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PUBLIC BODIES AND POLICY

HIGH-SPEED RAIL:

a model extended beyond

its relevance

Thematic Public Report

Executive Summary October 2014

boxsolid

his executive summary is intended to facilitate rea-

ding and use of the report from the Cour des

comptes.

Only the report implicates the liability of the Cour des

comptes.The responses from the administrations and

organisations concerned are appended to the report.

SOMMAIRE

Executive summary of the Thematic Public Report by the Cour des comptes

Introduction

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

A success that has reached its limits

. . . . . . . . . . . . . . . . . . . . . . . . . .7

A decision-making process that inevitably leads to the creation of

new lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

An unsustainable cost

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Recommendations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

INTRODUCTION

Executive summary of the Thematic Public Report by the Cour des comptes

The history of high-speed rail in France is the history of the convergence, 30

years ago of an avant-garde technology with a large public. Indeed, many

French people have had the opportunity to enjoy the comfort and speed of a

mode of transport that is moreover considered by the cities it serves as an indis-

pensable landmark of modernity.

As the high-speed rail network (HSL) has expanded, the relevance of the model

and its benefits to the community have gradually decreased: new lines are less

and less profitable, the extremely large number of stations served is inconsis-

tent with the very notion of high speed, the profit margin obtained from this

operation as a whole is decreasing and each year covers a slightly smaller por-

tion of the deficit incurred by the other SNCF rail operations.

This investigation completes several studies by the Cour des comptes on the

subject of rail transport: regional express transport in 2009, Transilien in 2010,

maintenance of the French national rail network in 2012, accounts and manage-

ment of the RFF (French Rail Network) in 2013, trains d’équilibre du territoire

(TET, trains linking several regions) in 2014.

It highlights three facts that partially challenge the current model, and which

are reflected by the three chapters of the report:

• the benefits of high-speed rail for the community are not as great as were

anticipated and the very heavy investment was committed at the expense of

maintaining the conventional network ;

• the decision-making for the creation of an HSL is presented as a rational pro-

cess, but in practice, it remains highly dependent on subjective and political

parameters ;

• the financial resources allocated for the construction of the infrastructure

nowadays barely enable funding of the lines under construction.

Two major questions remain open :

- the arbitrage between the increase in tolls payable by the SNCF which reduce

the profits of the high speed operation but are essential to renovate and

modernise the conventional network ;

- the choice of a sustainable source of funds to replace the environmental tax

with a view to the implementation by 2030 both of new projects, especially

those adopted by the "Mobilité 21" Commission, and other infrastructure clas-

sified by the government as priorities, such as the Seine-Northern Europe

canal.

INTRODUCTION

Executive summary of the Thematic Public Report by the Cour des comptes

A success that has reached its

limits

A technical success, the TGV in

France is today the most important

component of the long-distance pas-

senger railway system. Its ability to

serve the entire country using the

conventional network as well as the

high-speed lines makes it especially

attractive.

This

positive

picture

should not obscure either the limits

to this success nor its negative

effects on the rest of the railway sys-

tem.

A French model characterised by a

specific type of equipment, which

also runs on the conventional net-

work to serve more destinations

than in any other country

Twenty years after the Shinkansen

came into service in Japan in 1964, the

SNCF became the pioneer of high-

speed rail in Europe, bringing the first

sections of the high-speed line (HSL)

on the Paris-Lyon rail link into service.

The initial success of this link has led

the government to encourage the

development of a high-speed line net-

work. These lines were originally des-

igned for trains travelling up to

270kph, a speed that was increased to

300 and then 320 kph on the newest

lines. The network now extends

2036 km, and it is envisaged that it

will increase to 2700 km by 2018,

when the four lines currently under

construction will be completed.

