Transport- og Bygningsudvalget 2015-16
TRU Alm.del Bilag 331
Offentligt
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Scandlines Rødby-Puttgarden
Review of KPMG Report dated 24 January 2016
24 June 2016
TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
1653505_0002.png
Table of contents
Executive summary
Car revenue
Cargo revenue
Other revenue
Costs
Appendix
Page
6
13
19
23
26
31
Kirsten Aaskov Mikkelsen
Partner
Mobile: +45 22 20 22 19
E-mail:
[email protected]
Bjarne Iver Jørgensen
Senior Manager
Mobile: +45 22 20 23 56
E-mail:
[email protected]
This is an external version of an internal report, which has been customised to
be made available for public use. The only difference between the internal
report and this version is that some Scandlines confidential information in
Appendix I and II have been excluded and it has clearly been marked with a text
“Confidential information has been excluded”. All exclusions are made based
on the request of Scandlines Management.
Table of contents
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Deloitte Statsautoriseret Revisionspartnerselskab
CVR-nr. 33 96 35 56
Weidekampsgade 6
Postbox1600
0900 Copenhagen C
Scandlines Danmark ApS
Attn: Per Johannesen Madsen, CFO
Havneholmen 25, 8. sal
1561 Copenhagen V
Telefon: +45 36 10 20 30
Fax:
+45 36 10 20 40
www.deloitte.dk
Background and purpose of our review
Background and conditions
The Danish Ministry of Transport and Building has asked KPMG to prepare the
report “Forretningsanalyse af færgefarten Rødby-Puttgarden” dated 24 January
2016 (the “KPMG Report”) regarding Scandlines’ financial performance on the
Rødby-Puttgarden ferry service subsequent to the opening of the Fehmarn tunnel.
The KPMG Report concludes that Scandlines’ operations on the Rødby-Puttgarden
ferry service will be loss-making from the time of the opening of the Fehmarn tunnel
in 2026. We understand that this conclusion is in conflict with the prevalent opinion
of Scandlines and, therefore, you have asked us to perform a review of the KPMG
Report with focus on the assumptions and the facts that the conclusion is based on.
Our work is subject to specific preconditions as set out in a separate section.
In case this report is used for other purposes than as Management’s confidential
information or by persons other than you, we take no responsibility.
Scope of our review
The purpose of this report is to review the KPMG Report with the purpose of describing
and pointing out misstatements, inconsistencies with other official documents and
challenge the key assumptions applied in the KPMG Report.
We note that the scope of our review specifically excludes a technical review of the
calculations in the KPMG Report and that we have not had access to the underlying
financial model.
As agreed upon with Scandlines Management, we have specifically excluded the
following analysis from our report:
Financial modelling on the total Rødby-Puttgarden ferry service financial performance
Assessment of the relevance of the hypothesis tested in the KPMG Report
2015 effects from other areas than included in this report, i.e. staff costs for the
Bordershop
Review of cash flow and NPV assumptions and calculations
Assess alternative assumptions
Impact on Femern A/S’ business case
Postponement of the official opening year of the Fehmarn tunnel to 2028
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Conditions and distribution of responsibilities
Our work is not a complete review of the KPMG Report nor does it provide any
guarantees with respect to the accuracy of facts or assumptions specifically
addressed or facts and assumptions not addressed.
Our work does not include a review or discussion of the methodologies or
hypothesis in the KPMG Report.
We have taken on this engagement under the following preconditions:
Scandlines will deliver all the relevant documentation needed for the review
Relevant Scandlines personnel will be available as needed
We will be objective in our review and any subjective arguments in this report
will be with reference to a source
Important information
We have not involved persons outside Scandlines and Deloitte.
Deloitte disclaims any and all responsibility and liability for the contents of, any errors,
misstatements in or omissions from, this report.
Deloitte disclaims any and all responsibility and liability for any decisions made on basis
of this report.
Verification
Our review will not include a separate verification of the received data and information
and will not include an audit or review in accordance with International Standards on
Auditing and review and additional requirements under Danish audit legislation.
Sources of information
Our review has been conducted based on publicly available sources including
reports and data made available by Scandlines Management. Additionally, we have
made use of expert opinions and information provided by Scandlines Management.
A full list of our sources is included in Appendix III.
Deloitte
Statsautoriseret Revisionspartnerselskab
Kirsten Aaskov Mikkelsen
Partner
Bjarne Iver Jørgensen
Senior Manager
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TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
Table of contents
Executive summary
Car revenue
Cargo revenue
Other revenue
Costs
Appendix
Page
6
13
19
23
26
31
Executive summary
Page
KPMG base case scenario overview
Report conclusion
Car revenue
Cargo revenue
Other revenue
Costs
6
7
8
9
10
11
Table of contents
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Executive summary – KPMG base case scenario overview
In the KPMG Report, the base case scenario including price competition has been used as basis for the conclusion that
Scandlines’ operations on the Rødby-Puttgarden ferry service will be loss-making from the time of the opening of the
Fehmarn tunnel in 2026.
Key assumptions
The KPMG Report is based on the
following key assumptions:
The report assumes opening of
the Fehmarn tunnel in 2026
Scandlines will achieve a
market share of 8.3% for cars
and 30.0% for cargo
Scandlines will offer its
services to cars and cargo at a
25% discount compared to
Fehmarn tunnel prices
The Holger Danske ferry will be
out of service as of 2026
From 2025 to 2026, the total
Bordershop revenue will
increase relative to the increase
in the number of cars crossing
the Fehmarn belt, which is
expected to increase from 2.1
million to 3.2 million units
From 2025 to 2026, the number
of annual scheduled ferry
departures is expected to
decrease from 32,120 to 26,900
Staff costs related to Traffic as
well as Retail and Catering on
board are assumed to be fixed
and dependent on the number
of ferries
Forecast on Rødby-Puttgarden base case scenario including price competition
The conclusion in the KPMG Report (KPMG Report, page 32) has been based on specific forecasts for the operations after the opening of the
Fehmarn tunnel in 2026. The table below shows the forecast in the KPMG base case scenario including price competition.
This report provides a review of specific revenue and cost assumptions underlying the forecast.
