“By 2015, we should implement the Russian Railways’ Innovation Development Program aimed at the technological breakthrough in railway transportation. This means the use of nanotechnologies, introduction of intelligent transportation systems, development of conceptually new rolling stock, hydrogen-powered engines, etc. Immense motivation and appetite for innovations contribute to the existing demand from customers who want to receive quality transportation services. So, we set rather ambitious tasks: not only to overcome the technology gap between us and foreign railway companies, but even to move ahead of the curve.”
From V.I. Yakunin’s blog
The information and planning mode of the automatic train control system was implemented on the Saint Petersburg — Moscow route. The level of implementation of the scheduled freight traffic was extended (499 developed schedules for 2012/2013). The automated system to generate expected daily energyoptimized schedules — APK ELBRUS — was put into permanent operation at the pilot test site. Five Traction Resources Management Centers were created. The automated station process control system (ITAUR) was put into place at the test site.
The number of failures of infrastructure elements had been reduced by more than 10% by 2011. The track overhaul life was increased on 2,600 km of track. Railway sections with speed restrictions of 40 km/h and less were reduced by 3,566.0 km for passenger traffic and by 5,123.7 km for freight traffic. Methods for risk assessment and calculation of reliability and safety parameters were developed for infrastructure business entities. Innovative track alignment technologies were introduced using the current integrated system of spatial data of railway infrastructure. Dynamic laboratories for testing infrastructure with an axle load of 27 ton-force at a speed of 200 km/h were developed; advanced design of infrastructure facilities were introduced.
Technical specifications for the 2TE116UD diesel locomotive with a General Electric engine and for the 2TE25AM diesel locomotive with a MTU engine were approved. Acceptance tests of the TEM 14 double diesel locomotive and EP20 electric locomotive with asynchronous traction motors were carried out. Qualification tests of the 2ES10 electric locomotive were conducted. Specifications for the locomotive with a gas-fueled reciprocating engine and the GT1I natural-gas-powered locomotive were developed. The SOW for the development of a
A draft of the integrated rail traffic and infrastructure safety system was developed for the 2014 Winter Olympic Games. Integrated microprocessorbased systems have been implemented for marshal yards, including locomotive radio remote control were introduced. Extended functions and increased reliability of the train separation control systems were provided.
The resource, risk and reliability management methodology (URRAN) is being introduced in track, automation and remote control, electrification and power supply facilities. The following standards of JSC “RZD” were approved: “URRAN. Life cycle cost management of systems, devices and equipment of business entities of JSC Russian Railways; STO RZD”; “URRAN. System, devices and equipment of track facilities. Requirements for the reliance and functional safety”; “URRAN. System, devices and equipment of electrification and power supply facilities. Requirements for the reliance and functional safety”.
The certificate of compliance was issued by FBO “RC FRT” for ES1 Lastochka electric trains manufactured by Siemens AG (Germany). 15 electric trains were produced. The draft design of the ES2G electric train was completed (LLC Ural Locomotives). Under the agreement for the supply of Talgo passenger trains to be used along the Moscow — Kiev, Moscow — Berlin routes, the draft project was completed; on 06 November 2012 Belarusian Railways and JSC Russian Railways entered into an agreement envisaging the parties’ collaboration in the design and construction of the first railroad switch device at the Brest station.
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Main objectives for
Russian Railways has a leading global position, along with the railways of China and the United States, in terms of traffic volume and the length of railway lines. They are part of the integrated 1520 mm gauge railway network. Globally recognized routes, many of which are part of the international transport corridors (ITC), cross Russia. The strategic development of the Company aims to improve the global competitiveness of the Russian railways and their deep integration into the Eurasian transport system.
With the acquisition of the logistics operator GEFCO JSC “Russian Railways” became the largest Russian investor in France. The Company has an agreement to renovate and develop railway stations. We are cooperating closely with Alstom to create advanced traction rolling stock. We gained a backlog of projects with French partners related to the BCM projects in Russia and the development of direct passenger traffic between our countries.