The French network is characterised

by "mixed high speed", where the TGV

trains, specially designed for high

speed, run on both HSL open only to

this traffic, but can also make use of

the conventional network. On ave-

rage, a TGV runs about 40% of its time

on the conventional network at the

speed appropriate to that network,

i.e., below 220 kph. This mix results in

the particularity of the French model:

it serves a large number of destina-

tions, over 230 in total, consisting of

intermediate stops as well as end-of-

line stations. This distinctive feature

has implications in regard to the ave-

rage speed of high-speed trains and

their profitability.

Considering the significant invest-

ment required to build high-speed

lines and purchase the rolling stock,

high-speed rail really has to be a mass

transport mode, that is, it must serve a

large number of passengers, travelling

in high-capacity trains with high occu-

pancy rates. It will therefore be all the

more profitable if it serves major

population centres with high fre-

quency (23 return journeys per day

between Paris and Lyon or Paris and

Nantes, for example). But France is

already suffering from an imbalance

between the capital city and the small

number

other

major

cities.

Multiplying thenumber of stations

served necessarily leads to lower fre-

quency and more importantly a large

Executive summary of the Thematic Public Report by the Cour des comptes

A success that has reached its limits

fleet whose purchase, maintenance

and renewal are a heavy burden on

the accounts.

TGV service lines and destinations

Source : Guide TGV, SNCF (june 2014)

Executive summary of the Thematic Public Report by the Cour des comptes

A success that has reached its limits

The « the relevance zone »

for high-

speed rail compared with cars and

planes represents a journey of bet-

ween an hour and a half and three

hours

Fourteen countries in the world have

high-speed rail, using very different

models. In Asia, China and Japan have

the world's two largest networks, with

lines

totally

separate

from

the

conventional network. Several models

can be found side by side in Europe :

Spain (the largest European network)

and France use a partial mix. Other

countries, such as Italy, have an exclu-

sive high-speed network. Germany is

alone in having a full mix : its high-

speed network is limited and it is used

by conventional trains travelling at

normal speed, which limits the time

slots during which high speed can be

used. In fact priority in that country

has been given to the renovation of

the conventional network in order to

decongest it to benefit North/South

freight transport.

There are two consequences to this

heterogeneity. First of all it is difficult

to draw lessons from experiences in

neighbouring countries, with the

exception of one: The high-speed train

is only really competitive with cars

and planes, in terms of the market

share of total traffic between two

cities, for journey times between one

and a half and three hours, that is, for

distances of between 350 and 600 or

700 km. Less than that, the car wins;

more than that, the plane.

A success that has reached its limits

Executive summary of the Thematic Public Report by the Cour des comptes

Map of high-speed lines in Europe

Source : High-Speed Europe, RFF, 2014

It is consequently difficult to talk

about

« European

high-speed

network » as the practices of the dif-

ferent countries are so diverse in this

regard. Therefore, the argument of a

European network is rarely relevant in

justifying the creation of a national

line. While the London-Paris high-

speed link is pertinent, that between

Paris and Barcelona is not, given the

distance, and nor is Lyon-Turin, consi-

dering its cost.

In France, the TGV has stabilised the

decline in SNCF passenger traffic. It

still represents a minority of jour-

neys and is not used primarily by

those whose priority is saving time. It

is also coming up against new forms

of competition

Within its relevance zone, the TGV

brings about both an increase in total

traffic and a shift in mode from air

and automotive travel towards the

TGV. These aggregate shifts thus

account for 67 % of total traffic

increase for the Mediterranean TGV

A success that has reached its limits

Executive summary of the Thematic Public Report by the Cour des comptes

and 55 % for the Atlantice TGV and

first phase of the Eastern TGV.

Traffic in 2013 was 53.8 billion pas-

sengers-km1. It has remained unchan-

ged for five years. This level has been

achieved at the expense of long-dis-

tance conventional routes served by

Intercité trains (TET), where passen-

ger travel has fallen by five times in

thirty years and have seen the with-

drawal of many destinations. Traffic

for regional rail (TER, regional express

trains) has however increased in line

with that of the TGV, raising the ques-

tion of how expenditure is distributed

between the high-speed network and

the conventional network.