EURm
Revenue
Cars
Cargo
Catering
Onboard retail
Bordershop
Total revenue
Variable cost
Gross profit
Staff cost
Traffic related
Catering
Onboard retail
Bordershop
Other admin
Other operating
EBITDA
FY15
103
67
26
31
123
350
(144)
205
FY16
108
70
27
32
127
364
(151)
213
FY17
113
74
28
33
132
380
(156)
223
FY18
118
78
29
34
138
397
(163)
233
FY19
124
82
30
36
143
414
(170)
244
FY20
129
85
31
37
149
431
(177)
254
FY21
135
89
32
39
154
450
(185)
265
FY22
141
94
33
40
160
469
(192)
277
FY23
147
98
35
42
166
488
(199)
289
FY24
154
103
36
43
173
509
(207)
301
FY25
161
108
38
45
180
531
(216)
315
FY26
10
25
3
4
260
303
(206)
97
FY27
11
27
3
4
278
323
(218)
104
FY28
11
28
3
4
296
343
(231)
111
FY29
12
29
4
4
315
364
(246)
118
FY30
12
30
4
4
327
377
(255)
123
(11)
(11)
(11)
(20)
(4)
(31)
117
(11)
(11)
(11)
(20)
(4)
(32)
125
(11)
(11)
(11)
(21)
(4)
(33)
133
(11)
(11)
(11)
(21)
(4)
(33)
141
(12)
(12)
(12)
(21)
(4)
(34)
149
(12)
(12)
(12)
(22)
(4)
(35)
158
(12)
(12)
(12)
(22)
(4)
(35)
167
(12)
(12)
(12)
(23)
(4)
(36)
177
(13)
(13)
(13)
(23)
(4)
(37)
187
(13)
(13)
(13)
(24)
(5)
(37)
197
(13)
(13)
(13)
(24)
(5)
(38)
208
(12)
(12)
(12)
(25)
(5)
(39)
(6)
(12)
(12)
(12)
(25)
(5)
(40)
(1)
(12)
(12)
(12)
(26)
(5)
(40)
4
(12)
(12)
(12)
(26)
(5)
(41)
9
(12)
(12)
(12)
(27)
(5)
(42)
11
Executive summary | KPMG base case overview
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TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
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Executive Summary - Report conclusion
The KPMG Report concludes that the Rødby-Puttgarden ferry service will be loss-making from 2026. In our opinion,
it is highly dependent on the assumptions applied, and we consider it more likely that it will continue to be profitable
in 2026.
Observations commented in this report
Revenues
The applied price discounts for Scandlines on cars and cargo are
uncertain and appear to be inconsistent with other official documents.
Traffic and financial information applied for 2015 are inaccurate
compared to actual 2015 figures and may impact the 2026 result.
The conclusion is not based on the scenario with the highest EBIT-
margin for cars, which is inconsistent with the notion of Scandlines
being a rational market participant.
It is uncertain to which extent other sources of revenue e.g. busses,
dangerous goods and gangway have been included.
Estimated market shares for Scandlines for cars and cargo appear to
be in the lower end of the range.
Bordershop revenue has been forecasted using uncertain assumptions,
which appear too optimistic.
Costs used for 2015 including variable and fixed costs are inaccurate
and may impact the 2026 result.
Costs for Traffic as well as Catering and Retail on board are assumed
to be fixed, which is inconsistent with the experience of Scandlines
Management.
Scandlines will have another business model in 2026 than present,
which implies a more lean cost structure.
Financial information for 2015 has been misestimated which may
contribute to uncertainty in the forecast applied in the KPMG
Report.
The conclusion in the KPMG Report is dependent on specific cost
assumptions with significant uncertainty. Overstatement of costs
contribute to a misrepresentation of the profitability of the Rødby-
Puttgarden ferry service.
Consequence
The conclusion in the KPMG Report is based on assumptions that
appear to be inconsistent with other official documents and financial
information for 2015 has been based on misjudgment, which may
contribute to uncertainty in the forecast applied in the KPMG
Report.
Furthermore, the conclusion in the KPMG Report is not based on
the most profitable scenario for cars, which is inconsistent with the
notion of Scandlines being a rational market participant.
Costs
Conclusion
In our opinion, there are significant uncertainties related to the conclusion in the KPMG Report that the Rødby-Puttgarden ferry service will
be loss-making from 2026. We consider it more likely that the Rødby-Puttgarden ferry service will continue to be profitable in 2026.
Executive summary | Report conclusion
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TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
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Executive summary - Car revenue
Expected directional
impact on Scandlines
EBITDA
Car revenue in the KPMG Report is based on assumptions that are different from the Femern A/S Report. KPMG has
not used the most profitable ferry scenario as basis for their conclusion.
Key findings
A comparison of the price
forecast from Fehmarn
with Scandlines prices
shows that the implied
discount for cars is 30%
rather than the stated 25%
Observation
We find an implied price difference of 30% in 2026 on cars between Scandlines prices in
the KPMG Report and Fehmarn tunnel prices in the Femern A/S Report, which is different
from the base case scenario in the KPMG Report, page 27, stating a price difference of
25% resulting in a market share for cars of 8.3%.
Everything else equal, a relative difference of 30% on prices for cars may lead to a market
share above 8.3%.
Based on the traffic and financial forecasts in the KPMG Report, we assess that a
1% increase in the Scandlines market share for cars will result in an increase in
revenue of approximately EUR 1.2 million assuming constant prices.
Based on the average price on cars and the total revenue on cars in the KPMG Report, it
seems that KPMG does not estimate that Scandlines will have a part of the traffic jump in
2026 and onwards.
If Scandlines has a share of the traffic jump in the future, it will have a positive
impact on the car revenue compared to the figures in the KPMG Report, page 32.
We have estimated the effect on the 2026 number of cars in the base case scenario by
adjusting the number of cars in the KPMG Report by 7.1% resulting in a reduction of the
number of cars to 245 thousand from 264 thousand.
The adjustment will have a
negative impact on the car revenue compared to the figures in the KPMG Report,
page 32.
In the 2015-prices, there is an indicative 60% difference between the shopping ticket
prices for the Fehmarn tunnel and for Scandlines in the base case scenario with price
differentiation.
