THE WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY 2010

MARIA LEENEN, HAMBURG, SEPTEMBER 2010

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

OUTLINE

OUTLINE

I: II: III:

METHODOLOGY OF SCI VERKEHR WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY – RESULTS OF THE STUDY STRATEGIC CHALLENGES

3 10 19

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

2

STRATEGIC EXPERTISE

OUR SCOPE: STRATEGIC ADVICE FOR INTERNATIONAL CLIENTS

• SCI is an independent consultancy company for the transportation sector with activities and projects around the world • SCI is specialised in strategic advice to the railway and logistics industry

STRATEGY CONSULTING

MARKET-, ENTERPRISE- AND PORTFOLIO-ANALYSIS

• Strategy development • Portfolio assessments • Mergers & acquisitions • Due diligences • Asset value assessments

• Competition analyses • Market analyses • Product analyses • Market entry strategies • Transport and sector analyses • Sector-related economic consulting

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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CUSTOMERS

WORLDWIDE CUSTOMERS ASK FOR SCI’S EXPERTISE

• AAE Ahaus Alstätter Eisenbahn AG • ABB Schweiz Ltd. • AEG SVS Power Sypply Systems • Alcan Composite Structures • Allco Leasing GmbH • Alstom Transportation • Amtrak Office of Inspector General• Angel Trains Cargo • Ansaldo Signal N.V. • AnsaldoBreda spa • Arriva International UK • Auctus Management GmbH & Co. KG • Axtone GmbH • Babcock Brown London • BAE Systems Ltd. • Balfour Beatty Rail GmbH • Bank of America • Bayer Material Science AG • Bayerische Landesbank • Bearing Point SAS • Behr Industry GmbH & Co. KG • Bochumer Verein Verkehrstechnik GmbH • Bombardier Transportation • Bonatrans a.s. • Calyon • Cargocare AG • China South Locomotives & Rolling Stock Corp. Ltd. • CKD Vagonka a.s. • Connex • Cummins • Dellner Kupplungen GmbH • Deuta-Werke GmbH • Deutsche Bahn AG • Deutsche Beteiligungs AG • Deutsche Binnenschiffreederei • Deutsche Messe AG • Deutscher Gewerkschaftsbund • Dimetronic S.A. • DuPont Performance Coatings GmbH & Co. KG • Durtrack AG • ELIN EBG traction GmbH • ESW GmbH • EWS Railway LTD • Extel Systems Wedel • Fahrleitungsbau GmbH • Faiveley Transport • Ferrostaal AG • Fooke GmbH • Furrer+Frey AG • GE Transportation Systems • Greenbrier Equity Group LLC • Group Ermewa SA • Gutehoffnungshütte Radsatz GmbH • Hanning & Kahl GmbH • Hans Böckler Stiftung • Heitkamp Rail GmbH • Hitachi Europe Ltd. • HSH Nordbank AG • Hübner GmbH • I.T.I. Finanziaria S.P.A. • ING Bank N.V. • Interpipe • INVEST Financial Corporation • KfW IPEX-Bank GmbH • Knorr-Bremse • Korea Railroad Research Institut • Lavoisier SAS • Lease Valuation International Inc. • Leonhard Moll Betonwerke • Liebherr Transportation Systems GmbH • LLOYDS TSB Bank PLC • MAN • Marubeni Corporation • Microelectrica Scientifica Spa • Mitron OY • Mitsui & Co. • Molinari Consulting AG • MTU Friedrichshafen • Nahverkehr Rheinland GmbH • National Australia Bank • NedTrain Consulting • Nexans • Odenwald & Compagnie • ÖBB • One Equity Partners Europe GmbH • Ox-traction N.V. • Oxford Analytica Ltd. • Paribus-SK-Rail Management • Parsons Brinkerhoff Pte Ltd • Patentes Talgo S.A. • Pfleiderer Infrastrukturtechnik GmbH & Co. KG • Phoenix Dichtungstechnik GmbH • Pintsch Bamag GmbH • Plasser & Theurer Export von Bahnbaumaschinen GmbH • Prover Technology AB • Prysmian Spa • Rail Cargo Austria • Rail Interiors S.p.A. • Rail One GmbH • Rexwal Services SA • Rexxon Services SA • Rotem Company • Royal Bank of Scotland • Sabler Consult GmbH Wien • SAFOP SAP • Saft‘s Industrial Battery Group • SBB Cargo AG • Schalker Eisenhütte GmbH • Schaltbau AG • Scheidt & Bachmann GmbH • Schreck-Mieves GmbH • Schweizer Elektronic AG • Secheron SA • Serco-NedRailways • SGL Carbon SE • Siemens AG • Sika Schweiz AG • SIRTI S.p.A. • SKF Group • Skoda Transportation s.r.o. • Société Générale Group • Solaris Bus & Coach S.A. • Stadler Rail AG • Steer Davies Gleave • Stemmann-Technik GmbH • Stinnes AG • Stratorg S.A. • Strukton Systems • SüdLeasing GmbH • Sumitomo Mitsui Banking Corp. Europe Ltd. • Syndex • Synosys Inc. • Tatravagonka a.s. • Terra Firma Investments 2 Ltd. • Telenor Sverige AB • TFK Transportforschung GmbH • Thermo King Deutschland • Thyssen Krupp GfT Gleistechnik GmbH • Tiefenbach GmbH • Toyo Engineering Corporation • Traktionssysteme Austria GmBH • Tram S.A. • Transpetro GmbH • Transtechnik GmbH & Co. KG • Transwerk South Africa • Trinity Rail GmbH • TÜV Rheinland • U.S. Government • Universal de Productos Electricos S.A. • VAE GmbH • Valspar Industries GmbH • Veolia Transport • Verband der Bahnindustrie Germany • Verkehrs Industrie Systeme GmbH • Verkehrsbetriebe Zürich • Voestalpine Bahnsysteme GmbH • Voith Turbo • VolkerRail • Vossloh AG • Vossloh Kiepe GmbH • VR Leasing AG • VTG AG • Wagony Swidnica S.A. • Walter Bau AG • Wacosa AG • Weilburg Coatings GmbH • Westfracht • WestLB AG • Wincanton GmbH • Wirtschaftsministerium Baden-Württemberg • ZAO Transmashholding • ZF Sachs AG • Zuken GmbH
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 4

