Bond ?eské Dálnice AS 1.875% ( XS1415366720 ) in EUR

Issuer ?eské Dálnice AS
Market price 100 %  ▼ 
Country  Czech Republic
ISIN code  XS1415366720 ( in EUR )
Interest rate 1.875% per year ( payment 1 time a year)
Maturity 25/05/2023 - Bond has expired



Prospectus brochure of the bond Ceske Drahy AS XS1415366720 in EUR 1.875%, expired


Minimal amount /
Total amount /
Detailed description ?eské dráhy, a.s. is the Czech Republic's national railway company, responsible for the operation of most railway lines and services within the country.

The Bond issued by ?eské Dálnice AS ( Czech Republic ) , in EUR, with the ISIN code XS1415366720, pays a coupon of 1.875% per year.
The coupons are paid 1 time per year and the Bond maturity is 25/05/2023











Ceské dráhy, a.s.
(incorporated as a joint stock company under the laws of the Czech Republic)

EUR 400,000,000 1.875 per cent. Notes due 2023
The issue price of the EUR 400,000,000 1.875 per cent. Notes due 2023 (the "Notes") of Ceské dráhy, a.s. (the "Issuer"
or "CD") is 99.024 per cent. of their principal amount.
Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 25 May 2023. The
Notes are subject to redemption in whole at their principal amount at the option of the Issuer at any time in the event of
certain changes affecting taxation in the Czech Republic. In addition, the holder of a Note may, by the exercise of the
relevant option, require the Issuer to redeem such Note at its principal amount in the event of a Put Event (as defined in
and in accordance with Condition 7). See "Terms and Conditions of the Notes--Redemption and Purchase".
The Notes will bear interest from 25 May 2016 at the rate of 1.875 per cent. per annum payable annually in arrear on 25
May in each year commencing on 25 May 2017. Payments on the Notes will be made in EUR without deduction for or on
account of taxes imposed or levied by the Czech Republic to the extent described under "Terms and Conditions of the
Notes--Taxation".
This Prospectus has been approved by the Luxembourg Commission de Surveillance du Secteur Financier (the "CSSF"),
which is the Luxembourg competent authority for the purpose of Article 13 of Directive 2003/71/EC, as amended by,
among other things, Directive 2010/73/EU (the "Prospectus Directive") as a prospectus and constitutes a prospectus for
the purposes of Article 5(3) of the Prospectus Directive. Application has been made for the Notes to be admitted to listing
on the official list and trading on the Luxembourg Stock Exchange's regulated market. In line with Article 7(7) of the
Luxembourg Law on Prospectuses for Securities of 10 July 2005, by approving this Prospectus the CSSF assumes no
responsibility and gives no undertaking as to the economic or financial soundness of the transaction and the quality or
solvency of the Issuer.
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the
"Securities Act") or any U.S. state securities laws. The Notes are being offered outside the United States by the Joint Lead
Managers (as defined in "Subscription and Sale") in accordance with Regulation S under the Securities Act ("Regulation
S"), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
The Notes will be in registered form in the denomination of EUR 100,000. The Notes may be held and transferred, and
will be offered and sold, in the principal amount of EUR 100,000 and integral multiples of EUR 1,000 in excess thereof.
The Notes will be represented by a global registered note certificate (the "Global Note Certificate") registered in the
name of a nominee for, and deposited with, the common safekeeper for Euroclear Bank S.A./N.V. ("Euroclear") and
Clearstream Banking, société anonyme, Luxembourg ("Clearstream, Luxembourg"). Individual note certificates
("Individual Note Certificates") evidencing holdings of Notes will only be available in certain limited circumstances.
See "Summary of Provisions Relating to the Notes in Global Form".
An investment in the Notes involves certain risks. Prospective investors should have regard to the factors described under
the heading "Risk Factors" on page 3.
The Notes are expected to be rated Baa2 by Moody's Investors Service Ltd ("Moody's"). Moody's is established in the
EEA and registered under Regulation (EC) No 1060/2009, as amended (the "CRA Regulation"). Moody's appears on the
latest update of the list of registered credit rating agencies (last updated 1 December 2015) on the ESMA website
HTTP://WWW.ESMA.EUROPA.EU.
A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension,
reduction or withdrawal at any time by the assigning rating agency.
Joint Lead Managers
CITIGROUP