According to Scandlines Management, the shopping segment is very price sensitive and
with a price difference of 60%, Scandlines Management will expect a higher market share
than the 12% derived from the KPMG Report.
The KPMG Report concludes that a price discount of 50% will lead to a higher market
share and a higher EBIT-margin in 2026 relative to the base case scenario with a 25%
discount scenario.
In the KPMG Report, the conclusion is based on the 25% price discount scenario
even though the 50% price discount scenario is shown to result in a higher EBIT-
margin for 2026 and onwards, which is inconsistent with the notion of Scandlines
being a rational market participant.
8
EBITDA effect
Page
13
The KPMG Report
assumes that Scandlines
will not have a share of
the traffic jump
14
Differences in the number
of cars for 2015 have an
impact on the 2026
revenue
15
There is a price difference
of 60% on shopping
tickets, but Scandlines will
only capture 12% of the
shopping tickets market
16
A 50% price discount
scenario will lead to a
higher EBIT-margin for
2026 and onwards
17
Executive summary | Car revenue
Scandlines Rødby-Puttgarden - Review of KPMG Report dated 24 January 2016
TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
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Executive summary - Cargo revenue
Cargo revenue in the KPMG Report is based on assumptions that are different from the Femern A/S Report and it is
not obvious to what extent revenue on dangerous goods and busses has been taken into account.
Key findings
A comparison of the price
forecast from Femern A/S
Report with Scandlines
prices shows that the
implied discount for cargo
is 49% rather than the
stated 25%
Observation
We find an implied price difference of 49% in 2026 on cargo between Scandlines prices in
the KPMG Report and Fehmarn tunnel prices in the Femern A/S Report, which is different
from the base case scenario in the KPMG Report, page 27, stating a price difference of
25% resulting in a market share for cargo of 30%.
Based on the information that the cargo segment is highly price sensitive, we conclude
that a relative difference of 49% on prices for cargo will lead to a market share which may
be significantly above 30%.
Based on the revenue forecast and market share forecast from the KPMG Report,
we assess that a 1% increase in market share on cargo will have an impact on
revenue of approximately EUR 0.8 million assuming constant prices.
We have estimated the effect on the 2026 number of cargo units in the base case
scenario by adjusting the number of cargo units in the KPMG Report by 4.7% resulting in
an increase in the number of cargo units to 194 thousand from 185 thousand.
The
adjustment is expected to have a positive impact on the cargo revenue compared to
the figures in the KPMG Report, page 32.
An assumption of no dangerous goods transported by ferry from 2026 may lead to an
underestimation of cargo revenue.
If mandatory resting time not has been taken into account when estimating Scandlines’
market share, it may lead to an underestimation of cargo revenue.
EBITDA effect
Page
19
Differences in Traffic
numbers for 2015 have an
impact on the 2026
revenue
20
It is not obvious to what
extent transport of
dangerous goods
transportable on
passenger ferries and
resting time have been
reflected in the KPMG
Report
21
Expected directional
impact on Scandlines
EBITDA
Executive summary | Cargo revenue
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TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
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Executive summary - Other revenue
The increase in Bordershop revenue in the KPMG Report from 2025 to 2026 assumes close to full
impact of increase in number of cars and it is not obvious to what extent revenue on busses and gangway
has been taken into account.
Key findings
The KPMG Report
assumes a close to full
impact from Traffic jump
on Bordershop revenue
Observation
The KPMG Report assumes an increase in Bordershop revenue for Scandlines from EUR
180 million in 2025 to EUR 260 million in 2026 corresponding to an increase of 44.4%.
In the same period, the number of cars is expected to increase by 49.2%.
The increase in Bordershop revenue is expected as a result of the increased traffic. We
understand that Scandlines Management expects the growth in Bordershop revenue at a
lower level due to factors including increased competition.
A 1% decrease in the number of cars in the Bordershop corresponds to a decrease
in revenue by approximately EUR 2.6 million.
An assumption of no busses and gangway passengers transported in 2026 may lead to an
underestimation of revenue.
EBITDA effect
Page
23
It is not obvious to what
extent busses and
gangway passengers
have been reflected in
the KPMG Report
24
Expected directional
impact on Scandlines
EBITDA
Executive summary | Other revenue
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Executive summary - Costs
It is possible to adapt the level of expenses for Traffic and Retail on board and retail to the smaller
market shares.
Key findings
Staff costs related to
Traffic are flexible and
related to the timetable of
departures
Observation
The decrease in departures in the KPMG Report from 34,000 to 26,900 departures
corresponds to a decrease of 21%. According to Scandlines Management, the number of
departures is expected to decrease by 29% to 24,000.
Scandlines Management estimates that the flexibility will be very close to the decrease in
departures. Management base this on experience from current operations.
Based on the financial forecasts in the KPMG Report and taking the effect of the
2015 difference into account, the reduction in staff costs by 21% can be estimated
to reduce Traffic related staff costs by approximately EUR 5.0 million.
Scandlines Management expects the staff costs for Retail and Catering on board to be
lower relative to the KPMG Report.
Based on the financial forecasts in the KPMG Report and taking the effect of the
2015 difference into account, the reduction in passengers by approximately 90%
can be estimated to reduce Retail and Catering related staff costs by approximately
EUR 14.1 million.
Our comparison of the cost figures for 2015 in the KPMG Report to the actual figures
reported by Scandlines shows some differences. These differences may have an impact
on the costs forecasted for 2026 in the KPMG Report.
EBITDA effect
Page
27
Staff costs related to
Retail and Catering are
flexible and related to the
number of passengers
and timetable of
departures
Differences in 2015 staff
costs have an impact on
the 2026 figures
28
28
Several strategic
initiatives have not been
considered
Other operating expenses of EUR 39 million have a direct impact on EBITDA and the
KPMG Report has not considered the fact that Scandlines will adjust its business model
before 2026 to adapt to the new market situation.