Source : Cour des comptes (according to the SOeS and monthly transport bulletins)

Note : The km of HSL are shown on the right-hand scale (filled-in squares for lines in operation,

grey for those under construction)

Km of HSL in service and passenger travel of TGV and other long-distance trains (in pas-

senger-km) (1980-2020)

Contrary to popular belief, the TGV is

not mostly used by those for whom

time saving is a priority, that is to say

those travelling in a professional

capacity :

professional

reasons

account for only one-third among rea-

sons for travel.

One passenger-kilometre: unit of measurement equivalent to the transport of one passen-

ger over a distance of one kilometre.

& ’( $

$) $

,$ ,

A success that has reached its limits

Executive summary of the Thematic Public Report by the Cour des comptes

Use of the TGV according to reasons: private 63.8% and professional 36.2% (in thousands

of journeys)

Source : Cour des comptes after processing the data of the national transport and travel sur-

vey

In addition, TGV users are in the

highest deciles of income (as opposed

to regional transport or by car for

example). These two findings on

income and motivations of TGV users

raise questions about the relevance of

a model based in part on the service

by TGV of ends of line using conven-

tional track. The comfort of an unbro-

ken journey must be set against lower

occupancy rates and the deployment

of a large fleet of expensive trains if

they are not fully utilised or running at

full speed for the whole length of their

journey.

Finally, while it has been observed

that the TGV, in its initial phase of

development, gained market share

(often more than 60%) from the plane

and the car thanks to the single factor

of "speed", in recent times a change in

behaviour has emerged among some

consumers,

for

whom

price

has

become more important than saving

journey time. Taking into account,

among other things, the disappea-

rance of a large number of conventio-

nal long-distance rail connections

(Intercités/TET), customers are ten-

ding to move away from the railway

towards other modes of transport,

coach or carpooling, which, like low

cost air travel, have become formida-

ble competitors. The SNCF is still pro-

tected by the restrictions that exist in

France on long-distance coach trans-

port, but this de facto monopoly situa-

tion is not expected to last.

A success that has reached its limits

Executive summary of the Thematic Public Report by the Cour des comptes

The arguments regarding environ-

mental impact, economic develop-

ment

equality

between

the

regions must be qualified

The TGV enjoys a bias in its favour as

regards its impact on the environ-

ment, which must be qualified: energy

efficiency, per person transported,

depends by definition on the occu-

pancy rate. Even though this rate is far

higher for the TGV than competing

modes on the most popular lines, it

falls considerably as soon as TGV

trains run on conventional lines. The

same

reasoning

applies

emissions per passenger : if the rate of

TGV occupancy is less than 50 %, the

TGV's CO

balance is no better than

that of the coach. In addition, these

emissions also depend on the origin of

the electricity used. By purchasing on

the market, the SNCF imports a far

higher « carbon » proportion than the

French average, which is remarkably

low because of its nuclear power.

Following the calculation methods

adopted, this is capable of worsening

the CO

balance even further.

Furthermore, the construction phase

of the high-speed lines (HSL) also pro-

duces high levels of CO2: accordingly,

a comprehensive carbon balance of

the Rhin-Rhône (Eastern

branch) HSL

has showed that if one weighs all

emissions caused by the construction

of a line with emissions saved through

a shift in modal transport towards the

TGV, the line becomes carbon neutral

only 12 years after its entry into ser-

vice.

In the end, the cost per ton of CO

« avoided » through HSL, the relevant

environmental criterion used on pro-

jects, remains incomparably higher

than the carbon market price and

even the shadow price of the social

cost per tonne of avoided CO2 fixed at

€ 32 in 2010, and estimated at € 100

for 2030.

Regarding economic development,

there is a contrast between the gene-

ral opinion, which holds that an HSL is

always a positive factor for economic

development, and the few scientific

studies that post a more neutral

score. According to these studies, a

region

that

already

dynamic

remains so, with or without an HSL. A

region in difficulty also remains so,

and the examples of activities that

grow up around the new rail infra-

structure have more to do with relo-

cations than net creation.

