Report of the Board of Directors

Summary of the results and development of the NSB Group for 2014:

  • The operating profit is 2 001 MNOK (1 821 MNOK)
  • The profit before tax is 1 597 MNOK (1 645 MNOK)
  • Return on equity is 19.2 %
  • An increase in the number of journeys and operating income in the passenger train operations
  • Improved results in the bus operations
  • Unstable infrastructure and restructuring costs affect the freight operations and contribute to negative results for the year
  • Considerable gains from development and sale of property
  • /Punctuality was good for the first four months of the year, then lower than target, before an improvement towards the end of the year


Summary of results and development for the business areas

Passenger train operations

The passenger train operations consist of NSB AS and the subsidiaries NSB Gjølvikbanen AS and Svenska Tågkompaniet AB.

Operating income for passenger train operations was 7 087 MNOK (6 577 MNOK), an increase of 7.8 % compared to the previous year. A significant part of the change is due to an increase in journeys by 4.4 % to 68.5 million. This is primarily due to increased train capacity and improved route offer in Eastern Norway.

The operating profit was 659 MNOK (842 MNOK), a reduction of 183 MNOK. This is mainly due to increased depreciation and IT costs. For the operations in Sweden the profit was 0 MNOK (4 MNOK).

An adjusted and improved route offer was introduced in December 2014, based on the significant improvement introduced in 2012. The change has given customers in the eastern part of Norway, and from 2014 also in Trøndelag and at Sørlandsbanen, a better train service in terms of increased capacity, more departures, new trains and more seats. This change has led to an increase in the no. of journeys during the two last years of 12 %.

The procurement of the new regional and local trains is going according to plan, and 23 regional trains (type 74) and 38 local trains (type 75) are now in service in eastern part of Norway. The delivery of a total of 81 new trains will be completed during 2016.

The passenger train operations in Norway reached a punctuality of 88.3 %, the same level as in 2013 but below the target of 90 %.

Bus operations

The bus operations consist of the parent company Nettbuss AS, 32 wholly owned subsidiaries, and 8 partly owned companies. The Nettbuss Group operates in most of the counties in the southern and the middle of Norway. The Swedish part of the operations is mainly situated in the south west of Sweden. During the autumn Nettbuss merged its activity in Denmark with the Danish company Keolis BUS. The new company will have a market share of about 13 %, and Nettbuss owns 25 % of the shares.

The operating result is 120 MNOK (95 MNOK). The Nettbuss Group’s operating income for 2014 is 5 907 MNOK (6 046 MNOK), a decrease of 2.3 % from the previous year. The change in operating income is mainly due to the operations in Denmark not being consolidated from October 2014. The change in operating profit is mainly due to effects from efficiency programs.

The Norwegian market for long express bus travels is changing, partly due to increased competition. During 2014 the production in Norway has been adjusted to meet the competition in the market.

The express bus operation in Sweden is growing and market share is increasing. Profitability is good, and the company is now the market leader between Oslo – Gothenburg – Malmø. In October a new express route was started between Oslo and Stockholm.

The bus operations has taken part in several tenders during 2014, and re-won route contracts for Drammen and Hallingdal. The bus operations lost the tender for Nordfjord effective from July 2014, and Aust-Agder and Elverum from January and July 2015. Tenders were won for Molde (start January 2015) and Ringerike (start July 2015).

In Sweden new operations were started in Åmål in August, while the operations in Kungelv were closed in July. A tender in Lerum with start of operations in 2015 was won, while the existing operations in Orust were lost with effect from 2015.

The bus operations transported 131 (137) million passengers and drove 190 (198) million km. during 2014. The reduction is mainly due to non-consolidation of operations in Denmark from October 2014.

Freight operations

The freight operations are run by the CargoNet Group. The largest part of the business is operating pendulum freight trains for containers and other intermodal carriers. In addition CargoNet operates dedicated single customer train services, for example for transport of fuel and timber. In Sweden the company operates a number of long term contracts for train haulage.

The operation of container terminals is run through the wholly owned subsidiaries Rail Combi AS and Terminaldrift AS.

Operating income is 1 032 MNOK (1 070 MNOK), and the operating result is -90 MNOK (-44 MNOK).

The quality of the infrastructure has affected the operations also during 2014. The business has been characterised by the closure of several lines for shorter and longer periods due to flood, land­slides and poor weather. In total 128 (335) trains had to be cancelled due to unforeseen problems with the infrastructure. Operations in Norway have also been affected by increased competition from trucks and competing suppliers of cargo transport on rail. Reduced volume and restructuring costs contribute to the weak financial performance.