29
Expected directional
impact on Scandlines
EBITDA
Executive summary | Costs
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Table of contents
Executive summary
Car revenue
Cargo revenue
Other revenue
Costs
Appendix
Page
6
13
19
23
26
31
Car revenue
Price deviation on cars
Scandlines share of traffic jump
Difference in traffic numbers for 2015
Low market share on shopping with price difference
Choice of price discount scenario
Page
13
14
15
16
17
Table of contents
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Car revenue - Price deviation on cars
The KPMG Report states that the prices imply a discount of 25% relative to the Fehmarn tunnel prices.
When comparing the Fehmarn tunnel prices to the Scandlines’ prices, we identify a 30% difference.
A comparison of the price
forecast from Fehmarn
and the Scandlines prices
shows that the implied
discount on cars is 30%
rather than the stated 25%
We have compared the prices for cars between the
Scandlines prices stated in the KPMG Report and the
Fehmarn tunnel prices stated in the Femern A/S
Report. As there are no Fehmarn tunnel prices stated
in the KPMG Report, we have not been able to
compare internally from the KPMG Report.
The Scandlines prices for cars are stated in the KPMG
Report, page 59, at EUR 63.3 in 2016 increasing to
EUR 75.6 in 2025. In 2026, the price decreases to
EUR 57.8. From 2026, the price increases to EUR
62.6 in 2030.
The price for the Fehmarn tunnel has been based on
the 2015 price estimate of EUR 66.4 from the Femern
A/S Report, page 30, extrapolated using the inflation
rate as stated in the KPMG Report, page 56, which
results in an estimated price for the Fehmarn tunnel of
EUR 82.2 in 2026.
30% deviation
Price forecast, Cars
100
80
Price (EUR)
60
40
20
0
35%
30%
25%
20%
15%
10%
5%
0%
Deviation (in %)
KPMG Report
Note: Total price overview in Appendix II.
Effect and impact
Fehmarn
Deviation
Based on this comparison, we find an implied price difference of 30% in 2026 on cars between Scandlines prices in the KPMG Report and Fehmarn
tunnel prices in the Femern A/S Report. This is different from the base case scenario in the KPMG Report, page 27, which states that a price
difference of 25% results in a market share on cars of 8.3%.
Everything being equal, a relative difference of 30% on prices for cars will lead to a market share above 8.3%.
Based on the traffic and financial forecasts in the KPMG Report, we assess that a 1% increase in the Scandlines market share for cars will
result in an increase in revenue of approximately EUR 1.2 million assuming constant prices.
Revenue | Car revenue
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1653505_0014.png
Car revenue – Scandlines share of traffic jump
KPMG assumes that Scandlines will not have a share of the traffic jump.
The KPMG Report
assumes that Scandlines
will not have a share of the
traffic jump
Effect and impact
The market share of 8.3% is estimated excluding a share of the traffic jump, as mentioned on page 46 in the KPMG Report (section without price
differentiation).
The revenue on cars of EUR 10 million corresponds to approximately 173 thousand cars, which, however, only equals 5.4% of the total number of
cars of 3,177 thousand as mentioned on page 59 in the KPMG Report.
Based on the average price on cars and the total revenue on cars in the KPMG Report, it appears that KPMG assumes that Scandlines will not have
a share of the traffic jump in 2026 and onwards.
If Scandlines has a share of the traffic jump in the future, it will have a positive impact on the car revenue compared to the figures in the
KPMG Report, page 32.
Revenue | Car revenue
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1653505_0015.png
Car revenue – Difference in traffic numbers for 2015
We have compared the traffic estimate for 2015 used in the KPMG Report with the actual number of cars
for Scandlines for the year and find a deviation of (7.1)% for cars.
2015 traffic numbers used
in the KPMG Report
deviate from actual
numbers
Effect and impact
A total car traffic in 2015 of 1,659 thousand cars is estimated, which is based on traffic forecasts from Intraplan Consult GmbH according to the
KPMG Report, page 59.
Scandlines has informed us that the actual car traffic number for 2015 was 1,541 thousand cars, which deviates with 118 thousand cars from the
estimate in the KPMG Report corresponding to (7.1)%.
We have estimated the effect on the 2026 number of cars for Scandlines in the base case scenario by adjusting the number of cars in the KPMG
Report, page 59, by 7.1% resulting in a reduction of the number of cars to 245 thousand from 264 thousand.
The adjustment will have a negative
impact on the car revenue compared to the figures in the KPMG Report, page 32.
The table below sums up the information.
2015
Scandlines
(Actual)
('000)
Cars
1.540,9
KPMG
(Estimate)
('000)
1.659,0
('000)
-118
Variance
Variance
In % of
estimate
-7,1%
2026 KPMG estimate
Total
traffic
('000)
3.177
Scandlines
mkt. share
(%)
8,3%
Scandlines
mkt. share
('000)
264
Adjusted
Scandlines
mkt. share
('000)
245
Note: The market share calculated above does not take into consideration that the 3,177 thousand cars are including traffic jump and that the Scandlines
market share of 8.3% is excluding traffic jump. We have not been able to determine the size of the traffic jump and, therefore, we have not been able to
calculate the adjusted market share in number of cars for Scandlines.
Revenue | Car revenue
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Car revenue – Low market share on shopping with price difference
In the base case scenario with price differentiation in the KPMG Report, there is a price difference on
shopping tickets of 60% to Scandlines prices and KPMG estimates a Scandlines market share of 12%.
There is a price difference
of 60% on shopping
tickets, but Scandlines will
only capture 12% of the
shopping tickets market
In the base case scenario, there is a discount of 25% on shopping tickets both for the Fehmarn tunnel and the ferries according to the KPMG Report,
page 70.
In the Femern A/S Report, page 30, a one-way car ticket price is DKK 494 (2015-prices), a shopping ticket is a two-way ticket and, therefore, the
prices on the shopping ticket for the Fehmarn tunnel can be estimated to be DKK 741 (2015-prices) with a 25% discount.
According to Scandlines Management, the average price on a shopping ticket is below DKK 299, which corresponds to a 60% price difference to the
Fehmarn tunnel shopping ticket prices.
From page 28 in the KPMG Report, it can be derived that Scandlines will have 12% of the total shopping segment in 2026.
According to Scandlines Management, the shopping segment is very price sensitive.
Effect and impact
In the 2015-prices, there is an indicative 60% difference between the shopping ticket prices for the Fehmarn tunnel and for Scandlines in the base
case scenario with price differentiation.