With the launch of the direct Nice — Paris “Russian Railways” trains, the passenger turnover on these routes has increased 2.5 times. It shows that even with the availability of aviation and automotive transport services the desire of people to move around Europe by train has not decreased. We have projects underway in freight transportation, in particular the launch of regular container trains.
JSC “Russian Railways” takes an active part in the development of the Ust-Luga — Baltiysk (Russia)- Sassnitz/Mukran (Germany) ferry services. In June 2012 in the presence of the German Federal Chancellor Angela Merkel the regular rail ferry route Sassniz — Ust-Luga was launched. With this route a new transport corridor was created which allows intermodal transportation between the Asia-Pacific region and Europe by Russia and CIS countries transit.
In 2012 the “Russian Railway- International” to supervise the Company’s projects abroad. In 2012, the Holding Company approved the infrastructure management concept for the Company’s projects abroad. The concept is focused on improving efficiency of infrastructure management projects and increasing revenues due to implementation of high-margin infrastructure projects; expansion into new foreign markets and enhancement of the global competitiveness of “RZD” Holding Company.
At the 81st UIC General Assembly Session in December 2012 Vladimir Yakunin, President of “Russian Railways” was elected as UIC Chairman up to 2014. For the first time in the
In October 2012 in Tabriz (Iran) celebrations were held to mark the completion of the project of the electrification of the Tabriz-Azarshahr railway road as well as construction of five railroad stations in Iran. The Iranian side praised the results of the project and has put forward a proposal to consider the possibility for JSC “Russian Railways” to participate in a number of other projects on the electrification and construction of railroads in the country.
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The main objectives for the period
The reforms aim at upgrading the transportation system, realizing the country’s transit potential and creating necessary conditions for the growth of key sectors of the economy. This will lead to increased efficiency of the railway transport.
The accepted model of the freight transportation market has created significant incentives for the development of private operators’ business activities to provide freight cars for the carriage of goods and products. Private investment in this operator segment will stop the rapid ageing of the cargo car fleet. During the years of reform more than 400 thousand cars were purchased with an investment of about RUR 600 bn. By the beginning of 2011 the share of the car fleet owned by independent operators was 45%.
By 2012, the formation of a competitive market of freight cars and containers operation was completed, including through the transfer of the car fleet inventory of JSC “Russian Railways” to subsidiaries and the subsequent sales of the shares of some of these companies. The inflow of private investment has led to significant growth in the freight car fleet. By the end of 2012 it had grown to over 1,158.6 thousand units, of which 77.6% were cars of private operators independent of “Russian Railways”.
In 2011, the sale of the controlling stock of shares (75% minus 2 shares) of JSC “First Freight Company” took place, and in 2012 the remaining part of its shares was also sold. As a result, by 2013, over 78% of the freight turnover was achieved through the use of freight cars of independent operators.
By 2011, JSC “Russian Railways” made a commitment to eliminate competitive and potentially competitive activities as envisaged in the Program on the structural reform of the railway transport in the field of long distance passenger transport as well as suburban ones, universal and specialized and rolling stock operation, repair of freight cars, repair services for technical equipment and manufacture of spare parts and other activities not related to railway transportation.
By 2012, major organizational and legal activities in the field of passenger transport were completed. A mechanism was set up to encourage rail companies to run their operations more effectviely. Conditions for the financial mechanism of subsidies were worked out.
In accordance with the Resolution of the Government of the Russian Federation from 20.12.2011 № 1051 on the procedures for involving rolling stock between JSC “Russian Railways” and the “Freight Company”, on 26 January 2012 the agreement to use gondola cars which constitute the property of the “Freight Company” and their transfer to the private fleet of borrowed cars was made. In connection with this market change, the demand for this type of cars has substantially declined. A new mechanism for involving “Russian Railways” rolling stock is under consideration.
