New financing will support purchase of Dual-Mode locomotives.

Dedicated investment vehicles, acting as intermediaries between rolling stock manufacturers and operators, could be set to play a key role in Europe’s rail freight industry gaining momentum on its journey to a low-carbon future.

RIVE Private Investment, an independent, European investment company specializing in transportation assets and infrastructure with an energy transition, has structured a new €300 million financing platform dedicated to the acquisition of “innovative” locomotives. Additional incremental facilities of up to €225 million may be added.

The capex facility was provided by a group of banks consisting of KfW IPEX-Bank, Crédit Agricole CIB, Société Générale, and Siemens Financial Services through Siemens Bank.

The financing platform will initially support an order of 15 Vectron Dual-Mode locomotives manufactured by Siemens Mobility, which operate alternatively in electric or diesel mode and the acquisition of 20 Traxx MS3 locomotives manufactured by Alstom – able to operate in six European countries including Germany, Poland, and France – and 20 Modula EBB hybrid locomotives manufactured by Vossloh – the manufacturer’s first order for this new type of locomotive.

Scheduled for delivery, between 2024 and 2026, the locomotives will be leased to European operators and managed on behalf of RIVE by its long-time partner, Northrail – a leading leasing provider and asset manager of rolling stock in Europe.

“Through this operation, RIVE secures funding for the coming years and equips itself to deploy its investment strategy in the railway sector. RIVE and Northrail support their joint clients in renewing and growing their fleets towards a more sustainable business model and support manufacturers in the development of innovative products for the decarbonization of the sector,” the company underlined.

EU Rail Faces Funding Shortage

Camille Brunel, partner at RIVE Private Investment, added: “The rail sector plays a special role in the development of an environmentally-friendly mobility and transport offering. It faces colossal financing needs for the renewal and maintenance of asset fleets, making it a particularly attractive segment for banks and investors, to which we wish to expose our LPs even more. This operation with our banking partners marks a strategic step in the development of our impact transport asset portfolio.”

He continued: “Banks are currently seeing that rail is a sector of the future, with major financing needs. So, it’s a favored sector, and we’re seeing more banks than before (taking an interest).”

In terms of decarbonizing rail freight, much remains to be done, in contrast to passenger transport where railcars and high-speed trains have been quicker to adopt electrification.

Brunel noted the scale of the challenge ahead, revealing that out of an estimated total of 31,000 locomotives operating in Europe, 15,000 are over 30 years old. He also highlighted the limitations in production capacity with the few manufacturers that make up the market only able to supply 700 machines a year.

Commenting on the financing platform, Alexandre Gallo, president and CEO of DB Cargo France and president of French industry body AFRA (L’Association Française du Rail), told AJOT: “Clearly, this is very good news and represents a significant amount of investment. We certainly need more financial vehicles of this kind, especially for the ageing fleet of thermal locomotives. A large proportion of the electric fleet is still some 20 years away from renewal. And when you take into account current production capacity, there’s no doubt that more manufacturers are needed too.”

As for the measures taken in France and the EU to reduce carbon emissions in the rail sector, Gallo reckons there have been too few so far.

“Road transport currently benefits from a significant lobbying capacity, which means that efforts are concentrated on the truck fleet. Rail transport is rightly seen as a virtuous mode, at least for the time being, requiring less effort to decarbonize.”

Pressing Issues for Greening Rail

However, he went on to flag some of the pressing issues on the European rail freight industry’s greening agenda, among them the difficulties faced by operators of diesel locomotive fleets in gaining access to ‘sustainable’ rolling stock.

“Modern locomotives are very expensive in a sector with low margins, and state aid for their purchase is very patchy. Moreover, the distribution channels for clean fuels – HVO and B100, for example, are not yet sufficiently developed. In France, for example, these same clean fuels are taxed the same as fossil fuels, which is not normal.”

Gallo went on to note that the recent creation by the US and Canada of a Rail Decarbonization Task Force to develop a common vision for reducing emissions brought into sharp relief the need for a more collaborative approach in the sector in Europe.

“There is far too little co-operation in this field within the EU, and I think that such a working group of this kind could really take off within the context of discussions between the major rail groups in the sector, for example, the RFF – Rail Freight Forward, a coalition of European rail freight companies.”

He said that an interesting collaborative model to follow was in the maritime sector where Europe’s five leading ocean shipping groups – A.P. Møller –Maersk, CMA CGM, Hapag Lloyd, MSC and Wallenius Wilhelmsen, on the margins of the COP28 summit, issued a joint declaration calling on the International Maritime Organization (IMO) to create the regulatory conditions necessary to accelerate the transition to green fuels and facilitate the drive toward net zero emissions by 2050.

“This seems to me to be an excellent example of competitors coming together in a common cause,” Gallo said.