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DEUTSCHE BAHN AG
Project risks
The modernization of the overall rail system involves high
amounts of capital expenditures as well as a large number of
highly complex projects. Changes in the legal framework,
delays in implementation or necessary adjustments during the
frequently multiyear project terms can result in project risks
that have a cross-business unit impact due to the networked
production structures. Furthermore, increased prices for
ordered services or construction measures can lead to negative
effects. We take such risks into account by intensively monitoring
our projects. This particularly applies to our central
major projects.
Infrastructure financing risks
A key element of the German rail reform Act is the Federal
Government’s constitutional obligation to finance the infrastructure.
The crucial elements are not only a sufficient amount
of resources, but also the predictability of available funds. We
signed the Service and Financing Agreement with the Federal
Government, which covers financing of the existing network
until 2013. However, in order to ensure the long-term competitiveness
of the rail mode of transport, sufficient availability of
funds is required to ensure systematic new construction,
expansion and elimination of bottlenecks (requirement plan
capital expenditures). Our mid-term corporate plans assume
Federal funding will be forthcoming for the successful realization
of these capital expenditures, although a corresponding agreement
could not yet be concluded. moreover, there is also the
risk that the Federal Government may demand refunds due to
an audit of how Federal funds were employed.
Risks related to reduced concession fees
The amount of financial resources available to the contracting
organizations to order routes from transport companies is the
key factor driving development in the regional transport market
in Europe. For this reason payments generally received from
state or state-financed contracting organizations (concession
fees) represent a major portion of revenues in regional passenger
transport. Against the background of the public sector’s need
to make budget cuts there is a risk that the level of concession
fees available for future tenders or existing services may be
reduced. We counter this risk by making corresponding adjustments
to our service offer and by increasing our farebox revenues.
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Financial risks
We counter risks associated with interest rates, foreign exchange
and energy prices arising from our business operations with,
among other things, original and derivative financial instruments.
These A instruments [1] are explained in the Notes.
Exchange rate risks have risen as we expanded our international
business activities because of cash flows generated in
different currencies. This applies, in particular, to the US dollar,
the British pound and the Swedish krona.
A portion of our obligations stemming from pension benefits
and other pension-benefit-related commitments is covered
by plan assets consisting of stocks, property, fixed-income
securities and other assets. Declines in the value of these assets
directly reduce the extent of pension benefit obligations covered
by plan assets and can, under certain circumstances, lead to the
company making additional allocations.
Based on our good A ratings [2] we have very good
access to the capital markets. In order to ensure DB Group’s
solvency and financial flexibility at all times we have cash and
cash equivalents at our disposal as well as credit facilities, a
€ 2 billion commercial paper program and a € 15 million debt
issuance program. Within the framework of our cross-Group
cash-pooling arrangement we ensure that funds can be made
available within the Group as needed.
Legal and contractual risks
Legal risks may arise, for instance, in the form of claims for
damages and from legal disputes. These frequently stem from
construction projects, real estate transactions, or environmentrelated
issues. moreover, there is also the risk that some of the
long-term transport contracts may become uneconomical due
to unforeseen increases in costs. In cases like this we try to
counter the negative effects with commensurate measures to
reduce costs and raise income.
Provisions are made for legal and contractual risks after
estimating the respective probability of occurrence. The actual
utilization of these provisions depends on whether the risks
materialize to the extent as set forth in our current estimates.