Strategy for railway infrastructure development

25,3% 20,0 24,0% 10,0 18,9% 0,0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 CFR Network Statement - 2026 ANNEX 12.a Version: 15.0.0 Updated: 15.12.2024 Page: 4 / 14  Compania Naţională de Căi Ferate “CFR” S.A. România The analyzes performed indicate two categories of causes of this situation, respectively: • Significant distortion of the competitive environment, especially between the land transport modes, which creates a competitive disadvantage for the rail transport compared to the road transport. It is mainly about asymmetric and extensive outsourcing of the transport costs (e.g. the transport infrastructure costs, the transport safety costs) and the transport costs (e.g. the environmental costs, the accident costs). This allows road operators to offer much more attractive prices than the prices of the railway operators, although the total unit costs (including external costs) are significantly higher in the case of road transport. • The low level of performance and quality of the railway transport services, caused to a significant extent by the low level of performance of the railway infrastructure and, implicitly, of the services and facilities offered by the railway infrastructure manager. In terms of the infrastructure, the analyzes show that public funding for the railway infrastructure has been well below needs. The situation of public funds allocated in the last 5 years for the maintenance, repair, renewal and modernization of the railway infrastructure is presented in the following table. Public funds [thousand lei] Year Maintenance Repairs Renewal (RK) Investments * 2014 693 045 4 329 13 973 1 505 330 2015 756 237 65 599 18 990 1 388 208 2016 1 022 222 92 974 48 474 1 243 268 2017 888 392 35 109 37 937 2 224 984 2018 893 686 17 219 36 342 1 146 595 Total 4 253 581 215 230 155 717 7 508 385 Annual average 850 716 43 046 31 143 1 501 677 Needs per year 1 408 553 230 000 1 401 665 Coverage of needs 60.40% 18.72% 2.22% It should be noted that these allocations have been very low in relation to the financing needs for the maintenance, repair and renewal of railway infrastructure. Thus: • in terms of the infrastructure maintenance, the allocated public funds covered only 60.4% of the financing needs; • in terms of the infrastructure repair, the allocated public funds covered less than 20% of the financing needs; • in terms of the infrastructure renewal, the allocated public funds covered less than 2.5% of the financing needs. The direct consequence of inadequate financing of the maintenance, repair and renewal of the railway infrastructure is its progressive degradation and the occurrence of more and more frequent failures that require speed restrictions for the trains to ensure the minimum safety conditions. This has generated the further limitation of the competitiveness of the rail transport in relation to other modes of transport, materialized by the massive migration of the customers to the road transport. The less visible, but more dangerous effect of underfunding the railway infrastructure, coupled with the distortion of the competitive environment in the transport market, is that a vulnerability of the national economy is maintained by artificially promoting a more expensive mode of transport, which generates global costs, including substantially higher budget costs. The calculations made based on the results of an international study5 show that the transfer to the railway of each amount of 10% of the road traffic developed in Romania would generate, at national level, annual savings of over 2 billion Euros. Given that the railway infrastructure 5 External Costs of Transport in Europe, study conducted in 2011 by EC Delft, INTRAS and Franhofer ISI CFR Network Statement - 2026 ANNEX 12.a Version: 15.0.0 Updated: 15.12.2024 Page: 5 / 14  Compania Naţională de Căi Ferate “CFR” S.A. România has a transport capacity that could allow at least 30% of the current road traffic to be taken over, it results that the underfunding of the railway infrastructure generates annual losses of over 6 billion Euros in the national economy. In addition, the artificial and excessive promotion of road transport also contributes to maintaining a high level of dependence on petroleum products, which creates a significant vulnerability from the perspective of energy security. In Romania, the level of dependence on oil in the transport sector is higher than 97% (year 2011)6, even exceeding the European average. Last but not least, the limitation of the competitiveness of the railway transport by insufficient financing of the railway infrastructure generates the overload of the road network, whose transport capacity is already at a critical level in relation to the demands on many transport relations. 6 Calculations performed on the basis of INS data (Statistical Yearbook 2012, Sustainable Development Indicators in Romania (IDDR)) CFR Network Statement - 2026 ANNEX 12.a Version: 15.0.0 Updated: 15.12.2024 Page: 6 / 14  Compania Naţională de Căi Ferate “CFR” S.A. România 3. STRATEGIC OBJECTIVES The logic of the strategy regarding the development of the Romanian railway infrastructure is an iterative logic, with arborescent development, which includes the following stages: Identifying the national interests in the railway Defining the general transport, as well as strategic objectives Defining the specific Identify the strategic identifying the issues on the development of the strategic objectives, actions needed to achieve related to the railway infrastructure, derived from the general the specific objectives harmonization of these deriving from the national objectives interests with the interests in the railway European railway transport transport policy. The corroboration of the results of the studies and analyzes on the domestic and international transport market, on the macroeconomic effects of transport, on the operation of the Romanian railway system and on the current situation of the railway transport led to the identification of the following relevant conclusions regarding the substantiation of the Strategy for Railway Infrastructure Development: 1. The modal balancing of the national transport system, through the priority promotion of the railway transport, is a matter of national interest, mainly because: • leads to a massive reduction of the costs borne by the national economy in terms of transport, with consequences for strengthening the competitiveness of the national economy; • leads to the decongestion of the road network, which is already overloaded, and creates the premises for reducing its capacity deficit in relation to the transport demands, with consequences for more efficiently meeting the needs of people and goods on the Romanian territory, both in domestic and international traffic; • ensures the support of the increase of the people and goods mobility, especially in the internal traffic, with consequences regarding the support of the sustainable growth of the national economy and the consolidation of its balanced development; • represents a harmonized approach with the European Union's transport policy. 2. The integration of the Romanian railway system in the single European transport area and, in particular, in the Single European Railway Area, is both a matter of national interest and an approach aimed at ensuring the harmonization of the national interests with the European policy in the field of the railway transport. The analyzes emphasized that the recovery of the railway transport, with consequences for balancing and streamlining the national transport system, is possible only if its competitiveness is significantly increased, so that the Romanian railway system can become a significant player in the land transport market, able to regain lost customers and attract new customers. Also, the analysis of the current situation of the railway transport highlighted the existence of a great potential to increase the railway transport in the internal transport market. In the case of passenger transport, the theoretical growth space concerns both interurban public transport, currently performed by buses and coaches, as well as the possibility of attracting routes that are currently performed by individual means of transport. In the case of freight transport, the most significant growth space is given by the market of small shipments that are currently transported almost exclusively by road. The railway can once again become a significant player in this market, provided that the intermodal transport and the transport in isolated wagons are rehabilitated. The analysis of the current situation of the railway transport highlighted that the railway inf