According to Scandlines Management, the shopping segment is very price sensitive and with a price difference of 60%, Scandlines Management will
expect a significantly higher market share than the 12% derived from the KPMG Report.
With a price difference of 60% we estimate a market share of 12% to be in the lower end of the range.
Revenue | Car revenue
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Car revenue - Choice of price discount scenario
The business case with 50% price discount on cars results in a higher EBIT-margin than the business
case with 25% price discount on cars. The KPMG Report uses a 25% discount in the base case scenario.
The level of price
reduction impacts the
estimated market share
In the KPMG Report, pages 34-35, two separate scenarios are outlined
in which prices are reduced by 25% and 50%, respectively.
We understand from the KPMG Report, page 34, that prices on cars
have a direct impact on the expected market share after the opening of
the Fehmarn tunnel. In the base case (25% price reduction) scenario,
the expected market share in 2026 has been estimated at 8.3%. In the
50% price reduction scenario, the ticket price is estimated at EUR 38.6
and the related market share for cars is estimated at 19.9%.
In the base case scenario in the KPMG Report with a 25% price
reduction, the EBIT-margin in 2026 is expected to be negative with
7.8%, according to page 34 in the KPMG Report.
In the 50% price reduction scenario in the KPMG Report, the EBIT-
margin in 2026 is expected to be negative with 4.5%, according to page
35 in the KPMG Report.
The analysis indicates that the EBIT-margin in the KPMG Report is
sensitive to assumptions on market share as well as ticket price.
We have no knowledge of the methodology used in arriving at the
assumed market share. However, we note that the expected market
share is less than what is expected by Scandlines Management and
their external consultant.
Scenario
25%
Assumed ticket price
Expected market share for cars from 2026
EUR 57.8
8.3%
50%
EUR 38.6
19.9%
A 50% price discount
relative to the Fehmarn
tunnel is expected to lead
to a higher EBIT-margin
according to the KPMG
Report
Scenario
25%
Expected EBIT margin 2026
Required market share for 0% EBIT-margin [1]
Required ticket price for 0% EBIT-margin [1]
-7.8%
24.3%
EUR 197.3
50%
-4.5%
33.0%
EUR 73.7
Notes
[1] Indicates the break-even market share and ticket price (at w hich the EBIT-margin in
2026 w ill be 0%) given the specific market shares (8.3% and 19.9% respectively).
Effect and impact
The KPMG Report concludes that a price discount of 50% will lead to a higher market share and a higher EBIT-margin in 2026 relative to the base
case scenario with a 25% discount.
In the KPMG Report, the conclusion is based on the 25% price discount scenario even though the 50% price discount scenario is shown to
result in a higher EBIT-margin for 2026 and onwards, which is inconsistent with the notion of Scandlines being a rational market
participant.
Revenue | Car revenue
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Table of contents
Executive summary
Car revenue
Cargo revenue
Other revenue
Costs
Appendix
Page
6
13
19
23
26
31
Cargo revenue
Price deviation on cargo
Difference in traffic numbers for 2015
Other items
Page
19
20
21
Table of contents
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Cargo revenue - Price deviation on cargo
The KPMG Report states that the prices imply a discount of 25% relative to the Fehmarn tunnel prices.
When comparing the Fehmarn tunnel prices to the Scandlines’ prices, we identify a 49% difference.
A comparison of the price
forecast from Femern A/S
with Scandlines prices
shows that the implied
discount on cargo is 49%
rather than the stated 25%
We have compared the prices for cargo between the
Scandlines prices stated in the KPMG Report and the
Fehmarn tunnel prices stated in the Femern A/S Report.
As there are no Fehmarn tunnel prices stated in the
KPMG Report, we have not been able to compare
internally from the KPMG Report.
The Scandlines prices for cargo are stated in the KPMG
Report, page 59, at EUR 163.8 in 2016 increasing to EUR
195.7 in 2025. In 2026, the price decreases to EUR 149.7
and increases to EUR 162.1 in 2030.
The price for the Fehmarn tunnel has been based on the
2015 price estimate of EUR 236.3 from the Femern A/S
Report, page 30, extrapolated using the inflation rate as
stated in the KPMG Report, page 56, which results in an
estimated price for the Fehmarn tunnel of EUR 293.7 in
2026.
Scandlines has informed us that the cargo segment is
highly price sensitive. This is supported by an article from
the Danish business daily “Børsen” from 10 June 2014, in
which Ole Holm, Executive Officer of HCS, is quoted for
expressing that “international road traffic is price sensitive
and will always go for the cheapest solution” in the article
with the headline “Price battle entices truckers away from
expensive Fehmarn tunnel”.
49% deviation
Price forecast, Cargo
400
60%
50%
Price (EUR)
40%
200
30%
20%
100
10%
0
0%
Deviation (in %)
300
KPMG Report
Fehmarn
Deviation
Note: Total price overview in Appendix II.
Effect and impact
Based on this comparison, we find an implied price difference of 49% in 2026 on cargo between Scandlines prices in the KPMG Report and Fehmarn
tunnel prices in the Femern A/S Report. This is different from the base case scenario in the KPMG Report, page 27, which states that a price
difference of 25% results in a market share on cargo of 30%.
Based on the information that the cargo segment is highly price sensitive, we conclude that a relative difference of 49% on prices for cargo may lead
to a market share significantly above 30%.
Based on the revenue forecast and market share forecast from the KPMG Report, we assess that a 1% increase in the Scandlines market
share on cargo will have an impact on revenue of approximately EUR 0.8 million assuming constant prices.
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Revenue | Cargo revenue
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Cargo revenue - Difference in traffic numbers for 2015
We have compared the traffic estimates for 2015 used in the KPMG Report with the actual number of
cargo units by Scandlines in the period and find a deviation of 4.7% for cargo.
2015 traffic numbers used
in the KPMG Report
deviate from actual
numbers
Total cargo traffic in 2015 has been estimated at 418 thousand cargo units, based on traffic forecasts from Intraplan Consult GmbH in the KPMG
Report, page 59.
Scandlines has informed us that the actual cargo traffic number for 2015 was 438 thousand units, which deviates with 20 thousand cargo units from
the estimate in the KPMG Report corresponding to 4.7%.