SKILLS

STRATEGIC ADVICE NEEDS SOUND FACTS AND FIGURES

TOOLS AND PRODUCTS

STRATEGIC CONSULTING

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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STUDY “WORLDWIDE MARKET”

GENERATED FROM DETAILED STUDIES WE PROVIDE THE AGGREGATE STUDY “THE WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY”

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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FORECAST METHODOLOGY

4 STEPS OF THE SCI MARKET FORECAST

Contracted

• Awarded and documented projects • Periods (delivery known)

Announced

• Established and announced projects • Options

Virtual Project-based Long-term drivers

• Expected projects • General announcements

• Replacement purchase and maintenance demand (based on installed base) • Development of railways and transport • Megatrends • Macroeconomic development • Railway affinity

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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FORECAST METHODOLOGY

SCI MARKET FORECAST TOOL CALCULATES MARKET VOLUME OF THE WORLD MARKET FOR RAILWAY TECHNOLOGY
Schematic Illustration of SCI Market Forecast Tool

Market volume [EUR billion]

Long-term drivers Virtual

Contracted

Announced

© SCI Verkehr GmbH
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 8

OUTLINE

OUTLINE

I: II: III:

METHODOLOGY OF SCI VERKEHR WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY – RESULTS OF THE STUDY STRATEGIC CHALLENGES

3 10 19

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

9

TOTAL MARKET VOLUME

THE MARKET FOR RAILWAY TECHNOLOGY CONTINUOUS TO GROW

Total market volume [EUR billion]

Trends • 4.1% annual growth in the world market by 2015 (including increase in prices) • General drivers – Globalization – Urbanization – Environmental protection – Safeness • Current drivers – Stimulus packages – Recovery of freight transport market

160 131 102

2006*

2010

2015

© SCI Verkehr GmbH Legend: * Methodology change in 2008
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 10

TRANSPORT MARKETS

RAIL TRANSPORT MARKETS RECOVERING FASTER THAN EXPECTED

Freight: global rail transport development [Index 2000 = 100]
Market performance [Index 2000= 100]
200 150 100 2000 2003 2006 2009 2012 2015

Trends • Railway market recovered quicker than expected from world economic crisis: 4.5% growth in 2010 • 2008 freight level is going to be reached again in 2011 • Rail passenger transport more sustainable: 1.0% growth in 2009

100 = 6 930 billion tkm

Passenger: global rail transport development [Index 2000 = 100]
Market performance [Index 2000= 100]
200 150 100 2000 2003 2006 2009 2012 2015

100 = 2 380 billion Pkm

© SCI Verkehr GmbH
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 11

MARKET VOLUMES AND MARKET GROWTHS

REGIONAL MARKETS GROWING DIFFERENTLY

Market volumes 2010 and market growth in the period up to 2015 by regions
Western Europe: - MV: EUR 39.8 bn - CAGR: 3.3% Eastern Europe: - MV: EUR 9.6 bn - CAGR: 2.9% CIS: - MV: EUR 13.7 bn - CAGR: 4.9%