The freight operations are undergoing an efficiency project to reach profitability during 2015. The project includes downsizing and other measures to reduce operation and maintenance costs.

Punctuality in Norway was 90 % (89 %) delivery within 15 minutes, equal to the goal of 90 %.

Train maintenance

Train maintenance is operated by Mantena AS which is the largest supplier of maintenance services to train operators in Norway. The main activity is maintenance of locomotives, wagons and passenger train sets. In addition Mantena operates workshops for maintenance of parts and components. The company also performs maintenance and repairs of machines used for work on the railways in Norway. The operations include workshops in Oslo, Trondheim, Drammen, Skien, Bergen, Stavanger, Narvik and Bodø.

Mantena runs maintenance operations in Sweden through Mantena Sverige AB, and is also an important partner in the maintenance operation for the Stockholm underground trains.

Mantena shall meet future competition though efficient and reliable maintenance operations. The company’s competitiveness is critical and it has been working continuously for several years with measures to meet ever increasing demands for efficiency and reliability.

The operating income is 1 367 MNOK (1 584 MNOK). The reduction in income can be attributed to the inventories being transferred to the passenger rail operations and freight operations, which means that use of spares was not treated as income for the maintenance operator in 2014. The ­operating profit is 47 MNOK (112 MNOK).

Real estate

The group strategy for the real estate operations is to optimize the development of the value of the real estate assets with a view to sale of non-operational property according to market opportunities and the Group financing needs. In addition the real estate operations shall develop and manage the real estate properties to strengthen the transport business of the NSB Group. The NSB Group shall through its real estate operations be the leading developer of transport hubs for public transport and freight transport on rail.

In 2014 ROM Eiendom won a price for the new twin office buildings in Schweigaards gate 21 and 23 in Oslo. Both buildings were the first to achieve the environmental rating Breeam-NOR Excellent in Norway. Both buildings were in December sold to the Norwegian insurance company KLP.

The real estate operations comprise a rental area of approx. 730.000 square meters, property development potential of about 2 million square meters, and achieved an operating profit of 1 246 MNOK (936 MNOK). The positive result in 2014 is mainly due to high gains on sale of property.

About the NSB Group

Corporate governance

The Board of Directors has discussed and approved the statement regarding Corporate Governance which is enclosed the annual report.


The NSB Group is one of Norway´s largest transportation groups. The parent company­ NSB AS is owned by the State of Norway, represented by the Ministry of Transport and Communications. The Group´s headquarters is in Oslo, while operations are spread through­out­­ most of Norway, and in certain parts of Sweden and Denmark.


The Group is divided into several areas of operations:

  • Passenger train: Passenger train operations including shared services for the group
  • Bus: Bus operations
  • Freight: Freight train operations
  • Train maintenance: Maintenance and repair of passenger and cargo trains
  • Real estate operations: Operation and development of real estate

Goals and strategies

The NSB Group core business is passenger traffic by train and bus in the Nordic countries, freight transport on rail within and to/from the Nordic countries and ownership of strategic property close to stations and freight terminals. In addition the NSB Group conducts operations closely connected to the core business.

The NSB Group shall add value through developing, producing, marketing and selling competitive passenger and freight transport in the Nordic countries, and based on owned property support urban development facilitating public transport.

The NSB Group shall:

  • avoid injuries to people and damage to the environment
  • be the leading land-based transport company in the Nordic region
  • generate profits
  • have satisfied customers
  • have highly qualified and motivated employees
  • maintain financial freedom of action

Internal control

The NSB Group has adopted a framework for internal control, and established a control-environment that consists of values, ethical guidelines, organisational structure, authorisation structure­ and governing documents. The Board of Directors evaluates the Group’s business idea, values, ­strategies and plans on an annual basis. Risk analysis is performed annually for the business as a whole as well as for the various operations. Risk within financial reporting is evaluated through risk analysis of specific areas and periodic follow-up meetings with the business segments.

Based on the above the internal control system is periodically revised, by changes and improvements in the governing documents, guidelines and procedures.

Economic development for the NSB Group and the parent company NSB AS

The NSB Group has a profit after tax for 2014 of 1 509 MNOK (1 300 MNOK), an improvement of 209 MNOK. The operating profit is 2 001 MNOK (1 821 MNOK), an improvement of 180 MNOK. The improvement is mainly due to gains from the development and sale of real estate.