Effect and impact
We have estimated the effect on the 2026 number of cargo units in the base case scenario by adjusting the number of cargo units in the KPMG
Report, page 59, by 4.7%, after which Scandlines will have 194 thousand cargo units instead of 185 thousand cargo units.
The adjustment is
expected to have a positive impact on the cargo revenue compared to the figures in the KPMG Report, page 32.
The table below sums up the information.
2015
Scandlines
(Actual)
('000)
Cargo
437,7
KPMG
(Estimate)
('000)
418,0
('000)
20
Variance
Variance
In % of
estimate
4,7%
2026 KPMG estimate
Total
traffic
('000)
617
Scandlines
mkt. share
(%)
30,0%
Scandlines
mkt. share
('000)
185
Adjusted
Scandlines
mkt. share
('000)
194
Note: The market share calculated above does not take into consideration that the 617 thousand cargo units are including traffic jump and that the
Scandlines market share of 30% is excluding traffic jump. We have not been able to determine the size of the traffic jump and, therefore, we have not
been able to calculate the exact market share for Scandlines.
Revenue | Cargo revenue
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Cargo revenue – Other items
It is not obvious whether any revenue from dangerous goods has been accounted for after the opening of the
Fehmarn tunnel and it is not obvious if KPMG has taken the resting time into account when calculating market
share on cargo.
It is not obvious to
what extent
transport of
dangerous goods
transportable on
passenger ferries
has been included
in the KPMG
Report
Scandlines Management has informed us that 4-5% of the total cargo volume is related to dangerous
goods corresponding to 6% of the total cargo revenue for 2015.
In the KPMG Report, dangerous goods are only mentioned on page 4, where it is stated that the
ferry Holger Danske will be out of service from 2026 and, therefore, it is expected that transport of
dangerous goods will not be part of the Scandlines business. However, it is not obvious if KPMG
uses this assumption in the revenue forecast on page 32 in the KPMG Report.
According to Scandlines Management, dangerous goods are classified with and without requirement
of open deck transportation and Scandlines Management has informed us that under 1% of the
dangerous goods transported in 2015 was required to be transported on an open deck ferry like
Holger Danske. The rest of the dangerous goods can be transported on passenger ferries as has, to
a large extent, been the case so far.
Scandlines Management also points out that according to the EU tunnel Directive, it is only possible
to transport dangerous goods through the Fehmarn tunnel in the time period 11pm – 6am. Therefore,
Scandlines Management considers transport of dangerous goods on ferries to be more flexible.
It is not obvious to what extent transport of
dangerous goods transportable on passenger
ferries has been included in the KPMG
Report.
An assumption of no dangerous goods
transported by ferry from 2026 may lead to an
underestimation of cargo revenue.
It is not obvious to
what extent
resting time has
been taken into
account when
calculating market
share on cargo in
the KPMG Report
According to Scandlines Management, it is an important factor in estimating the market share on
cargo how much cargo customers will and are able to use the time on the ferry as mandatory resting
time.
In addition, Scandlines offers safe parking for cargo customers in the harbors during night time.
It is not obvious to what extent resting time
has been taken into account when calculating
market share on cargo in the KPMG Report.
If mandatory resting time has not been taken
into account when estimating Scandlines’
market share, it may lead to an
underestimation of cargo revenue.
Revenue | Cargo revenue
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Table of contents
Executive summary
Car revenue
Cargo revenue
Other revenue
Costs
Appendix
Page
6
13
19
23
26
31
Other revenue
Bordershop assumptions
Busses and gangway
Page
23
24
Table of contents
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Other revenue - Bordershop assumptions
The increase in Bordershop revenue in the KPMG Report from 2025 to 2026 assumes close to full
impact of increase in number of cars.
Bordershop revenue in
2026 assumes close to full
impact of increase in
number of cars by 49.2%
According to page 32 in the KPMG Report, the Bordershop revenue is expected to increase by EUR 80 million from 2025 to 2026 corresponding to an
increase of 44.4%.
According to page 59 in the KPMG Report, the number of cars is expected to increase by 49.2%.
According to Scandlines Management, it is not expected that the Bordershop revenue is impacted to that extent based on the following arguments:
Only a small share of the traffic increase of cars will be in the shopping segment on which Scandlines will have a high capture rate.
The majority share of the traffic increase is expected to be in the vacation segment where Bordershop has a lower capture rate.
From page 28 in the KPMG Report, it can be derived that the shopping part of the cars in 2026 is 15.6% corresponding to 495.6 thousand cars.
The KPMG Report assumes an increase in Bordershop revenue for Scandlines from EUR 180 million in 2025 to EUR 260 million in 2026
corresponding to an increase of 44.4%.
In the same period, the number of cars is expected to increase by 49.2%.
A 1% decrease in the number of cars in the Bordershop corresponds to a decrease in revenue by approximately EUR 2.6 million.
Effect and impact
Revenue | Other revenue
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Other revenue – Busses and gangway
It is not obvious whether any revenue from busses and gangway has been accounted for after the opening of the
Fehmarn tunnel.
It is not obvious
to what extent
transport of
busses and
gangway
passengers has
been included in
the KPMG
Report.
In 2015, Scandlines had revenue of more than EUR 30 million related to busses and gangway
(Source: Scandlines Management).
We cannot identify if revenue related to busses and gangway is mentioned somewhere in the KPMG
Report and, therefore, we cannot conclude whether it is comprised as part of the revenue.
It is not obvious to what extent transport of
busses and gangway passengers has been
included in the KPMG Report.
An assumption of no busses and gangway
passengers transported by ferry from 2026
may lead to an underestimation of revenue.
Revenue | Other revenue
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Table of contents
Executive summary
Car revenue
Cargo revenue
Other revenue
Costs
Appendix
Page
6
13
19
23
26
31
Costs
Difference in variable costs for 2015
Staff costs and other operating expenses –
Traffic
Retail and Catering on board
Other operating expenses
Page
26
27
28
29
Table of contents
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Costs – Difference in variable costs for 2015
There are differences between 2015 figures for Scandlines and the KPMG Report, which have an impact
on the 2026 figures.