It follows that an HSL has an ambiva-

lent effect on regional development.

Contrary to the notion of TGV « for

all » that would bring equality bet-

ween the regions, the TGV instead

tends to accentuate the polarisation

around large cities, particularly the

largest of them, primarily Paris.

Faced with this rather mixed balance,

it would appear necessary to review

the French model, from at least two

perspectives :

- firstly, technological: even though

France was truly a pioneer in high-

speed rail, it has failed to impose its

model internationally, with only two

A success that has reached its limits

Executive summary of the Thematic Public Report by the Cour des comptes

exceptions. Moreover, the parameters

of the new international tenders

require commercial speeds above

350 kph, which the French offer is

unable to meet. To remedy this delay,

a « TGV of the future » is among the

34 projects in the «N ew Industrial

France" Plan announced in July 2013.

- secondly, policy, which lies in impro-

ving the connection between high-

speed rail and other modes of rail

transport. To this end, rather than

considering the TGV as the sole land-

mark of modernity and retreating into

the contradiction of « TGV everyw-

here, stops everywhere», it is urgent

to define a joint offer between TER

and TGV, which, on a conventional but

renovated network, can deliver a rapid

service, but at less than 220 kph.

Similarly, the connection between the

railway and modernised road links (car

pooling, car sharing, for example)

should be considered as a priority in

passenger transport policy.

Executive summary of the Thematic Public Report by the Cour des comptes

A decision-making process that

inevitably leads to the creation

of new lines

Investment in high-speed lines is

subject to a socio-economic assess-

ment the results of which, even if

negative, frequently become blurred

in the decision-making process; this

leads to projects being implemented

when their relevance is sometimes

questionable. This trend is reinforced

by the increasing use of co-financing

with local authorities. These opera-

tions call for counterparties who are

able to act against the rationality of

investment in high speed, as the

most recent projects demonstrate.

The socio-economic analysis of pro-

jects can be improved but remains

essential

Among the projects for new high-

speed lines or any other transport

infrastructure, it is necessary to distin-

guish between those that are most

profitable for society and those that

are much less so. Socio-economic ana-

lysis (also called cost-benefit analysis)

is the method most used internatio-

nally for the assessment of these

investments. By reverting to a single

criterion of a monetary nature for dis-

parate data (value of time, of a ton of

carbon, etc.), this enables the calcula-

tion of the gains for society resulting

from a public investment by subtrac-

ting the costs involved and also taking

into account the lifetime of the infra-

structure using the discount rate. The

result of this weighted sum, the net

present value (NPV), like the ratio of

NPV to public credits (i.e., the NPV per

euro invested), are important parame-

ters for comparison between projects.

The internal rate of return or IRR,

which is the discount rate that reduces

to zero the NPV, discriminates against

it : any project where the IRR is below

a certain value, 4 %, is in principle

ruled out.

Multi-criteria analysis, which is the

other evaluation method, is less tech-

nical and responds better to the ques-

tion of alternative solutions (railway

rather than a road) but has the disad-

vantage of leaving a lot of room for

subjectivity in the weighting of crite-

ria.

In France, the Loi d’orientation des

transports

(LOTI,

Guidelines

for

Internal Transport Act)

1982

requires that a socio-economic and

environmental assessment be inclu-

ded in the public inquiry for major

investments in the field of transport.

All civil government investments are-

subjected to an analysis of this type

under the Act of 31 December 2012

Executive summary of the Thematic Public Report by the Cour des comptes

on multi-annual public finance plan-

ning. For the largest projects, an inde-

pendent expert second opinion is now

required.

On the conclusion of the socio-econo-

mic analysis currently being conduc-

ted, the overriding advantage of rail

infrastructure lies in the time savings

that it allows. However, this analysis

has encountered several limitations.

First, it is difficult to obtain indepen-

dent expert second opinions due to

the reluctance of the SNCF to disclose

the data for traffic per line, for reasons

of commercial confidentiality. This

data is nevertheless essential for

assessments and expert second opi-

nions.

