From Munich to Monopoli, innovative financing solutions for trains generate lower emissions and commuting times, as well as high-technology maintenance in Germany and Italy

Like two-thirds of all regional train passengers in Bavaria, Christine often takes the Munich S-Bahn, the regional train network of Germany’s third-largest city. The journey from her home in Pasing, just 10 km from Marienplatz in the city centre, however, can be unpredictable. “It’s very crowded and there are a lot of delays,” she says. “Normally it should only take 20 to 25 minutes, but sometimes it can take me up to an hour.”

Christine is not alone. Across Germany almost one in three rail passengers reached their destination with a delay of 15 minutes or more in 2022. The S-Bahn Munich rail network is prone to delays, because every S-Bahn train entering or leaving central Munich has to pass through a single trunk line, the Stammstrecke, one of the busiest in all Europe. This leaves the network susceptible to bottlenecks and delays. Work is underway on a second trunk line. Though it will take years to complete, recently ordered new generation trains promise some quick improvements.

Acquired through an innovative €2 billion leasing arrangement financed by the European Investment Bank and UniCredit with a guarantee from the Free State of Bavaria, the new 200-metre trains, which are the same length as Germany’s high capacity InterCity trains, will be the longest regional trains in the country. Highly energy efficient, the 90 new electric trains, built by Siemens Mobility, will feature extra-wide doors for easy and faster access and an LED information strip running the length of the train. The trains also provide information to the passengers about the occupancy of each carriage and where along the train they should head for more space. These innovative trains were developed specifically for the Munich regional passenger transport network.

“We’re hoping that these more comfortable and reliable trains will help convince people living on the outskirts of Munich to leave their cars at home and take the train,” says Alexander Gerum, Project Manager S-Bahn Munich, at Bayerische Eisenbahngesellschaft, which plans, finances and manages regional passenger rail transport in Bavaria.

The investment in Bavaria is part of a wider effort by Germany’s federal government to improve rail services and cut CO2 emissions by shifting more traffic from roads to rail. In September 2023, the German government announced a plan to make up to €40 billion available for railway modernisation programmes until 2027.

Unique financing solutions for Italy trains

Other countries in Europe are also prioritising rail transport as an important part of their decarbonisation strategies.

In March 2023, the European Investment Bank signed an innovative financing arrangement totalling €3.4 billion for the modernisation of the Palermo-Catania railway line in Sicily, which will slash current travel times between the two cities by a third.

The financing package includes a unique €1.3 billion “50% counter-guarantee” backed by InvestEU. This guarantees the so-called advance and performance bonds that contractors must secure from banks to reassure developers that they will be protected in case of default.

“Companies winning large infrastructure contracts like this typically need to show the public authorities in charge that they have financial guarantees in the form of the advance and performance bonds in place,” says Giovanni Inglisa, a senior loan officer at the European Investment Bank who covers financial institutions. “The problem is, there are relatively few companies qualified to win such contracts, so most banks are already heavily exposed to these companies and unable to offer further guarantees. By offering banks a counter guarantee, we share the risk and enable them to provide more bonds.”

“It’s the first time anywhere that we have provided counter guarantees of this kind and we are now aiming to replicate this initiative on different projects and in other countries,” says Inglisa.

Under this unique financing arrangement, developed in conjunction with Ferrovie dello Stato Italiane, Italy's national state-owned railway holding company, the counter-guarantee will generate guarantees from other financial institutions resulting in a total of €2.6 billion to implement construction contracts and subsequently start work.

In addition to this, the European Investment Bank will also lend €800 million directly to Italy’s Ministry of Economy and Finance, bringing the total sum available for the modernisation of the Palermo-Catania railway line to €3.4 billion.

Digital transformation in Italy train technology

Financing new trains and upgrading rail networks are just part of the European Investment Bank’s support for the rail sector and the European Union’s Sustainable and Smart Mobility Strategy, which aims to double rail freight and triple high-speed rail activity by 2050. Between 2012 and 2022 the EU bank signed €43.8 billion of loans to the rail sector worldwide, the vast majority of which was in the European Union. While the biggest loans tend to be for infrastructure and new rolling stock, the Bank also supports research and development vital to the sector’s digitalisation and decarbonisation.

In September 2023, the European Investment Bank signed a €20 million loan (another €10 million have been approved and will be signed in the coming months) to fund research and development at MerMec, an Italian firm specialising in advanced technologies for rail transport (signalling, measuring trains and systems, electric traction, telecommunication), urban electric mobility, and industrial applications.

“The digital transformation of the railway sector is a key enabler for improved efficiency and safety,” says Matteo Fusari, a lead engineer at the European Investment Bank. “But it’s not just about collecting data through remote sensors. It’s about processing the data quickly and providing actionable insights.”

One of the most promising technologies being developed by MerMec is a train car that detects and reports on the location of rail line defects, while travelling at high speeds. It uses a combination of visual and magnetic resonance imaging, and the data is recorded and processed on the train car before being transferred to managers monitoring the network remotely

The European Investment Bank loan will support MerMec’s research and development operations in Monopoli, a relatively less-developed region of Puglia, which benefits from EU cohesion funding. The loan will support skilled employment in R&D – some 280 full time positions every year over its four-year life — and 400 new permanent jobs are expected to be created as a result of the  programmes financed.