Key Strategic Priorities
Main objectives for the period
Railway transport is an economic activity with the same economic categories as any other economic activities. If transport is not treated as a business, it will not be able to reduce costs and improve the quality of services, timely respond to customers’ demands and introduce innovations. So, the most important aspect of the current reform is the organization of activities, the economic model of which can ensure economic efficiency of our railways.
Development of the corporate management will allow the “RZD” Holding Company to obtain an additional competitive advantage due to increased profitability and rate of mobilization of own capital for promising and capital-intensive projects, a wider access to the global market of borrowed capital to ensure its stable economic growth and reduce the cost of raised investments.
The unified corporate standard of financial planning and budgeting of the Company was adopted on 31 October 2012 under No. 2182r. It covers the main principles, mechanisms and timelines for the Company’s planning and budgeting. The unified classifier of indicators of budget management and financial planning has been developed. The Company’s automated budget management system has been put in place. At present, it is used by all subsidiaries and affiliates.
In 2012, financial sustainability of JSC “RZD” was provided. In total, operating income for 2012 exceeded RUR 1,366 bln, expenses amounted to RUR 1,298.6 bln, the net profit was RUR 14.1 bln. Under the condition of state regulation of freight railway transportation tariffs the company proved its profitability at the end of the year and received net income.
The total net assets of companies, in which JSC “RZD” participates, amount to more than RUR 450 bln. For the last three years, the total amount of revenues from sale of shares of its subsidiaries made up RUR 239.6 bln. (including in 2012 — about RUR 80.0 bln.).
JSC “RZD” is one of few companies maintaining the economically reasonable balance between the labor productivity dynamics and actual wages. The labor productivity growth was 4.5% in 2012.
In 2012, the average monthly wages of employees of JSC “RZD” engaged in transportation increased by 7.6% and amounted to RUR 36,124. The actual wage growth was 2.4%.
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Today, JSC RZD ranks as one of the main issuers, setting the benchmark for the overall position of Russian corporate securities on the domestic and international capital markets. We are open for cooperation with investors and aim to provide as much transparent financial information as possible. Each year, we organize non-deal roadshows and investor days in Russia, Europe, and Asia. Traditionally, JSC RZD is an active participant in the largest specialized financial and economic forums both in Russia and abroad.
In 2010, JSC RZD participated in the international capital market for the first time, having placed
During the three following years, JSC RZD became known on the international capital markets as a borrower that sets new cost benchmarks for Russian issuers. In 2011, JSC RZD entered the super-long loan market in UK pounds by placing stocks for 20 years. In 2012, the Company set a new benchmark for loans in rubles and US dollars.
In December 2010, we held the first JSC RZD Investor Days in London, which were attended by over 40 investment funds and banks. Considering the strong interest from the investment community, JSCo RZD decided to hold such events regularly. In December 2011, another Investor Day was held in London. In 2012, we held investor days in London, Zurich, and Moscow. We also held regular meetings with industry analysts and media representatives.
The overall corporate rating of JSC RZD is maintained at the same level as the sovereign rating of the Russian Federation. In March 2012, the Standard & Poor’s agency raised the individual rating of JSC RZD from BB+ to the investment level BBB- and confirmed the cumulative corporate rating of RZD at the level of the sovereign rating of the Russian Federation: BBB, stable.
From 2010 to 2012, considerable efforts were made to improve the structure of the loan portfolio, which involved decreasing the share of short-term loans, increasing the average term for fulfillment of obligations and diversifying loan sources. The Company adopted an efficient financial strategy that defined medium-term benchmarks for the portfolio structure and debt burden, which determined the borrowing policy in
In 2012, we were the first company to place bonds with a guard against inflation in the local market without a government guarantee. This is a totally new market instrument that creates a market of inflation-protected securities in Russia. The coupon rate for this issue is floating and depends on the annual average of the Consumer Price Index, which protects invested funds against inflation.
