CFO interview: Danish railway on track to carbon neutrality

“Our target is to grow passenger revenue by a third from 2019 to 2030”, says Thomas Thellersen Børner, Chief Financial Officer of Danish State Railways (DSB). DSB is investing to ensure full electrification and conversion of its fleet of trains, and targeting zero emissions by 2030. The railway transport company is also in the midst of changing in-house thinking from train punctuality to customer punctuality.

DSB is an independent, public state-owned enterprise under the Danish Ministry of Transport and Housing. It is the most important passenger traffic company in the country and provides regional train services, long-distance transport services, and the hybrid urban-suburban S-trains serving the Copenhagen region.

In November, NIB signed a 15-year loan agreement of EUR 400 million with DSB to finance the acquisition of electric rolling stock during 2020–2025. The loan will help finance 42 new, electric locomotives as well as more than 100 trains and coaches. DSB’s fleet currently includes around 200 diesel locomotives and trains. The loan project is eligible for being financed with NIB Environmental Bond proceeds.

The investment is part of a ten-year programme that aims to replace the company’s ageing fleet and to curb CO2 emissions to zero by 2030. In addition, DSB expects to both streamline its operations and to save so much energy that it can halve its energy consumption by 2030.

The investment is a significant step towards realising the Danish government’s carbon emission policy. In 2019, the Folketing passed Denmark’s first binding climate law which forms the basis for action plans that aim at reducing total greenhouse gas emissions in Denmark by 70% by 2030.

DSB transports about 70% of all train passengers in Denmark. How has the COVID-19 pandemic impacted the number of people travelling, and how do you expect traffic to develop in the years ahead?

“We have almost 200 million train customers per year, and we expect that figure to increase in the coming years. It is obvious that the COVID-19 pandemic has reduced the number of customers and, right now, the amount of customers are probably at about 60% compared to 2019. We expect to end up at about 65% for the whole of 2020”, says Mr Thomas Thellersen Børner, CFO of DSB.

“But our long-term expectation is that we will grow. This is because we expect public transport to increase and become a much more prominent part of the total traffic in Danish society, partly due to the outlook for increased traffic congestion on the roads, and the green agenda. The new trains that we are investing in with NIB’s financing will also have a major impact on passenger growth, as they will improve customer experience and allow us to produce a better service for our customers.”

To what extent does the procurement plan of the e-trains in the coming years go hand in hand with the completion of the entire electrification of the Danish rail network?

“This is part of a bigger investment were DSB invests in trains and locomotives and the workshops to keep them rolling, and then the Danish state invests in the infrastructure. We are in the middle of a major cooperation with the Danish state agency Banedanmark, which contains investments of more than 10 billion euros in new rolling stock and workshops, as well as a full electrification of existing rail tracks, and a new electric signalling system for both long distance and regional tracks, and the tracks that run the S trains in the Copenhagen area. All of these investments contribute to improving customer experience.”

Banedanmark is responsible for responsible for maintenance and traffic control on the entire state-owned Danish railway network.

“Apart from the investment programme, we are generally working a lot with being a customer-oriented train company. This is not a new thing, but we are training our personnel to view themselves as being part of a company that does not run trains, but rather transports customers with all that this changing of approach entails.”

“We are in fact starting to see some nice effects from focusing heavily on that perspective. One example is that, if you go five years back in time, when we measured our punctuality, it was train punctuality. So, what percentage of trains arrive at destination according to the schedule. Now, we measure customer punctuality to their end destinations, because you might want to shift from a regional train to an S-train on your way and it’s the total costumer experience that matters to us. This approach sharpens our focus and helps us drive growth through better customer satisfaction.”

“We are working to substantially reduce travel times and increase frequencies throughout the Danish rail network towards 2030, which demands some minor further investments to supplement the investments already decided in parliament.”

How will the new locomotives and trains reduce travel time, increase efficiency and connectivity?

“Today, we have a lot of different trains and locomotives that are either driven by diesel or electric power, which are of different generations and therefore maintained at different and rather specialised, workshops. Some of them are so old that they are no longer produced, so we have to make the spare parts ourselves. We have three spare part factories here in Denmark producing electrical and mechanical parts for which there is no other market for. So, you know, that is not a recipe for success.”

“I am actually quite proud that we manage this complexity while at the same time deliver punctuality at a very high level compared to other European countries. Punctuality wise, we are among the best.”

“It is pretty clear that a more homogenous and modern fleet, with higher operational flexibility and technical stability, will drive even better punctuality and better customer satisfaction. For us, this is instrumental in fuelling future growth and in our ambition to be CO2 neutral in 2030, which is our goal.”

What will happen to the old locomotives and trains?

“Following our green ambitions it is clear that waste management and recycling is a chief aspect of our business today. This also applies to how we treat our equipment. All parts will be handled according to the highest standards in terms of avoiding pollution and other harm. As much as possible will be recycled. Any part that cannot be recycled or sold off will be handled according to the highest standards of waste management. Denmark has high standards and regulations in place, and we of course live up to these.”

“If we can sell the old locomotives and trains, then we will. We will, however, only sell them to replace something that is even less efficient or even less environmentally friendly.”

“The new locomotives that we are buying from Siemens have a recycling percentage of 98%. That is rather positive.”

What is the additionality for DSB having this long-term sustainable financing from NIB?

“In general, we are increasingly aware of partnerships being value-driving aspects of our business, and that also goes for our green agenda. It is of course essential for us to partner up with collaborators that have a similar focus as we have on the green agenda. Our green ambitions do not only concern the operational value chain, but also our financial relationships.”

“I actually think that your organisation’s strong focus on infrastructure and sustainability goes hand in hand extremely well with our ambitions, as well as the Danish governments’ ambitions for the Danish railway.”

“So, our long-term ambitions in electrical and environmentally-friendly trains fit perfectly with NIB’s long-term sustainable financing contribution. This is clearly of value for us, and I also think that this is of value to NIB.”

“With the investments, we ensure that the train is a sustainable choice and an efficient transport choice also in the future”, says Mr Thomas Thellersen Børner, Chief Financial Officer of Danish State Railways (DSB).