North America: - MV: EUR 19.5 bn - CAGR: 5.0%

Asia: - MV: EUR 36.5 bn - CAGR: 4.3%

South/Central America: - MV: EUR 3.3 bn - CAGR: 6.8%
© SCI Verkehr GmbH Legend: CAGR = compound annual growth rate

Africa/Middle East: - MV: EUR 5.7 bn - CAGR: 4.0%

Australia/Pacific: - MV: EUR 2.9 bn - CAGR: 2.3%

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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TOP TEN COUNTRIES

COUNTRIES’ RANKING CHANGE: CHINA NO. 1

Top ten countries by market volume [EUR billion] (average 2009–2011 p.a.) (2009 ranking)
(2) (1) (3) (4) (7) (6) (5) (8) (10) (9)

Trends • China ranks top in the world for the first time, replacing the US market • Currently, all global players benefit from Chinese market • The Russian market is the third-largest in the world and has to invest heavily to replace its vehicle fleet • Germany asserts its rank and remains the only European country within top five

© SCI Verkehr GmbH
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 13

PRODUCT SEGMENTS

THE ROLLING STOCK SEGMENT REMAINS INVESTMENT AREA NO. 1

Market volume and market growth by product segment [EUR billion/%]

Trends
• Rolling stock segment with highest market volume – 2010: EUR 74.3 billion – 2008: EUR 73.8 billion Growth rate [%] • Increasing share of passenger vehicles – 2010: 67% – 2008: 50% • Infrastructure has grown due to the economic stimulus programmes • 2010: EUR 42 billion – 2008: EUR 39.5 billion • Trends will continue around 2013 and apply to systems technology as well

Market volume [EUR billion]

Market volume [EUR billion]

Market growth [%]

© SCI Verkehr GmbH Legend: Growth rate corresponds to the compound annual growth rate CAGR
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 14

SHARE OF OEM AND AFTER SALES

AFTER-SALES MARKET WITH SLOWER GROWTH RATE THAN OEM BUT LESS VOLATILE
Share of OEM and after-sales-service in product segments 2010 Trends • After-Sales market grows more slowly than OEM market – OEM: 4.6% – After-Sales: 3.6% • After-Sales markets volatility is much lower – OEM: 4.9% – Total After-Sales: 0.1% • Step by step the After-Sales markets are becoming more accessible

Rolling Stock 49%

Infrastructure 42%

Systems Technology 53%

51% OEM
© SCI Verkehr GmbH

58%

47% After-Sales-Service

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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MARKET DETAIL

MARKET ASSESSMENT NEEDS A VIEW IN DETAIL

Market volume and market growth by rolling stock segment and region [EUR billion/%]

Market © SCI Verkehr GmbH Legend: Growth rate corresponds to the compound annual growth rate CAGR
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

Market growth 2010–2015 [%]

volume [EUR billion]
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MARKET DETAIL

.... SOME EXAMPLES OF “STARS, CASH COWS AND LOSERS” WITHIN THE MARKETS AND SEGMENTS
Market volume and market growth by rolling stock segment and region [EUR billion/%]
LRV Australia HST Asia

Market growth 2010–2015 [%]

FW North America

D-Loco Asia

LRV CIS PC Eastern Europe

EMU Western Europe

Market © SCI Verkehr GmbH Legend: Growth rate correspond to the compound annual growth rate CAGR
SCI Verkehr GmbH / Büro Hamburg / +49 (40) 50 71 97-0 / September 2010

volume [EUR billion]
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OUTLINE

OUTLINE

I: II: III:

METHODOLOGY OF SCI VERKEHR WORLDWIDE MARKET FOR RAILWAY TECHNOLOGY – RESULTS OF THE STUDY STRATEGIC CHALLENGES

3 10 19

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

18

TOP TEN MANUFACTURERS

CHINESE MANUFACTURERS ARE ON THE FAST TRACK

New rolling stock: top ten rolling stock manufacturers by turnover 2009 (estimation) (2008 ranking)
(1) (2) (4) (3) (5) (7) (10) (*) (8) (6)

Trends • Bombardier extended market lead in 2009 • Alstom still is in the second place • Both, CNR and CSR outcompete Siemens regarding market volumes • CAF entered the top ten for the first time • Freight wagon manufacturer Trinity left the top ten after the sharp fall of sales in 2009

Turnover 2009 [EUR billion]
Legend: * not in the ranking 2008
SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010 19

ESTABLISHED VS. CHINESE MANUFACTURERS

GROWTH RATES OF ESTABLISHED AND CHINESE MANUFACTURERS DRIFT APART
New rolling stock: turnover development by manufacturer [EUR billion]
Turnover new rolling stock [ EUR billion]