Key Strategic Priorities
Main medium-term benchmarks
JSC “RZD” has undertaken a considerable restructuring of its management system, moving from a territorial-based organization to a vertically integrated system categorized by various business activities. The aim of this new management system is to create an environment which will enable a dramatic increase in the productivity of Russian Railways and an improvement in the interaction between the Holding Company’s units, its customer focus and competitiveness. These changes are caused both by external circumstances and the Holding Company’s need to improve and increase its efficiency.
Chains of command were created for key activities: management of sales, transportation, traction rolling stock operation and repair, infrastructure, etc. Their managers are vested with powers and the responsibility for the performance of current workloads and the implementation of development projects.
Railways have started to operate in a new capacity — as regional centers of corporate management (RCCM). Considering that the main function of railways is the technological and corporate coordination of activities of regional units of JSC “RZD” branches, subsidiaries and affiliates, the RCCMs will soon be required to establish and strengthen the horizontal relations between these units.
In future, this coordination will pave the way for systematic and consistent operations across all railway services, improving the effectiveness of how they interact, and establishing integrated technological and managerial processes, which will promote management quality and performance inside the regional units of JSC “RZD”.
In 2011 the Holding Company’s passenger complex was established.
JSC “RZD” started to create the transport and logistics business model in the Holding Company’s structure. Launching high-margin logistics services is the strategic goal of JSC "RZD.
New tools allow the Holding Company to coordinate its operating activities, which is very important for the achievement of the the Company’s long-term business goals. Specifically, new approaches to improve the interaction between branches, subsidiaries and affiliates were adopted, such as balanced score cards, integrated planning, and internal exchange of services.
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Major tasks for
Economic scale, geographical reach and the resulting unquestionable importance of the activities of JSC “RZD” at a state level equate to an ever-increasing degree of social responsibility. This is why we are and remain the leader in employees’ social security, the promotion of an improved quality of life in the regions impacted by rail transport, and environmental protection. It is the responsibility of any large business to set the pace for Russia’s general social and economic development and this is even more the case for a natural monopoly, such as JSC “RZD”.
The health, safety and environmental policy of JSC “RZD” aims to achieve a balance between social and economic tasks and maintain a favorable environment for the achievement of all Company’s activities. In 2012, investments in social development projects were RUR 10.2 bln
The number of employees of JSC “RZD” and its sublidiaries exceeds 1 mln employees. Their increasing consumer demand accounts for an annual gain in Russia’s GDP of 0.6%. Effective personnel management is a key requirement for JSC “RZD” given the strategic and operational tasks that is undertaking. The company has implemented a corporate competence system, established the corporate university of JSC “RZD”, and continuously improves its training and personnel development system is subject to continuous improvement.
Systematic work with young people is one of the key tools for development of the Company’s talent pool. We motivate young people to activities aimed at increasing the Holding Company’s efficiency, encourage authors of valuable proposals and projects. In 2012, young people aged under 30 accounted for 28% of the total number of staff. The Company has set up a strong youth pool that is willing and able to act as an effective coordinator of ongoing change.
JSC “RZD” has retained its status as a stable, socially responsible company by having fulfilled all the obligations set out in the Bargaining Agreement. These are not just financial payments; the se are investments in the Company’s future. In accordance with the Bargaining Agreement, wages were indexed based on an increase in consumer prices. JSC “RZD” maintains the economically reasonable balance between labor productivity rates and actual wages.
75 regions of Russia have 234 nonstate healthcare institutions run by JSC “RZD”. Mobile consulting and diagnostic centers operate at five railways; the y are becoming a part of the compulsory health insurance system.
Rail transport is globally recognized as the most environmentally-sound type of transport. Nonetheless, JSC “RZD” still focuses on activities to protect nature. Currently, more than 2.5 th. enterprises of JSC “RZD” branches use natural resources between Kaliningrad and Yuzhno-Sakhalinsk. None of the se enterprises has a sizable impact on the environment.
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Major tasks for