Originally Abellio was established to prepare for the liberalization of the European rail market and help NS to achieve its objectives in the Netherlands. Abellio’s strategy was established on three pillars: earn, learn and prepare. Ultimately the Dutch passengers should benefit from our presence abroad. Abellio’s strategic priority is to offer reliable services to our passengers and achieve sustainable financial results whilst effectively managing risks through a diversified portfolio and keeping investments at an acceptable level as agreed with our shareholder the Dutch Ministry of Finance.
All of Abellio’s franchises in the United Kingdom (UK) and Germany are expected to be profitable over their contract periods. However, the rail markets in both UK and Germany are currently difficult to operate in and some restructuring of the national rail industry in both countries is anticipated to achieve better alignment between track and train, to facilitate future climate targets and growth in mobility. For future sustainable profitability of our existing contracts it is important to reach agreement with the franchising bodies to compensate for the challenges that train operating companies are facing which are beyond their control. In the UK, passenger railway contracts are tendered as net contracts, meaning that passenger revenue risk is taken by the operator and any subsidy received is calculated on costs net of revenue. In Germany, most passenger railway contracts are tendered as gross contracts, meaning that passenger revenue risk is retained by the tendering Transport Authority and any subsidy received is based on the gross costs of the contract.
In 2019 Abellio worked within the capital at risk framework which as between the Dutch Ministry of Finance and NS. With this framework NS and its subsidiary Abellio can develop foreign activities whilst balancing acceptable risks and results. The framework stipulates how much capital at risk can be invested in the UK and Germany. Foreign franchises and concessions, like Dutch activities, involve (financial) risks. The Dutch State as shareholder, represented by the Ministry of Finance, has in 2016 agreed with NS rules to limit the financial exposure in foreign activities. The core of the framework is that an upper limit has been set for the capital at risk that NS, as the parent of Abellio, may allocate for its foreign activities of Abellio. This consists of € 500 million for invested capital and issued guarantees. The total amount of invested capital and issued guarantees is € 418 million as at 31 December 2019 (31 December 2018 € 452 million). An additional limit of € 500 million applies to the bids in the United Kingdom for specific parent company guarantees that the franchise provider requires from the ultimate shareholder. These guarantees can be seen as a contingent contribution in capital which can be drawn as a subordinated shareholder loan to support activities of the franchise and to fulfil required liquidity ratios. No capital contributions or equity investments are required at the start of a franchise. Shareholder loans drawn for investments during the franchise are relatively low because investments in rolling stock are financed via operational lease transactions for the duration of the contract. The total amount of parent company guarantees is € 480 million as at 31st December 2019 (31 December 2018 € 326 million) of which an amount of € 89 million has been drawn as shareholder loans (31 December 2018 € 64 million). The increase in total parent company guarantees in 2019 regards the new franchise East Midlands which started in August 2019, indexation and an increase in the value of the British pound from 1.11 at 31 December 2018 to 1.18 at 31 December 2019.
Abellio capital at risk
(in € million)
Equity attributable to NS
Guarantees provided by NS
Called on under guarantees (NS portion)
Total guarantees provided & equity
Total normal PCS guarantees provided by NS
PCS guarantees called on (NS portion)
Of which called on