Trends • Between 2005 and 2009 turnover of both Chinese manufacturers more than doubled – Yearly growth rate: 20%

+108%

• In the same period, turnover of the “The Big Three” had a 17% growth – Yearly growth rate: 4% • The Chinese manufacturers’ share in the worldwide market grows very dynamically

+17%

Alstom/Bombardier/Siemens

CNR/CSR

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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PROFITABILITY OF RAILWAY MANUFACTURERS

PROFITABILITY MAKES ALL THE DIFFERENCE

Total: revenue and EBIT comparison top railway manufacturer 2009 [EUR billion/%]
Turnover [EUR billion]

Trends • The Big Three gained a higher profitability than Chinese companies • Up to now state owned Chinese manufacturers are more focused on increasing volumes – but they are catching up • Highest profitability is found in specialised and/or medium sized companies with two digit EBIT Margins

Bombardier Transporation1

1

© SCI Verkehr GmbH Financial year ending 31 Jan, ² Financial year ending 30 Sept, ³ Financial year ending 31 Mar,* Gross profit
21

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

Alstom Trasnport³

Siemens Mobility²

EBIT Margin [%]

CHINESE MANUFACTURERS’ WORLDWIDE PRESENCE

CHINESE MANUFACTURERS ARE “AT THE GATES”

PKP Cargo and CNR to create joint venture, CNR’s first plant outside China

CNR exports locomotives to Belarus

Delivery of CSR multiple units for Georgia CNR exports freight wagons to Vietnam and Mongolia CNR exports trams to Malaysia / CSR receives major order from Malaysia CNR exports metro coaches to Saudi Arabia / CSR signs Saudi locomotive contract Major contract for CNR from Argentina CSR will exports DMUs to Tunisia CSR Zhuzhou delivers first 14 locos to Iran

CNR builds for the Rio de Janeiro metro

CSR supply metro coaches for Rapid Metro Rail Gurgaon in India / Mumbai Metro to receive CSR trains
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SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

CONSEQUENCES

WHAT ARE THE CONSEQUENCES FOR THE ESTABLISHED MANUFACTURERS?

NEW DEVELOPMENTS

ESTABLISHED ADVANTAGES

• More and more, Chinese market is served by strong Chinese domestic industry • Therefore, global players will lose relevant market shares in China and elsewhere • New markets in USA, South America and India may not be able to compensate those losses

• Established players still have – Advantage in technology – Advantage in profitability – Efficiency of production • Specialists can deal more flexibly with the highly fragmented markets in Europe

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CHALLENGES

OUR CLIENTS ADAPTATION TO CHALLENGES – SOME EXAMPLES OF OUR PROJECT WORK

Positioning

• A component manufacturer wants to consolidate the international bogie market and intended to acquire an European bogie manufacturer. SCI has to cross-check the market situation

Costs / efficiency

• A supplier wants to adjust their product prices and production costs regarding the target costs in the different regional markets

Suitable new markets

• Asian technology group seeks possibilities for a market entry in Russia (including a roadmap for suitable products as well as entry strategies and cooperation partners) • An international Investor wants to acquire a rolling stock leasing company. SCI has to evaluate the business plan and the expected market position of the target. We estimated the fair market value of the assets and the target. • A vehicle manufacturer is looking for market opportunities, partnerships and targets to increase their maintenance business

Financing

Maintenance

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SUMMARY

UNDERSTANDING OF THE SPECIFIC MARKET REQUIREMENTS MAKES THE DIFFERENCE
Stable market with long-term growth opportunities - but... .... changing market environment... • European home markets come under fire • Asian companies try to take advantage from home market experience • Expected next waves of M&A and consolidation processes ....requires different market intelligence • Continuous observation and understanding of the markets • Monitoring of projects and positioning of competitors

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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CONTACT

CONTAKT

Maria Leenen CEO SCI Verkehr GmbH

Andreas Wolf Project Manager SCI Verkehr GmbH

Christian Bessler Marketing & Sales SCI Verkehr GmbH

Schanzenstraße 117 20357 Hamburg Tel.: +49 (40) 50 71 97-0 / September 2010 Fax: +49 (40) 50 71 97-20 E-Mail: m.leenen@sci.de

Vor den Siebenburgen 2 50676 Cologne Tel.: +49 (221) 931 78-16 Fax: +49 (221) 931 78-78 E-Mail: a.wolf@sci.de

Vor den Siebenburgen 2 50676 Cologne Tel.: +49 (221) 931 78-20 Fax: +49 (221) 931 78-78 E-Mail: c.bessler@sci.de

SCI Verkehr GmbH / Hamburg Office / +49 (40) 50 71 97-0 / September 2010

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