SOCIÉTÉ GÉNÉRALE
CORPORATE & INVESTMENT BANKING

The date of this Prospectus is 23 May 2016








IMPORTANT NOTICES
The Issuer accepts responsibility for the information contained in this Prospectus and declares that,
having taken all reasonable care to ensure that such is the case; the information contained in this
Prospectus to the best of its knowledge is in accordance with the facts and contains no omission likely to
affect its import.
The Issuer has confirmed to the Joint Lead Managers named under "Subscription and Sale" below (the
"Joint Lead Managers") that this Prospectus contains all information regarding the Issuer and the Notes
which is (in the context of the issue of the Notes) material; such information is true and accurate in all
material respects and is not misleading in any material respect; any opinions, predictions or intentions
expressed in this Prospectus on the part of the Issuer are honestly held or made and are not misleading in
any material respect; this Prospectus does not omit to state any material fact necessary to make such
information, opinions, predictions or intentions (in such context) not misleading in any material respect;
and all proper enquiries have been made to ascertain and to verify the foregoing.
The Issuer has not authorised the making or provision of any representation or information regarding the
Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the
Issuer. Any such representation or information should not be relied upon as having been authorised by the
Issuer or the Joint Lead Managers.
Neither the Joint Lead Managers nor any of their respective affiliates have authorised the whole or any
part of this Prospectus and none of them makes any representation or warranty or accepts any
responsibility as to the accuracy or completeness of the information contained in this Prospectus. Neither
the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances
create any implication that there has been no adverse change, or any event reasonably likely to involve
any adverse change, in the condition (financial or otherwise) of the Issuer since the date of this
Prospectus.
This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Notes.
The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may
be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and
the Joint Lead Managers to inform themselves about and to observe any such restrictions. For a
description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this
Prospectus and other offering material relating to the Notes, see "Subscription and Sale".
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as
amended (the "Securities Act") or any U.S. state securities laws. The Notes are being offered outside the
United States by the Joint Lead Managers in accordance with Regulation S under the Securities Act
("Regulation S"), and may not be offered, sold or delivered within the United States or to, or for the account or
benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
In this Prospectus, unless otherwise specified, references to a "Member State" are references to a
Member State of the European Economic Area, references to "EUR" or "euro" are to the currency
introduced at the start of the third stage of European economic and monetary union, and as defined in
Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as
amended and references to "CZK" are to the Czech Koruna, the lawful currency of the Czech Republic.
References to "billions" are to thousands of millions.
Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly,
figures shown for the same category presented in different tables may vary slightly and figures shown as
totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
In connection with the issue of the Notes, Citigroup Global Markets Limited (the "Stabilising
Manager") (or persons acting on behalf of the Stabilising Manager) may over allot Notes or effect
transactions with a view to supporting the price of the Notes at a level higher than that which might
otherwise prevail. However, there is no assurance that the Stabilising Manager (or persons acting
on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action
may begin on or after the date on which adequate public disclosure of the terms of the offer of the
Notes is made and, if begun, may be ended at any time, but it must end no later than the earlier of


