to safeguard their best
interests, a discussion should be initiated together with the major funders to determine
how such a declaration of intent should be formulated. This could be the public
transport authorities' first step towards simplifying the financing of bus fleets. A
sufficiently strong and well-articulated commitment would facilitate financing and give
the operator greater options of buying buses from different manufacturers and at a
lower cost. This would benefit both the passengers and the taxpayers. In the long-term,
it would pave the way for the large number of buses needed to achieve the goal of
doubling travel by public transport.
4 Concluding remarks from the report writers

For this report, we interviewed leading individuals and players in the public transport
bus services industry to highlight areas that may be worthy of consideration for the
various decision makers. In short, we want to emphasize the following points:
From a societal perspective, it is remarkable that the public bodies tasked with
procuring public transport (the public transport authorities) do not do a better job of
adhering to the agreements and contract structures that the industry as a whole
agreed on. This creates uncertainty and greatly increases costs for both road
users and taxpayers. The improvements that are sometimes achieved in terms of
quality and environmental-friendliness should be viewed in relation to the
additional costs they generate.
To ensure that industry-wide agreements are followed and to counteract
inefficiencies in the procurement processes, consideration should be given to
instituting a national coordinator for public transport a type of ombudsman. This
coordinator should probably be appointed and supervised by the Swedish
Association of Local Authorities and Regions (SKL). The primary task would be to
coordinate and support the public transport authorities in their procurement
processes.
Due to excessively detailed traffic contracts that do not follow industry-wide
standards in combination with stiff competition, the majority of bus operators face
major profitability problems. As a result, there are few funders who are willing to
finance the purchase of bus fleets at a reasonable price.
Banks cannot adequately taken into account the strong correlation between public
transport buses under contract and society's need for public transport, which would
reduce both counterparty and residual value risks. It should therefore be the public
transport authorities' job to clarify the correlation by providing written confirmation
(guarantee) that the purchased buses will be used even if the bus operator
becomes insolvent.
If there is no change as proposed in this report, the goal of doubling travel by
public transport by 2020 would be difficult to achieve. Meanwhile, costs would
increase by more than the amount of travel itself. In such a scenario, the funders
24
)
would in all probability continue to be cautious. Bus manufacturers would be forced
to build up even greater exposure with their customers. Several bus operators
would most likely be knocked out, causing less competition on the market.
Ultimately, it would be the travelers and the taxpayers who would be the biggest
loser in such a scenario.
25
)
5 Appendix
5.1 Bibliography
Documents
Allmn trafikplikt en vgledning [Public service obligation a guide], Transport
Analysis, July 2011
Arriva's Annual Reports 2005-2012
En utvecklingskraftig bussbransch Frutsttningen fr frdubblad kollektivtrafik
[Strong development in the bus industry Conditions for doubling public transport],
Svenska Bussbranschens Riksfrbund March 12, 2012
Keolis' Annual Reports 2005-2012
Netbuss' Annual Reports 2005-2012
Nobina's Annual Reports 2005-2012
P vg mot en mer kostnadseffektiv kollektivtrafik [On the way to more cost-effective
public transport], Svenska Bussbranschens Riksfrbund, March 2013
Statistics on the bus and coach industry, Svenska Bussbranschens Riksfrbund, March
12, 2013
Veolia's Annual Reports 2005-2012
Electronic sources
http://www.brhistoria.se/Kollektivtrafiken/Regleringarochavregleringar.aspx
http://www.bussmagasinet.se/2013/03/statliga-och-kommunala-bolag-sanker-
bussbranschen/
http://www.svenskkollektivtrafik.se/Nyheter1/2011/December-2011/Nya-
kollektivtrafikmyndigheter-2012/
Databases
Retriever
26
)
5.2 Interviews
County public transport authorities:
Henrik Dagns, Traffic Director, Sknetrafiken
Bjrn Holmberg, Head of Information & Head of Staff, SL
Michael Karlsson, Section Head, Traffic Administration, Financing and Investment, SL
Matti Lahtinen, Procurement Manager, Vsttrafik
Johan Wadman, Traffic Director, Public Transport Administration, Uppsala lnstrafik
Bus operators:
Martin Atterhall, Fleet Manager, Nobina Fleet AB
Marie-Louise Bergkvist, former Managing Director Buss i Vst Trafik AB
Katarina Bjurman, Nobina Sverige AB
Mikael Dahlborn, Financial Manager, Nobina Fleet AB
Niels Peter Nielsen, Managing Director, Nobina Denmark
Per Skrgrd, CFO Nobina AB
Johan hlander, Managing Director, Arriva Sverige AB
Magnus kerhielm, Managing Director, Keolis Sverige AB
Bus manufacturers:
Hkan Bjrk, Head of Key Account Management, Buses & Coaches, Scania AB
Claus Bay, Managing Director, Svenska Neoplan AB
Stefan Eriksson, Deputy Managing Director, Svenska Neoplan AB
Jonas Helsner, Sales Director, Solaris Sverige AB
Jurong Li, Business Controller Area North at Volvo Bus Corporation, Volvo Bussar AB
Funders:
Per Andersson, Senior Transaction Manager, DNB Bank Asa, Swedish Branch
Stefan Alvolin, Vice President Client Executive Large Corporates, Swedbank
Peter Bergmann-Stumpp, Director at Carnegie Investment Bank, Fixed Income
Origination, Carnegie Investment Bank AB
Thomas Bohlin, Key Account Manager, Nordea
Christoffer Granlund, Financial Sales & Vendor Manager, Siemens Financial Services
Sven Grill, Product Owner Structured Lease Finance, Handelsbanken
Elisabet Holst, Key Account Manager, Nordea
Mats Holmstrm, Global Head of Project Asset and Export Finance, SEB
Ola Mellberg, Account Mager, De Lage Landen Finans AB Sweden
Mats Nystrm, Client Analyst Large Corporates, Swedbank
Christer Olander, Senior Transaction Manager, Project, Asset & Export Finance, SEB
Mattias Wikholm, Head of Corporates Sales/DNB Bank Asa, Swedish Branch
Industry organization:
Lars Annerberg, Manager of Contracted Fixed Route Services/Svenska
Bussbranschens Riksfrbund
27

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Analysis of Alternative Financing Possibilities for Bus Operators

Stockholm, December 2013

Member of Ernst & Young Global Limited

This report was written by EY1, serving as an independent observer working on

1.3 Limitation of liability7

2 Swedish public transport market

2.1 Overview of the Swedish public transport market

0 Revenue from operations

Contribution/capital infusion - municipality

2.3 Travel by public transport must be doubled by 2020

2.4 Regulations and deregulations

2.5 Business model

Figure 3. Business model Regional transport services25

2.6.2 Bus manufacturers/suppliers

2.7 Bus operators' profitability and financial situation

2.7.1 Sales and profitability

EBIT margin (%)

2.7.2 Capital structure

3.1.1 Funders and arrangement of financing

3.2 Credit risks

3.3 Summary of observations

4 Concluding remarks from the report writers

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