33. Off-balance sheet arrangements

A number of investigations are under way against NS and/or group companies, and various claims have been submitted that are being contested by NS. Where deemed necessary, provisions have been made for this. A number of important subjects are explained below.

Long-term contracts

There were a number of long-term financial commitments to third parties at year-end 2023, mainly concerning lease arrangements for trains, company cars and copiers. There are also long-term contracts for services by third parties in the areas of automation, maintenance and cleaning.

Energy contracts

As at the end of 2023, the purchase commitments under the energy contracts in the Netherlands for the volumes already covered, the payments for the Programme for Responsibility and the surcharge for green electricity:

• €87 million for the period 2024 (remainder of the 10-year contract, position at the end of 2022: €141 million); and

• €288 million for the period 2025-2028 (position at the end of 2022: nil). These concern purchases under the new contracts with PZEM and Shell for the supply of energy and Guarantees of Origin in the period 2025 to 2027 and the possibility of purchasing energy from PZEM for the period after 2027, which could subsequently be incorporated into a new or existing contract if an extension option with PZEM is eventually exercised and approved by PZEM.

The expected energy volume to be used for traction energy for the year 2024 is fully covered, and the expected volumes for 2025-2028 are partially covered (80% for the year 2025, 60% for the year 2026, 40% for the year 2027 and 20% for the year 2028). Transport costs and energy taxes are not included in the purchase commitments shown. If the difference between the market values and the contract value exceeds a given threshold, (i) the Group or Eneco (for the contract up to and including 2024) and (ii) the Group or PZEM must provide cash collateral as security to the other party. Any payments and liabilities are netted, as they are both inextricably linked. At year-end 2023, NS has no margin obligations/securities to/from Eneco (year-end 2022: €360 million received in the form of margin funds). At year-end 2023, NS delivered cash collateral of €6.8 million (year-end 2022: nil) to PZEM.

For more detailed information about the energy contracts, see note 26.

Tax group

For the purpose of corporation tax, all the Dutch subsidiaries belonging to the Group are part of the NV Nederlandse Spoorwegen fiscal unity. As a result, the Group is jointly and severally liable for all tax liabilities of the subsidiaries included in the fiscal unity.

Investment commitments

At the end of 2023, the Group had outstanding investment commitments of €1,304 million (2022: €1,346 million), primarily for purchasing and upgrading trains and investments in the areas around the stations.

Contingent liabilities

The Group has paid €32 million (translated) of its share in the issued share capital (€162 million after translation) of EUROFIMA AG. The Group has a liability for full payment on demand of the shares and other guarantee commitments totalling €292 million (after translation). Payment of the liability can be demanded if EUROFIMA AG’s own equity position gives reason to do so.

As a result of the agreements made with the Belgian carrier regarding the IC Brussels service in the context of the main rail network, the Group is making allowances for a negative balance for the Group in the settlement of the costs of commercial operation for this route. The amount of that negative balance depends on the commercial results on that route. The expected outcomes are part of the main rail network impairment test as explained in note 15.

Contingent assets

The Group has various outgoing claims and/or disputes that have not been valued because the outcome of these matters is uncertain, with the exception of the claims and disputes that have been valued in the context of the fair value of Abellio UK (see note 1).

Guarantees

The Group has issued guarantees totalling €340 million (31 December 2022: €504 million) relating to the operation of the current and former franchises in the United Kingdom and Germany. Some of the guarantees relating to Abellio Germany have been provided for (see note 30).

Franchises

The Group had the following franchises during 2023.

Current franchise main rail network Netherlands (until 2024)

The main rail network franchise is awarded by the Ministry of Infrastructure and Water Management. It covers passenger transport by rail on the main rail network in the Netherlands. The old main rail network franchise and the HSL franchise (see the section below) ended in 2014, and the Ministry decided in December 2014 to award a new integrated main rail network franchise to NS for the period from 1 January 2015 to 31 December 2024. The train services on the HSL South have also been covered by this franchise from 1 January 2015 onwards. The franchise agreement stipulates that performance must improve during the term of the franchise. The evaluation will take place during 2024. If NS does not achieve the target values for 2024, NS will be obliged to pay a sum of €1.5 million for each performance indicator not attained up to a maximum of €19.5 million per evaluation. If NS does meet the conditions, a maximum bonus of €10 million can be earned for each evaluation. In addition, the Ministry can impose a fine of up to €6.5 million a year on NS if NS does not achieve the minimum baseline values for the franchise performance indicators. The performance indicators are measured for the following performance areas: general (customer satisfaction), the door-to-door journey, ease of travelling (transport capacity at peak times), journey information (in the event of disruptions), safety (including personal safety) and reliability (punctuality for passengers).

The agreements made with the government include agreements on the production assets (rolling stock in particular) that are to be used for operating the main rail network franchise. Depending on the ownership situation and the form of tender, the production assets may be leased in the event of complete or partial loss of the main rail network franchise to a subsequent franchise holder, or sold at the carrying amount, and/or their leases may be transferred unchanged to the subsequent franchise holder.

The overall fees for track use and the franchise for the integrated main rail network/HSL South franchise were €213 million in 2023. The negotiation agreement of 2011 included an adjustment mechanism to avoid the liquidation of HSA. This adjustment mechanism has been included in the implementation agreement for the franchise. It works as follows. If the average return on investment for the franchise holder over a fixed period turns out to be lower than the threshold value (4%), the holder will be entitled to an adjustment to the franchise price (equal to the difference between the actual return and 4%, with the adjustment over the entire duration of the franchise being capped at the equivalent of €144 million at 2010 prices). There was no entitlement to any such adjustment over 2015. Any entitlement to an adjustment was first calculated in 2016 using the average return on investment for 2015 and 2016, and thereafter on a rolling basis using the previous three years. An entitlement to an adjustment to the franchise price deriving from the implementation agreement does not lapse if at any point in subsequent years the return on investment exceeds the threshold value. Payment of any entitlement that may have arisen through an adjustment to the franchise price will be spread in instalments, as per the implementation agreement. The adjustment mechanism for the average profitability is recognised during the franchise on a straight-line basis covering the entire franchise term.

The franchise also includes an adjustment mechanism for a settlement of any windfalls in energy price changes over the franchise period. This adjustment will be calculated cumulatively, with NS owing the Ministry of Infrastructure and Water Management 75% of the difference between the actual energy prices and the forecast energy prices according to the business case, with no adjustment being made if the cumulative actual return on investment falls below the cumulative norm return. Apart from the calculation outlined above, NS owes an unconditional one-off sum of €56 million to the ministry for 2016. This payment is amortised on a straight-line basis over the entire term of the franchise. This arrangement is capped at €290 million (including the one-off payment) and will never result in a payment to NS by the Ministry of Infrastructure and Water Management. No energy cost adjustment is owed for 2023 and previous years.

In addition to the franchise fee and the HSL fee, infrastructure levies amounting to €271 million (2022: €249 million) are owed to ProRail .

In late December 2023, the transport franchise for the main rail network for the period 2025-2033 was re-awarded to NS by the Ministry of Infrastructure and Water Management. For further explanation of the new franchise, see note 15.