Differences in 2015 variable
costs have an impact on 2026
figures
Effect and impact
Pursuant to Appendix I, variable costs for 2015 amount to EUR 145 million according to page 32 in the KPMG Report.
Pursuant to Appendix I, variable costs for 2015 for Scandlines are slightly higher, according to Scandlines Management.
We have calculated that the percentage deviation of the variable costs is
3-5% in 2015.
We have estimated the effect on the 2026 variable costs in the base case
scenario by adjusting 2015 variable costs in the KPMG Report by 1-5%,
after which Scandlines will have variable costs of EUR 208.1-216.3
million instead of EUR 206.0 million.
The table to the right shows the effect on the 2026 variable costs in the
base case scenario in the KPMG Report of different percentage
deviations.
Increase in
variable costs
(%)
1%
2%
3%
4%
5%
Increase in 2026
base case
variable costs
(EURm)
2.1
4.1
6.2
8.2
10.3
Variable costs
after adjustment
(EURm)
208.1
210.1
212.2
214.2
216.3
Costs | Variable costs
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Costs - Staff costs and other operating expenses - Traffic
It is possible to adapt the level of expenses for traffic to the smaller market share for ferry services because of
flexibility, and there are differences between 2015 figures for Scandlines and the KPMG Report.
Staff costs related to
Traffic are flexible and
related to the
timetable of
departures
The KPMG Report states on page 31 that according to Ship Experts, the staff costs related to Traffic are characterized to be very fixed as they are related
to the number of ferries.
However, according to Scandlines Management, the staff costs related to Traffic are flexible and related to the timetable of departures instead of ferries
only. Management focused on the following arguments:
There is no legal or operational need for staff on a ferry that is in a lay-up overnight or in off-season. There is no staff on Holger Danske overnight in
the present conditions.
With ferries only operating in the daytimes then Scandlines has the possibility to employ the staff under more cost favorable conditions than signing on
24h staff.
With the number of passengers estimated in the KPMG Report, there is no need for safety staff beyond base operational manning.
With more ferries operating the same routes with similar vessels, Scandlines has the possibility to plan the duty roster.
According to Scandlines Management, Scandlines has 34,000 scheduled departures per year.
In the KPMG Report, page 30, it is estimated that Scandlines will have 26,900 departures in 2026.
According to Scandlines Management, Scandlines expects to have 24,000 departures in 2026 based on Scandlines’ market expectations.
In the KPMG Report, page 32, it is stated that the staff costs for Traffic for 2015 equal EUR 11 million.
Staff costs for 2015 for Scandlines for Traffic equal EUR 20 million, which correspond to a difference of 82%.
Differences in 2015
staff costs for Traffic
have an impact on the
2026 figures
Effect and impact
The decrease in departures in the KPMG Report from 34,000 to 26,900
departures corresponds to a decrease of 21%. As a result, a decrease in
departures expected by Scandlines from 34,000 to 24,000 departures
corresponds to a decrease of 29%.
Management estimates that the flexibility will be very close to the decrease in
departures.
Based on the financial forecasts in the KPMG Report and taking the effect
of the 2015 difference into account, the reduction in staff costs by 21% can
be estimated to reduce Traffic related staff costs by approximately EUR 5.0
million.
The table to the right presents the effects on the staff costs for Traffic in 2026
depending on how flexible the staff costs are, also taking the 2015 difference in
staff costs into account.
Reduction in
staff costs for
Traffic (%)
10%
15%
20%
25%
30%
Decrease in
2026 staff costs
for Traffic
(EURm)
2.5
3.7
5.0
6.2
7.4
Staff costs for
Traffic after
adjustment
(EURm)
22.3
21.1
19.8
18.6
17.3
Costs | Staff costs and other operating expenses
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Costs - Staff costs and other operating expenses – Retail and Catering on board
It is possible to adapt the level of expenses for Retail and Catering on board to the smaller market share for ferry services
because of flexibility, and in addition there are differences between the 2015 figures for Scandlines and the KPMG
Report.
Staff costs related to
Retail and Catering on
board are flexible and
related to the number
of passengers and
timetable of
departures
The KPMG Report states on page 31 that according to Ship Experts, the staff costs related to Retail and Catering on board are characterized to be very
fixed as they are related to the number of ferries.
According to Scandlines Management, the staff costs related to Retail and Catering on board are flexible and related to the number of passengers and
timetable of departures instead of ferries only. Scandlines Management focused on the following arguments:
There is no legal or operational need for Retail and Catering staff on a ferry that is in lay-up overnight or in off-season.
Scandlines has the ability to adjust how many outlets on board the vessel that are open on each departure and will adjust to the expected number of
passengers.
Scandlines has the ability to adjust the number of persons in the open outlets to the expected number of passengers, i.e. by adjusting the number of
tills open.
According to Scandlines Management, Scandlines has 34,000 scheduled departures per year.
In the KPMG Report, page 30, it is estimated that Scandlines will have 26,900 departures in 2026.
Scandlines expects to have 24,000 departures in 2026.
According to Scandlines Management, Scandlines had 6.133 thousand passengers in 2015.
In the KPMG Report, page 59, the estimated number of passengers in 2026 is 10,475 thousand and with an estimated Scandlines market share on cars of
8.3%, the estimated number of passengers for Scandlines will decrease by approximately 90% compared to 2015.
Differences in 2015
staff costs for Retail
and Catering on board
have an impact on the
2026 figures
Effect and impact
In the KPMG Report, page 32, it is stated that the staff costs for Retail and Catering on board for 2015 equals EUR 22 million.
Staff costs for Retail and Catering on board for 2015 for Scandlines equal EUR 13 million, which corresponds to a difference of 41%.
Scandlines Management expects the staff costs for Retail and
Catering on board to decrease by 70 - 90% in a scenario with 8.3%
market share.
Based on the financial forecasts in the KPMG Report and taking
the effect of the 2015 difference into account, the reduction in
passengers by approximately 90% can be estimated to reduce
Retail and Catering related staff costs by approximately EUR 14.1
million.
The table to the right presents the effects on the staff costs for Retail
and Catering on board in 2026 depending on how flexible the staff
costs are also taking the 2015 difference in staff costs into account.