Furthermore, the overestimation of

time savings has tended to obscure

the changes in consumer behaviour

that has turned towards slower but

cheaper transport. Above all, it has

justified the construction of a number

of increasingly important lines at the

expense of maintaining the conven-

tional network, creating an imbalance

the consequences of which are now

serious.

Despite these shortcomings, the Cour

des comptes considers that the socio-

economic analysis should remain of

prime importance – if the above-men-

tioned faults are corrected –, to the

extent that the criterion of profitabi-

lity remains decisive in justifying the

optimal use of public resources.

Nevertheless, debate remains fierce

between

the

supporters

this

approach and those who believe that

non-economic considerations (equa-

lity of access for the regions to high-

speed rail, for example) should be

incorporated into the selection para-

meters. This debate is all the more

topical now that a new ministerial

directive of June 2014 has introduced

multidimensional

approach

assessments for transport, without

citing the socio-economic assessment

in this context. However, in practice,

the socio-economic assessment was

already often pushed aside in favour

of less rational decision-making pro-

cesses. The

new

directive

could

amplify this trend.

In theory, decision-making is based

on successive stages but in fact it is

irreversible from the start

The duration of implementation of

transport infrastructure has become

significantly extended due to the pro-

liferation of stages upstream of the

project, where citizen participation in

public debate has become essential.

This participation is primarily inten-

ded to obtain citizens' adherence to

the project.

Environmental protection has also

added stages prior to the decision, as

has heritage protection during the

construction phase. Today, it takes 14

to 18 years between the first drafts

and the commercial inauguration of a

line.

In principle, in France the key stage in

the implementation process for trans-

port infrastructure is the declaration

A decision-making process that inevitably leads to

the creation of new lines

Executive summary of the Thematic Public Report by the Cour des comptes

A decision-making process that inevitably leads to

the creation of new lines

of public utility (DUP) which deter-

mines the execution of the project.

Experience shows that this stage

becomes caught up in the overall pro-

cess where successive publicity stunts

end up serving as decision-making.

This observation holds for the projec-

ted Tours-Bordeaux line (Sud Europe

Atlantique), where successive state-

ments by the Prime Minister and the

Minister of Transport in January and

February

1994

bringing

the

Aquitaine,

Centre

and

Poitou-

Charentes regions into the project,

served as the decision itself. Similarly,

the statement of the Prime Minister in

March 2004 on the Poitiers-Limoges

line had the strength of a decision

even though no prior study had been

initiated.

Beyond such publicity stunts, the pro-

liferation of "small steps" eventually

ends by entrenching a project in rea-

lity. Of course, "prior debates" to the

studies, « preliminary engineering

studies », « a preliminary project out-

line » are provided for in the legisla-

tion and validated by ministerial deci-

sions.

But

these

steps

trigger

expenses the sum of which eventually

end up justifying the implementation

of project. As the local authorities

concerned have a share of these

expenses and thus underscore their

future involvement in the realisation

of the project itself, it gradually

becomes impossible to stop.

This is all the more important in that it

has justified the emergence of a

concept of « co-construction » for the

lines arising from the « Environment

Summit », consisting of juggling preli-

minary studies and consultation at

the same time, thus reducing the

importance of the former in favour of

the latter. This was particularly true

for the Poitiers-Limoges project.

Under these conditions, the declara-

tion of public utility (DUP) adopts the

findings of the public debate as well

as the expenditure incurred in the pre-

liminary stages and ceases to act as

the trigger for the decision.

Finally, funding, even though essen-

tial, is not central to the decision-

making.

the

case

Tours-

Bordeaux, the DUP process took place

in 2006 and the selection of the

concessionaire in 2010, the financial

arrangements having taken about

four years, for a total of € 8.8 billion.

For the Poitiers-Limoges line, even

though the public inquiry has been

completed, the financing has not been

decided on, or even considered.

