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 2022, 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 IT, maintenance and cleaning.

The Group has various lease contracts for continuing operations that had not yet commenced as at 31 December 2022. The future payments under these non-cancellable lease contracts amount to € 13 million within no more than one year, € 74 million within no more than five years and € zero thereafter.

Energy contracts

As at the end of 2022, the purchase commitments under the energy contract in the Netherlands for the volumes already covered, the payments for the Programme for Responsibility and the surcharge for green electricity for the 2023-2024 period (the remainder of the 10-year contract) came to € 141 million (compared with € 176 million at the end of 2021). The amount expected to be required for 2023 and 2024 is fully covered. 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, the Group or Eneco has to give the other party guarantees or provide cash collateral. Any payments and liabilities are set off against each other, as they are both inextricably linked. As at year-end 2022, NS had received € 360 million (year-end 2021: € 313 million) in collateral in the form of margin money, which is recognised under other liabilities.

For more detailed information about the energy contracts, see note 27.

Tax group

For the purpose of corporation tax, all the Dutch subsidiaries belonging to the Group are part of the NV Nederlandse Spoorwegen tax entity. 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 2022, the Group had outstanding investment commitments of € 1,346 million (2021: € 911 million), primarily for purchasing and upgrading trains and investments in the areas around the stations.

Contingent liabilities

The Group has paid € 30 million (translated) of its share in the issued share capital (€ 152 million after translation) of EUROFIMA AG. The Group has a liability for full payment on demand of the shares and other guarantee commitments totalling € 274 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 16.

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 Abellio UK's fair (see note 2).

Guarantees

The Group has issued guarantees totalling € 504 million (31 December 2021: € 781 million) relating to the operation of the franchises in the United Kingdom and Germany. Some of the guarantees relating to Abellio Germany have been provided for (see note 31).

Franchises

The Group had the following franchises during 2022. The ScotRail franchise expires in 2022 and has not been continued by the Group.

• * With a possible extension of four years until 2030.

Main rail network in the Netherlands

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 paragraph 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 € 183 million in 2022. 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 2022 and previous years.

in June 2020, the Ministry of Infrastructure and Water Management announced its intention to award the franchise directly to NS from 2025. This was confirmed by the House of Representatives in September 2020. In October 2022, the Ministry sent the Programme of Requirements to the House of Representatives. In November, the House of Representatives debated this, with the result that the scope of the main rail network franchise remains unchanged in principle.