Reduction in staff on
Retail and Catering on
board (%)
50%
60%
70%
80%
90%
Decrease in 2026 staff
costs for Retail and
Catering on board
(EURm)
7.8
9.4
11.0
12.5
14.1
Staff costs for Retail and
Catering on board after
adjustment (EURm)
7.8
6.3
4.7
3.1
1.6
Costs | Staff costs and other operating expenses
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Costs – Staff costs and other operating expenses - Other operating expenses
We understand that several strategic initiatives within Scandlines will contribute to a more lean and
focused business set-up
A reduction of the
administrative staff in
2015 has not been
reflected
Strategic response has
not been considered
According to Scandlines Management, Scandlines reduced the administrative staff during 2015, which will result in a decrease in staff costs from 2016 and
onwards compared to the 2015 cost level.
The reduction of the administrative staff has not been reflected in the KPMG Report.
As a rational market participant, Scandlines will adjust its business model before 2026 to adapt to the new market situation. We understand that Scandlines
Management is considering several options including a cost reduction program to obtain a more lean cost structure.
Effect and impact
Other operating expenses of EUR 39 million have a direct impact on
EBITDA. The table to the right quantifies the effect of a reduction in other
operating expenses in 2026 relative to the base case scenario in the
KPMG Report.
Scandlines Management expects to implement a business model which
implies a cost reduction in other operating expenses of at least 30%.
Reduction in
other operating
expenses (%)
10%
20%
30%
40%
50%
Decrease in 2026
other operating
expenses (EURm)
3.8
7.7
11.5
15.4
19.2
Other operating
expenses after
adjustment
(EURm)
34.6
30.7
26.9
23.0
19.2
Costs | Staff costs and other operating expenses
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Appendix
Appendix I
Appendix II
Appendix III
Page
31
32
33
Table of contents
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Scandlines Rødby-Puttgarden - Review of KPMG Report dated 24 January 2016
TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
Appendix I
Our review of the financial results for 2015 realized by Scandlines and the historical figures used as basis
for KPMG’s forecast show a variance of more than 20% in EBITDA for 2015.
Confidential information has been excluded.
Appendix
31
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TRU, Alm.del - 2015-16 - Bilag 331: Kvalitetskontrol af KPMGs rapport “Forretningsanalyse af færgefarten Rødby-Puttgarden
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Appendix II
The comparison of prices shows a difference between prices assumed by Femern A/S and prices used in
the KPMG Report for both cars and cargo.
Cars
The base case scenario in the KPMG Report is based on a price difference of 25% between the Scandlines price for cars and the corresponding price for the Fehmarn tunnel. Our
recalculation shows that the actual price difference utilised is 30%.
Actual Scandlines prices in 2015 forecasted using identical inflation forecast a Scandlines price in 2025 of EUR 78.4 compared to EUR 75.6 assumed in the KPMG Report.
Before opening
2016
Assumed Scandlines prices [1]
Femern A/S planned prices [2]
Deviation (in %)
63,3
67,5
-6%
2017
64,5
68,8
-6%
2018
65,8
70,2
-6%
2019
67,1
71,6
-6%
2020
68,5
73,0
-6%
2021
69,9
74,5
-6%
2022
71,3
76,0
-6%
2023
72,7
77,5
-6%
2024
74,1
79,0
-6%
2025
75,6
80,6
-6%
2026
57,8
82,2
-30%
After opening
2027
59,0
83,9
-30%
2028
60,2
85,6
-30%
2029
61,4
87,3
-30%
2030
62,6
89,0
-30%
Notes
[1] The price forecast for Scandlines has been based on the KPMG Report page 59.
[2] The price forecast for the tunnel has been based on the 2015 price of EUR 66.4 added w ith a 1.6% inflation rate for 2016 and 2.0% for years thereafter as stated in the KPMG Report page 56 and 59.
Confidential information has been excluded.
Cargo
The base case scenario in the KPMG Report is based on a price difference of 25% between the Scandlines price for cargo and the corresponding price for the Fehmarn tunnel. Our
recalculation shows that the actual price difference utilised is 49%.
Actual Scandlines prices in 2015 forecasted using identical inflation forecast a Scandlines price in 2025 of EUR 221.1 compared to EUR 195.7 assumed in the KPMG Report.
Before opening
2016
Assumed Scandlines prices [1]
Femern A/S planned prices [2]
Deviation (in %)
163,8
240,1
-32%
2017
167,0
244,9
-32%
2018
170,4
249,8
-32%
2019
173,8
254,8
-32%
2020
177,3
259,9
-32%
2021
180,8
265,1
-32%
2022
184,4
270,4
-32%
2023
188,1
275,8
-32%
2024
191,9
281,3
-32%
2025
195,7
286,9
-32%
2026
149,7
292,7
-49%
After opening
2027
152,7
298,5
-49%
2028
155,8
304,5
-49%
2029
158,9
310,6
-49%
2030
162,1
316,8
-49%
Notes
[1] The price forecast for Scandlines has been based on the KPMG Report page 59.
[2] The price forecast for the tunnel has been based on the 2015 price of EUR 237.2 added w ith a 1.6% inflation rate for 2016 and 2.0% for years thereafter as stated in the KPMG Report page 56 and 59.
Confidential information has been excluded.
Appendix
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Appendix III
Sources
Abbreviation
Femern A/S Report
KPMG Report
TP 2014
Børsen article
AU memo
SL presentation
Type
Public document
Public document
Public document
Newspaper article
Memo, Aalborg Uni
Presentation
Source
Sund og Bælt: Finansiel analyse af Femern Bælt-forbindelsen inkl. danske landanlæg (February 2016)
KPMG: Forretningsanalyse af færgefarten Rødby-Puttgarden (24 January 2016)
Trafikprognose for en fast forbindelse over Femern Bælt (November 2014)
Børsen: Priskrig lokker lastbiler ud af dyr tunnel (10 June 2014)
Per Homann Jespersen, Road freight transport across a fixed Fehmarn Belt link (2007)
Søren Poulsgaard Jensen, Scandlines sejler videre: Præsentation af konkurrencescenarier (14 January 2015)
Appendix
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