1. Challenges and vision of company future development within a competitive market ČD, a.s., Jiří Havlíček EFRTC General meeting, 22/06/2012

2.  In 2011 ČD carried 166 mil. travellers / year, means cca 450 000 daily  In 2011 ČD carried within integrated transport systems cca 49 mil. people, means cca 135 000 daily  Increase of revenues from tickets cca 5% compared to 2010 cca 450 000 Railway transport represents one of the key and accessible mode of transport cca 135 000 +5 % 2

3. Passenger transport – ČD, a. s. Regional  Operated under long term agreements with each of the 14 regions, including the city of Prague Long-distance  Consists of interregional and international rail transportation activities  Operated under long term agreements with the state Commercial  Non-regulated passenger transportation operations  Includes „high-speed“ operations – SuperCity Pendolino 3

4. Renewal of rolling stock fleet is ine of the key preconditions od ČD competitiveness Signed contracts (mil. CZK)New and modernized Rolling stock Rolling stock investments NewModernization 4

5. Competition on Czech railway market Freight transport Market opened 63 licensed operators for freight transport CD Cargo market share (86,84 % in gross tkm, 78,19 % in train km) Passenger transport Market opening (22 officially registered operators for passenger transport) Tenders for operation of long-distance lines are being commenced by Ministry of Transport First three tenders to be opened in 2012/13 - up to 8 % of market (9 interested parties for the first one) 5 Fair competition is desirable, motivates to the bid of higher quality

6. One of the major preconditions is harmonization of conditions with road transport 6  Imbalance between railway and road infrastructure development  Each train pays for use of any type of infrastructure, in road sector only selected group of cars pay on selected network  Higher requirements set in legislation for railway business

7. One of the major goals is finalization of corridor lines modenization with future construction of high speed lines and convergency of infrastructure priorities  Czech railways are under-invested and overall modernization runs slowly and with delays to original timeplans and in comparison with neighbouring countries  Insufficient parameters of modernized corridors limit competitive business (maximum speed up to 160 km/h on limited part of network)  Capacity issues around municipalities  Strategy of infrastructure development must reflect market needs and plans of „order parties“ 7

8. Slow speed implies low interest in railways service Examples of travel time by train, high speed line and bus on selected lines: LineBy train nowadays High speed line (estimation) By bus nowadays Prague – Nürnberg5 hod 46 min3 hod4 hod 15 min Prague – Brno2 hod 40 min1 hod2 hod 30 min Prague – Pilsen1 hod 35 min30 min1 hod Prague - České Budějovice2 hod 35 min1 hod 35 min2 hod 35 min 8

9. Railway system is very closely linked, sensitively reacting on any failures  Inhomogeneous and potentially conflicting strategies  Missing economic motivation for investments in the projects of operators´interest  Global optimum of railway system not achieved, synergies not used, increase of costs of railway system State SŽDC, state organization  Infrastructure operation  Infrastructure maintenance and development  Allocation of capacity for operators ČD, a.s.  Railway transport passenger operator  Railway stations ČD - Cargo, a.s. RISKSCurrent state in the Czech Republic 9

10. Organizational structure overview Three main arguments in favor of the proposed organizational structure:  Considerable cost savings due to synergies and increased efficiency  Coordination of priorities between rail operator and infrastructure manager  Best practice option used by the most successful companies in the rail industry Infra- structure Freight transport Passenger transport Station & Service Railway holding Shared services Potential solution might be an integrated railway holding with four subsidiaries 10

11. 11 „Holding model“ management (implementation of joint policies, methodologies etc.) Shared service centres for prioriti areas within ČD Group (IT, accountance, investments, treasury, purchasing) Preparation of Passenger transport subsidiary company Preparation of „Stations and service“ subsidiary company ČD has already commenced the steps towards holding structure implementation

12. Czech Railways put a strong emphasis on the optimization of the railway station management 12  Introduction of station fee Current projects Optimization and standardization of services in stations along with the fee and the new categorization  Sale of non-essential railway station buildings to municipalities  Sale of other dispensable real estate property in the railway stations  Revitalisation of the Prague Main Station revitalisation in cooperation with Grandi Stazioni  Revitalisation of the station buildings through differentiated funding

13. NUMBER OF PASSENGERS 1 REGIONAL VS. LONG-DISTANCE POSSIBILITY TO CHANGE TRAINS 3 Categorization has been updated recently based on these three parameters 13 Categorization reflects the traffic importance of individual stations  Reflects the volume of necessary services  Reflects number of passengers and the volume of necessary services  Reflects the time passengers usually spend in stations and the volume of necessary services 2

14. 14  Elementary services will further be completed with a range of additional services. However, these will not be granted for each category of stations (e.g. Bicycle depository, lost and found etc.)  Legislation changes are expected to be necessary to start the station fee  Exact date of fee introduction has not been set yet The station fee is in preparation, being intensively discussed with the Ministry of Transport

15. 15 ČD optimizes the property portfolio also by the sale of dispensable (non-core) real estate property VOLUME OF non-core PROPERTY EXPECTED EFFECTS Process  Ca 4600 buildings  Ca 62 mil. m2 plots  Cash income  Decrease of maintenance and renovation cost  Higher work efficiency  The sale process will be supported by a consorcium of companies (real estate agents, management consulting, investment banks)  Because of the enormous volume of property, ČD intends to sell it in large „packages“  Part of the property will be probably sold to the infrastructure manager (SŽDC – state organisation)

16. 16  Main features of this revitalization:  Enlargement of underpasses  New Passenger service center  New luggage depository  Rennovation of the facade The Prague Main Station is being successfully revitalised in cooperation with Grandi Stazioni

17. 17  ČD is trying to obtain European funding for the rennovation of railway st.  Currently a notification process is running to confirm this subsidy will not account for a inadequate state aid The challenge is to find sufficient financing for the renovation of the core assets Regional operational programs  Programming period 2009- 2013  600 m CZK  Renovation of station buildings

18. Thank you for your attention HavlicekJ@gr.cd.cz 18