The assessment of the expected

return on TGV is mostly optimistic

In principle, the Réseau Ferré de

France (RFF), which is ultimately res-

ponsible for the implementation of

the high-speed lines, « may only

accept an investment project if it is

subject to specific funding in order to

avoid any negative consequences»

its accounts. IN other words, RFF may

only invest a maximum of the net pre-

sent amount of its revenues over the

life of the line, estimated at 50 years.

Then again, experience has shown

Executive summary of the Thematic Public Report by the Cour des comptes

A decision-making process that inevitably leads to

the creation of new lines

that by varying the parameters that

determine the discounted net reve-

nue, it is possible to steer the findings

in an optimistic direction.

Thus, the expected revenues are clo-

sely linked to traffic forecasts. In the

case of Tours-Bordeaux (a section

operated under concession), RFF by

definition will not receive any toll.

Consequently, its financial contribu-

tion to this project depends on the

additional revenue envisaged on the

section Paris-Tours that is not under

concession, which depends on both

the level of traffic and the amount of

the toll. In both cases, the preliminary

assessments show a strongly optimis-

tic bias.

Similarly, depending on whether the

discount rate applied is higher or

lower, this will be either an obstacle or

an incentive to HSL projects. Thus,

RFF participation in different HSLs

were calculated with discount rates

varying from one line to another:

7.5% for phase one of the Eastern line,

4 % for phase one of the Rhine-Rhone

Est, 8 % for Tours-Bordeaux. Lastly,

even with optimistic assumptions,

some projects do not reach a mini-

mum threshold of profitability for the

community. For example, in the case

of Poitiers-Limoges, the results of stu-

dies have never exceeded an internal

rate of return (IRR) of 3.3 %, which

would be a justification for not conti-

nuing with the project.

The construction of unprofitable

high-speed lines is encouraged by

the increasing use of local authority

financing

Because of both the demands of the

State and their growing preponde-

rance in regional development poli-

cies, local authorities are becoming

increasingly involved in the financing

of projects. Naturally, they only do so

if they are able to find counterparties.

These conditions can impair the profi-

tability of the projects.

The HSL East was one of the first

examples, as 16 local authorities par-

ticipated not only in its funding, but

also in the development of the

conventional network to provide ser-

vice to 16 non-TGV destinations.

These co-financings have given rise to

questionable choices: the existence of

two stations (TGV Lorraine, Meuse

TGV) that have no interconnection

with the regional transport network ;

the creation of costly service lines of

doubtful sustainability ; the prolifera-

tion of stops from Reims onwards.

The case of Tours-Bordeaux is even

more illustrative because it involves

58 local authorities for a total amount

of € 1.3 billion. Apart from the com-

plexity of a financial package compri-

sing so many participants which in

addition were not really coordinated,

the local authorities

made their parti-

cipation conditional on obtaining

numerous benefits and as packed a

timetable as possible.

The best-known example is that of the

participation of the Midi-Pyrénées

local

authorities

the

Tours-

Executive summary of the Thematic Public Report by the Cour des comptes

A decision-making process that inevitably leads to

the creation of new lines

Bordeaux line, conditional on the deci-

sion to build the Bordeaux-Toulouse

line whose importance and profitabi-

lity are open to question. From com-

mitments to providing service by

developing other parts of the rail net-

work, the Tours-Bordeaux project

strictly speaking has grown from 300

km and € 5.6 billion (value June 2006)

to the Sud Europe Atlantique (SEA)

project of over 850 km and € 14 billion

(value June 2006).

As for the Poitiers-Limoges HSL, to

ensure it a minimum – albeit small –

return, some of the traffic from the

conventional Paris-Orleans-Toulouse

(POLT) line has to be rerouted onto

the SEA line. This proposed reduction

from eleven to only four return jour-

neys per day aroused the strong reac-

tion of certain local officials, resulting

in this suggestion eventually being

dropped.