The parent company NSB AS shows a profit after tax for the year of 947 MNOK (614 MNOK). Group contributions and dividend from subsidiaries in the amount of 720 MNOK (390 MNOK) are included in the result. Operating profit for the parent company is 541 MNOK (757 MNOK). The change is mainly due to low pension costs in 2013 and increased depreciation and IT costs.

The Groups net cash flow from operations is 1 338 MNOK (1 150 MNOK). Net cash flow used for investments is 637 MNOK (2 600 MNOK). This includes 2 302 MNOK in acquisition of property, plant and equipment as well as investment property and sale of assets including real estate of 1 755 MNOK. Investments were mainly used to increase capacity and profitability within the Group’s business segments. A dividend of 515 was paid to the company shareholder in 2014.

Including this year’s profit, total equity for the parent company is 5 961 MNOK (5 809 MNOK). The equity ratio is 25 % (27.1 %). Retained earnings for the parent company are 817 MNOK. For the NSB Group, total equity is 8 400 MNOK (7 941 MNOK), resulting in an equity ratio of 30.2 % (30.4 %).

The Group return on equity is 19.2% (17.3 %).

The Group working capital is 2 740 MNOK (1 680 MNOK), an increase of 1 060 MNOK.

The owner represented by the Ministry of Transport and Communication expects a dividend of 50 % of the profit after tax for the NSB Group. The Board proposes the following allocation of the result of the parent company NSB AS:

Dividend 753 MNOK
Transferred to other reserves 194 MNOK
Total allocations 947 MNOK

The annual financial statements have been presented under the assumption that the company will continue as a going concern and the board confirms that this is the case.


Financial risk

The Group activities expose the Group to a variety of financial risks: market risk (including currency exchange risk, interest rate risk and other price risk), credit risk and liquidity risk. The Group overall risk management programme focuses on the unpredictability of financial markets and seeks to mini­mise potential adverse effects on the Group financial performance. The Group utilizes derivative financial instruments to reduce some of the risk exposures. The NSB Group financial risk management is described in note 14.

NSB borrows money in the markets and the currency that offers the most favourable terms. Borrowings in foreign currencies are converted to Norwegian currency through currency swap agreements. NSB has a goal of minimising currency risk in its financial management. NSB has some exposure to currency risks in its daily operations related to bank and cash deposits for business units abroad, but otherwise to a minimal degree, due to the fact that its income and expenses primarily occur in NOK. If there is an agreement for a considerable purchase in foreign currency, the currency risk is covered at almost 100 % during the course of the agreement.

NSB is exposed to changes in the interest rate level. The parent company uses financial instruments to reduce interest rate risk and to achieve its desired interest rate structure. Guidelines have been established, regulating what portion of total outstanding debt that is to be subjected to interest rate fixing during a 12 month period, and for the duration of the loan portfolio.

Surplus liquidity is invested in short-term Norwegian bonds and commercial papers. Changes in interest rate can affect the value of the portfolio, the papers are however normally held until maturity. Limits for exposure towards certain sectors and institutions are established based on credit evaluations.

The current guidelines state that the funding need during the next twelve months should be covered through excess liquidity and committed credit facilities. The NSB Group has a goal of having­ a free liquidity of at least 500 MNOK.

NSB has covered its borrowing needs for 2014 satisfactorily through a long term bond at the beginning of the year, plus several short term loans in the domestic commercial paper market during the year. The unrest in the financial markets is somewhat reduced, but there is still uncertainty related to the development of interest rates and to loan margins that will be achieved in the future. NSB has a high focus on counterparty risk in financial transactions.

Operational risk

Analysis of operational risks is done systematically, for example for traffic safety and the achievement of financial goals. Based on the risk analysis, control activities reduce identified risks, including automatic controls, audits and analysis related to special risk areas.

Social responsibility

The Ministry of Transport and Communication has in the articles of association clarified that the board shall ensure that the company is socially responsible. The company shall annually report on this to the owner through the annual planning document (§ 10-plan).

The NSB Groups greatest contribution to society is to facilitate that the community’s transportation challenges take place in an efficient, accessible, safe and environmentally friendly manner. The contribution shall be achieved by planning and implementing measures to increase the capacity of public transport to/from home and work, to develop public transportation hubs and develop residential and commercial buildings in close proximity to these hubs, and offer sustainable freight transport on rail.

