A challenging quarter for Norske Tog in a Norway closed down by the coronavirus

The traffic reduction for the train operators was at 80-90 per cent in the second quarter of 2020. The operators’ drop in revenues was partly compensated by state rescue packages, so that the operators could pay rental costs for the stock.

The state rescue packages contributed to Norske Tog maintaining its revenues. Norske Tog’s operations were therefore not greatly affected by the infection control measures. In the first six months of 2020 Norske Tog saw a pre-tax profit of NOK 27.8 million (NOK 136.8 million). The decrease in profit is due to a change in value on bond loans (NOK 44 million) (no cash effect), somewhat lower income (approx. NOK 14 million) and somewhat higher costs.

Successful startup

In June Norske Tog had the startup of Traffic Package 2 Nord, for the trains between Oslo and Bodø, where SJ Norge is the operator.

“The preceding process went very well, with smooth inspections and takeover according to plan. With the startup of Traffic Package 2, Norske Tog now has three customers: VY, Go-Ahead and SJ,” says Øystein Risan, CEO of Norske Tog.

The same day that Traffic Package 2 started up, Norske Tog signed the contract for Traffic Package 3 West, Oslo-Bergen, with VY Tog. Start-up of Traffic Package 3 is in December.

Some of Norske Tog’s procurements are two to three months delayed as a result of the infection control measures. This applies to the tender process related to the procurement of new local trains, as well as the tender deadline for mid-life upgrades of type 72 local trains. However, the delays are considered to be inconsequential.

Boost in digital expertise

At the end of May, Norske Tog moved to new premises at Drammensveien 35 in Oslo. However, for the entire second quarter most of Norske Tog’s employees have worked from home.

“A positive impact of extensive working from home arrangements is a significant boost in digital expertise in the entire organisation. This is learning that Norske Tog will benefit from going forward,” Risan says.

Need for new trains

In the second quarter Norske Tog has provided input to the Norwegian Railway Directorate’s work on developing a long term plan for phasing out and procuring rolling stock. The point of departure for Norske Tog’s recommendations is that much of the rolling stock is very old and will need to be replaced in the next ten years. The average age of rolling stock is 18.8 years. The oldest trains on Norwegian rails are more than 40 years old.

Norske Tog has estimated the investment need for rolling stock in the period from 2020 to 2031 to be NOK 30-50 billion. Of this, NOK 28-43 billion is related to procurements and NOK 3-6 billion to upgrades. Currently Norske Tog has 17 different train types (motor coach set and locomotive with carriages). In its recommendation to the Directorate, Norske Tog has proposed a reduction to three main types of trains: Local trains, regional trains and long-distance trains.

“Having fewer train types will reduce costs and time spent when procuring new trains. In addition, we believe that operation and maintenance will be simpler and less expensive. Norske Tog estimates that this may yield savings of more than NOK 100 million annually,” Risan says.

Further read:

The quarterly report Q2 2020 is available here.

All annual and quarterly reports is available here.