Executive summary of the Thematic Public Report by the Cour des comptes

An unsustainable cost

There are three reasons why the cost

of the French high-speed rail model

has now become unsustainable: exis-

ting lines are less and less profitable,

new projects are not financed for

lack of sources of funds, and the pro-

fitability on high speed lines is not

sufficient to guarantee a positive

result for the SNCF as a whole.

Lines are less and less profitable

HSL construction costs have been

constantly increasing over the last

30 years. From € 4.8 million

2003

/km

for the Paris-Lyon link, they have risen

to € 26 million/km today. On the latest

lines these costs are divided between

60-70 % for civil engineering, 20/30 %

for rail, 10 % for the land.

The gap between estimates and what

is achieved has averaged 17 % bet-

ween the declaration of public utility

(DUP) and the opening of the five

HSLs that have been assessed retros-

pectively. Similarly, operating costs

tend to be higher than expected, dou-

ble the forecasts for the Nord or

Rhône-Alpes

Méditerranée

high-

speed lines.

Forecasts of traffic are rarely achie-

ved. Once fully operational, out of six

HSLs that have been subject to

assessments of this type, only one, the

Paris-Lyon, has achieved higher traffic

than expected, five have lower traffic

including one, the Nord HSL, whose

traffic is lower by one half. On ave-

rage, forecasts are over-optimistic by

24 %

Consequently, profitability is always

lower than forecast and has tended to

deteriorate as the most profitable

lines were completed.

An unsustainable cost

Executive summary of the Thematic Public Report by the Cour des comptes

Profitability

of HSLs shown by construction date

Source : Cour des comptes, based on data from the CGEDD (General Council for the

Environment and Sustainable Development)

__________________________

Economic and socio-economic returns are defined, the first as the financial profitability of

RFF+SNCF taken together calculated in constant euro and excluding financial expenses, the

second by adding in the surplus of other stakeholders (passengers, competing infrastructure

operators, public authorities, environmental impact) as outlined in Chapter II.

New projects are in financial stale-

mate

The projects included in the draft

national plan for transport infrastruc-

ture of 2011 represented an expendi-

ture of € 107 billion in railways of

which € 60 billion was for the 2500 km

of high-speed line to be built.

Against these costs, funding sources

available to the transport infrastruc-

ture financing agency (AFITF) are less

than € 2 billion, all projects and all

sectors taken together (that is,

including roads, sea and river infra-

structures).

Faced with this stalemate, the govern-

ment appointed a commission called

« Mobility 21 », to allocate the diffe-

rent projects according to their level

of priority. The enthusiasm for high

speed rail in fact is in conflict with the

growing costs of building HSLs toge-

ther with their declining profitability,

the most relevant lines having been

built first. Following the work of this

commission, the government has still

chosen a more ambitious scenario in

which rail spending would amount to

An unsustainable cost

Executive summary of the Thematic Public Report by the Cour des comptes

€ 23 billion by 2030. It follows from

this choice that, apart from the lines

actually under construction, the other

projects are not being financed in the

current state of the existing or fore-

seeable funding sources of the AFITF.

The sources of available funds are

being depleted

As regards the State, its budgetary

capacity for investment does not

exceed € 700 million in 2013. These

appropriations are borne by the

AFITF, whose usefulness the

Cour des

comptes

has in the past had occasion

to criticize. Its sources of funds come

from various earmarked taxes, a pro-

portion of radar fines and a State

balancing subsidy. It was envisaged

that this subsidy would gradually

disappear with the growing impor-

tance of the environmental tax, for

which proceeds for the full year

should have been around € 870 mil-

lion. However, the State subsidy star-

ted

being

reduced

from

2013

onwards, even though collection of

the environmental tax was postpo-

ned, now

sine die

Under these conditions, not only is the

AFITF struggling to meet its current

budget commitments, but the lack of

a new and sustainable source of fun-

ding, it has no more leeway for new

spending up to the 2030 horizon. In

this regard, the allocation in 2015 of

revenue from the increase in the

TICPE, the French domestic energy

products tax, on diesel (2 cents/litre)

will probably not be enough to make

up the shortfall from the relinquish-

ment of the environmental tax. There

is now the risk that new projects may

be started even though they are

underfunded and that the State will

gamble both on the implementation

of the projects being staggered and

on greater participation by local

authorities to make up this underfun-

ding. This assumption is all the more

shaky given that the financial situa-

tion of local authorities is tighter.