The NSB Group reports on social responsibility according to the accounting law (§ 3-3C). These reporting requirements are included in the social responsibility report which is a part of the annual report. The CSR report includes among others information on work environment and absence due to sickness, external environment and anti-corruption work.

Future challenges

During the next 16 years there will be one million more inhabitants in Norway. Towards 2040 the population in and around the larger cities is expected to grow by 40 %, and the demand for efficient, smart and sustainable transport will grow. In spite of technological progress transport is one of the sectors with the strongest increase in environmental emissions, and in 2012 about 19 % of the total emissions in Norway was due to road traffic. Transport is thus a key factor in reducing climate change and to achieve sustainable development. The negative climate effects can for example be reduced by changing to transport modes with lower emissions, such as public transport, and to improve the efficiency of the present vehicles and transport systems.

The NSB Group by rail, bus and real estate operations play an important part in facilitating a shift towards public transport. Our passenger train and bus operations deliver a substantial and sustainable route network to and from transport hubs, and our real estate operations develop hubs which makes it possible to live and work near good public transport services. Our freight operations deliver freight transport on rail, which is both energy efficient and sustainable, and avoids the disadvantages related to freight transport on road.

NSB’s increased service for passenger transport on rail, especially in eastern Norway, which started in December 2012, has led to a large growth in the number of journeys and income. A further improved route offer was introduced in December 2014 with a 10 minute frequency between the seven largest stations in Norway, and more departures on Sørlandsbanen and Trønderbanen. The investment and delivery of new trains continues. In total 81 new trains will be delivered by 2016. At the same time the older train sets type 69 A/B will be phased out from the Oslo traffic. When the new double track parts on Dovrebanen (2015) and Vestfoldbanen (2016) are completed, rush hour service to Hamar will be improved and new express trains on the Vestfold line will be introduced.

In the real estate operations large projects are developed near public transport hubs. The development around Oslo Central Station continues, with further development in Bjørvika, and the upgrade of the older part of Oslo Central Station is finished in January 2015.

The two office buildings in Schweigaards gate, Oslo, have been completed and sold, and further development is planned in the vicinity of Schweigaards gate 21 and 23. New office buildings are built at Filipstad and in Bergen, and at Grefsen in Oslo a large number of flats are built in association with a local partner. Large projects are planned or under development in Drammen, Fredrikstad, Kristiansand, Sandnes, Bergen and Trondheim.

Most of the bus industry, except express bus, is operated through tenders. The transition to tenders has contributed to low profitability in the industry. The bus operations in NSB face the same challenges, and the processes regarding calculating and bidding for tenders as well as further optimizing operating efficiency have been improved. During the next 5 years a lot of the routes operated by our bus operations today will be put out for tender. Our goal is to keep our market share, and grow in the express bus segment.

Freight transport on rail is characterized by low profitability, unstable infrastructure and reduced volumes. The NSB Group is conducting an improvement project to ensure profitability in the freight operations during 2015. This includes a reduction of the number of employees and other measures to reduce costs related to operations and maintenance.

To be able to achieve more freight transport on rail the reliability of the infrastructure must be improved to ensure reliable and punctual delivery to the customers. This will also help to improve customer satisfaction and growth in passenger rail transport. A prerequisite is that society gives priority to maintenance and renewal of critical infrastructure.

The Department of Transport and Communications is currently working on a reform of the railway sector to achieve an optimal governance of the sector, a business and customer oriented organization and clear goals. In the spring of 2014 the Department asked central interest groups to give their views on important themes related to the railway reform. The NSB Group has given input, especially regarding planning, organization and responsibility in the sector. The government is expected to submit a paper to the parliament during 2015 with spesific suggestions on how the Norwegian railway sector should be changed. The NSB Group will help to develop and carry through an optimal solution for the railway sector.

2014 has in total been a good year for the NSB Group. The Board would like to thank the NSB Group´s employees for their efforts in 2014, and looks forward to common efforts to develop the NSB Group according to the forthcoming challenges and possibilities.

Oslo, 12th of February 2015

Kai Henriksen (chairman of the board), Bjarne Borgersen, Wenche Teigland, Åsne Havnelid, Tore Heldrup Rasmussen, Audun Sør-Reime, Rolf Jørgensen, Jan Audun Strand, Geir Isaksen (CEO)

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