In for the long haul

With the support of its owners, Hector Rail has embarked on an exciting journey of expansion across Europe, one that has been shaped by organic growth and strategic acquisitions

Founded in 2004, and headquartered in Stockholm, Hector Rail was initially conceived as a private traction company. In the years since it has grown into an independent line haul provider for the Hector 142 bEuropean rail transport market, delivering traction to its customers between facilities and terminals.

Through the creation of efficient solutions, the company is able to provide added value for its customers, who range from industrial shippers and forwarders, to intermodal operators and traditional railway companies. Its list of competencies includes the planning of production, loco fleet management, optimising loco operations, driving the train, and improving corporate culture and safety procedures.

“Since 2004,” begins Joakim Landholm, Group CEO of Hector Rail, “we have grown both organically and through the process of targeted acquisitions to the point where today we are producing approximately 14 million train kilometres per year via our operations in Sweden, Norway, Denmark, Germany and the UK.”

Hector Rail benefits from possessing a strong financial backbone, one that comes partly as a result of its acquisition in 2014 by EQT Infrastructure II, one of the world’s largest private equity firms. EQT Infrastructure II recognised Hector Rail as being a well-run business with a strong track record and reputation, and its acquisition has proven to be hugely beneficial when it comes to its own plans for continued expansion.

“Our intention is to become Europe’s leading independent provider of rail freight services,” Joakim explains. “Acquisitions are an important way of achieving this and in November 2016 we made such an acquisition in the form of GB Railfreight, the UK’s third largest rail freight operators.” GB Railfreight operates over 1000 trainloads a week, moving approximately 15 per cent of the UK’s rail freight. Its fleet of over 130 locomotives and 1100 wagons have transported goods for customers such as Network Rail, Drax, EDF Energy, Aggregate Industries and Tarmac.

Hector Rail’s total fleet currently comprises of 225 locomotives and this is set to increase further with the confirmation in March 2017 that it had secured an order for 15 Vectron AC locomotives from Siemens. With a maximum output of 6400KW and a top speed of 200 kilometres per hour, all Vectron AC locomotives come equipped with the European Train Control System (ETCS) as well as the ATC2-STM train control system. These new locomotives will be used to serve new contracts for heavy freight and timber transport in Sweden and Norway, and are due for delivery inHector 142 c early 2018. This order follows a similar one made for five Vectron locomotives by the company in July 2016.

Turning to current and future market conditions, Joakim’s outlook is refreshingly positive. “If we look at the core markets where we are present we are seeing relative stability in the UK, Germany and across Scandinavia, at least in the short to medium term. In the longer term, we anticipate low single digit growth across most international market segments.”

As well as having to factor in fluctuating economic conditions, Hector Rail also has to navigate the competition that other forms of transportation pose, particularly the ever-expanding network of roads across the continent. “While there have been considerable developments when it comes to roads in the last decade, there remains the issue that with more vehicles out there the issue of congestion remains unresolved,” Joakim says. “At the same time, the oil price is a huge factor in determining the respective competitive positions of rail and road transportation, and with this remaining relatively depressed all railfreight providers need to work hard to become even more efficient.”

At a group level, the support of EQT Infrastructure II provides Hector Rail with access to capital. This gives the company an important competitive advantage, particularly when compared to state incumbents, which are typically more financially restrained, and offers it the ability to identify potential acquisitions and to invest in its existing business.

“On an operational level,” Joakim continues, “being based in Scandinavia and the UK allows us to work in close proximity to our customers. This also gives us to chance to build strong and lasting relationships with them, something we do better than most, and to get a clear understanding of their logistical needs. As a result, we can design transport solutions that actually provide our customers with an effective means of transportation at a competitive price, while also being able to run the business at a profit.”

When asked about Hector Rail’s strategy aims for the years ahead, Joakim is equally as optimistic. “Our target for the next three-to-five years is pretty clear. We want to continue to grow in our existing markets, growing organically in Scandinavia and through targeted acquisitions in the UK, while taking advantage of any opportunities to expand further across the continent, specifically in the German speaking market. I believe that what the industry needs at this time are players like Hector Rail to push things forward and our recent achievements prove that it is possible to grow and be profitable in this business.”