Moreover, as the « Mobility 21 » com-

mission has acknowledged, some

extremely costly projects such as the

Seine-Nord Europe canal or the Lyon-

Turin rail link, which it has not taken

into account, would alone be suffi-

cient to drain all the funding sources

of the AFITF until 2030 if they were to

be launched.

Finally, the SNCF's TGV business is

proving less and less profitable. While

turnover has stagnated since 2012,

the operating margin has decreased

under the cross-effect of revenue cap-

ping and increased costs. On the reve-

nue side, we observe that for commer-

cial reasons the SNCF is reluctant to

increase ticket prices, knowing that

the TGV is a product the user already

perceives as being expensive. On the

cost side, the increase in tolls is cer-

tainly an important factor, but it is far

from the only one : rising labour costs

is another, as well as the purchasing

An unsustainable cost

Executive summary of the Thematic Public Report by the Cour des comptes

policy on high speed trains under the

inducement of the

State to support the industrial order

book of the national manufacturer's

transportation division.

Turnover, operating margin and margin rate (% of turnover) of TGV / France

Source : Cour des comptes, according to data from SOeS and SNCF

At the same time, the SNCF needs to

maintain a high margin in the TGV

business, essential for it considering

the difficulties faced in certain of its

other rail operations (freight, TET). To

this end, the SNCF is increasingly

resistant to the toll increases that are

being contemplated to enable RFF to

finance the construction of new rail-

way lines.

This resistance is nonetheless a zero-

sum game, since if RFF does not have

the toll revenue that it needs to reno-

vate the conventional network, that

body has no choice but to halt the

renovation or continue getting deeper

into debt. Moreover, as RFF debt also

tends to increase because it finances

increasingly less profitable HSLs, it is

not surprising that its debt, which has

already reached € 34 billion, continues

to rise by € 1.5 billion per year.

$ %" $

RECOMMANDATIONS

Executive summary of the Thematic Public Report by the Cour des comptes

c4right

to better integrate high-speed

with the mobility choices of the

French, making the TGV part of an

offer that takes advantage of all

means of transport – long-distance

rail

alternative

high

speed

(200 km/hr trains, tilting trains),

regional rail, collective transport

(road and air) and cooperative trans-

port (car pooling, car sharing and

renting) – and removing the restric-

tions on competition from long-dis-

tance modes of road transport ;

c4right

in parallel, to gradually restrict

the number of stops on sections of

HSL and TGV services on conventio-

nal lines and ends of lines, keeping

only those justified by a large

population base ;

c4right

to ensure transparency and

access to SNCF data, especially

volumes of passenger travel by line ;

c4right

to give priority to the socio-

economic assessment of HSL pro-

jects announced for before 2030 and

the second expert opinion by the

CGI, including those that were the

subject of a public utility enquiry

before 23 December 2013 ;

c4right

not

decide

launch

preliminary studies until :

- a business plan for the line has

been defined, bringing in the infra-

structure manager and the railway

operator or operators ;

formal

joint

Ministerial

Decision has taken into account the

financing prospects for the infra-

structure project and the distribution

between the stakeholders (state,

RFF, possibly local authorities) ;

c4right

to ensure payment by AFITF of

its financial commitments to RFF

and rapidly clarify the issue of this

agency's resources ;

c4right

to focus primarily on the finan-

cial resources to maintain the net-

work in relation to development pro-

jects and improve the management

of rail network maintenance by the

infrastructure manager ;

c4right

to ensure that the definition of

the future debt ratios of the infra-

structure manager actually result in

unprofitable

projects

not

being

financed.