(in millions of euros)
Provisions for reorganisation costs
Provision for soil remediation
Termination fees/net asset payments
Balance as at 1 January 2020
Balance as at 31 December 2020
Provision for reorganisation costs
The purpose of the provision for reorganisation costs is to cover the costs arising from reorganisation measures. Most of the provision is needed for redundancy schemes, bridging payments and the redeployment of staff whose jobs have been eliminated as a result of reorganisations. Important starting points for determining the provisions for reorganisation costs at year-end 2020 in the Netherlands are:
the final collective bargaining offer submitted by NS to the parties to the collective labour agreement is accepted by the trade unions in February 2021;
Estimates with respect to advancement and outflow during the reorganisation.
Provision for soil remediation
The provision for soil remediation is for managing and remedying environmental damage. The provision is calculated using an average discount rate of 1.5% (2019: 1.5%).
Termination payments/net asset payments
On 20 September, the Emergency Measures Agreements (EMAs) for the three Abellio UK DfT franchises were replaced by Emergency Recovery Measures Agreements (ERMAs). Depending on the operator, these contracts vary in length from 6 to 18 months and, like the EMAs, the costs were borne by the DfT with a management fee earned by the TOCs.
One of the conditions of signing the ERMA is that each TOC agrees to the possibility of a termination payment to the DfT and, depending on certain factors, a net asset payment at the end of their ERMA. On 21 October 2020, the DfT published the Estimated Termination Sum to be paid by each TOC. The TOCs have submitted a substantive response to the DfT’s (preliminary) calculation method, following which the DfT will determine and confirm the final termination payment in 2021. The TOCs will then have the choice to accept or reject this payment, after which the ERMA will end and the original contact will be reinstated.
In anticipation of the final confirmation by the DfT, the Group has made an estimate of the termination payment and net asset payments. These are based on communications by the DfT. The Group is currently disputing the substantive calculations by the DfT and has provided justifications for this. Given the uncertainty of the amount of these payments, they have been accounted for under provisions. The Group is aiming for a significant downward adjustment of the termination payment. This is expected to become clearer later in 2021.
‘Other provisions’ include provisions for losses arising from accidents and fire, uncertainties concerning settlements with carriers, provisions for maintenance in connection with lease contracts and provisions for staff-related matters. Withdrawals include the payments for individual compensation for victims of WWII transport.
Individual Compensation for Victims of WWII Transport
During the Second World War, NS operated trains on instructions from the occupying forces. Various discussions with Mr. Salo Muller, a Holocaust survivor, have shown that Mr. Muller, but also others, want NS not only to commemorate the victims of the transports and their direct descendants collectively, but also to acknowledge and compensate for their suffering individually. NS does not believe that anyone benefits from lengthy legal proceedings and has expressed its willingness to grant individual financial compensation on moral grounds, to those most directly affected by its actions. It was therefore jointly decided not to institute legal proceedings on liability and to set up a committee to implement the compensation scheme. A special committee chaired by Job Cohen has been tasked with handling individual compensation on moral grounds to an as yet undefined group of survivors and their direct descendants. The committee started work in January 2019. The Committee on Individual Compensation for Victims of WWII Transport by NS presented its recommendation on 26 June 2019. NS has adopted the committee's recommendation and made a provision of €47 million in 2019 to account for the expected compensatory payment and costs of execution (recognised under other operating expenses). At the end of 2020, almost the entire provision has been settled.
NS announced on 26 June 2020 how it will implement the collective form of acknowledgement. NS has made available and paid €5 million to four existing remembrance centres for this purpose.
A provision is recognised in the balance sheet whenever the Group has a legal or constructive obligation as a consequence of a past event and it is probable that the settlement of that obligation will entail an outflow of funds.
Provisions are determined by calculating the net present value of expected future cash flows based on a pre-tax discount rate that reflects both the current market valuations of the time value of money and, where necessary, the specific risks relating to the liability.
Reorganisation costs and non-activity schemes
Provisions are made in connection with reorganisations if a formal, detailed plan has been drawn up for the reorganisation, and the reorganisation is either under way or has been publicly announced. No provision is made for future operating expenses. Provisions for reorganisations relate mainly to redundancy schemes, bridging payments and the redeployment of redundant staff.
Provision for soil remediation
The provision for soil remediation work is intended to cover the costs incurred for the upkeep or repair of operating assets. In line with the Group's published environmental policy and the applicable legal requirements, provisions for the control and remediation of environmental contamination are formed when the contamination occurs or is found to have occurred.
A provision for onerous contracts is included in the balance sheet if the economic benefits that the Group expects to derive from a contract are exceeded by the unavoidable costs of meeting the obligations under the contract.
The provision is measured at the present value of the anticipated net costs of continuing the contract or, where this is lower, the present value of the anticipated costs of termination of the contract, being any compensation or penalty entailed by the breach of contract. Before the provision is formed, an impairment loss is applied to the assets to which the contract relates.
Provisions are formed for losses arising from fire, accidents, guarantees issued, claims, provisions for maintenance in connection with lease arrangements and other risks.