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30 days after the issue date of the Notes and 60 days after the date of the allotment of the Notes.
Any stabilisation action or over-allotment must be conducted by the Stabilising Manager (or
persons acting on behalf of the Stabilising Manager) in accordance with all applicable laws and
rules.
This Prospectus contains various forward-looking statements that relate to, among others, events and
trends that are subject to risks and uncertainties that could cause the actual business activities, results and
financial position of the Issuer and its subsidiaries (the "Group") to differ materially from the
information presented herein. When used in this Prospectus, the words "estimate", "project", "intend",
"anticipate", "believe", "expect", "should" and similar expressions, as they relate to the Issuer and its
management, are intended to identify such forward-looking statements. Investors are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of the date of this
Prospectus. The Issuer does not undertake any obligations publicly to release the result of any revisions to
these forward-looking statements to reflect the events or circumstances after the date of this Prospectus or
to reflect the occurrence of unanticipated events.
When relying on forward-looking statements, investors should carefully consider the foregoing risks and
uncertainties and other events, especially in light of the political, economic, social and legal environment
in which the Group operates. Factors that might affect such forward looking statements include, inter
alia, overall business and government regulatory conditions, changes in tariff and tax requirements
(including tax rate changes, new tax laws and revised tax law interpretations), interest rate fluctuations
and other capital market conditions, including foreign currency exchange rate fluctuations, economic and
political conditions in the Czech Republic and other markets, and the timing, impact and other
uncertainties of future actions. See "Risk Factors". The Issuer does not make any representation, warranty
or prediction that the factors anticipated by such forward-looking statements will be present, and such
forward-looking statements represent, in each case, only one of many possible scenarios and should not
be viewed as the most likely or standard scenario.
Information Sourced from Third Parties
Certain information contained in this Prospectus has been sourced from third parties including, without
limitation, information published and/or provided by the Ministry of Transportation of the Czech
Republic (the "Ministry of Transportation"), Eurostat, the Union Internationale des Chemins de Fer,
SZDC and the Czech Statistical Office (Ceský stastistický úad) which, in each case, are independent
sources. Where information has been sourced from a third party, the source has been identified, the
information has been accurately reproduced and, as far as the Issuer is aware and is able to ascertain from
information published by that third party, no facts have been omitted which could render the reproduced
information inaccurate or misleading. While the Issuer believes that the information sourced from third
parties, which is reproduced in this Prospectus, is reliable, the Issuer has not independently verified such
information and cannot guarantee its accuracy or completeness.
References and Links to Websites
Any websites included in the Prospectus are for information purposes only and do not form part of the
Prospectus.




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CONTENTS

Page
OVERVIEW ................................................................................................................................................. 1
RISK FACTORS .......................................................................................................................................... 3
TERMS AND CONDITIONS OF THE NOTES ....................................................................................... 17
SUMMARY OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ............................. 31
USE OF PROCEEDS ................................................................................................................................. 35
SELECTED FINANCIAL AND OPERATING INFORMATION ............................................................ 36
DESCRIPTION OF THE ISSUER ............................................................................................................. 38
MANAGEMENT ....................................................................................................................................... 70
INDUSTRY OVERVIEW .......................................................................................................................... 78
THE REGULATORY FRAMEWORK ..................................................................................................... 88
TAXATION ............................................................................................................................................... 92
SUBSCRIPTION AND SALE ................................................................................................................... 95
GENERAL INFORMATION..................................................................................................................... 97
FINANCIAL STATEMENTS .................................................................................................................... 99













OVERVIEW
This overview must be read as an introduction to this Prospectus and any decision to invest in the Notes
should be based on a consideration of the Prospectus as a whole.
Words and expressions defined in the "Terms and Conditions of the Notes" below or elsewhere in this
Prospectus have the same meanings in this overview.
Issuer:
Ceské dráhy, a.s., incorporated in the Czech Republic
Joint Lead Managers:
Citigroup Global Markets Limited and Société Générale
The Notes:
EUR 400,000,000 1.875 per cent. Notes due 2023
Issue Price:
99.024 per cent. of the principal amount of the Notes
Issue Date:
Expected to be on or about 25 May 2016
Maturity Date:
25 May 2023
Use of Proceeds:
The Issuer will use the net proceeds of the issue of the Notes for
general corporate purposes, including, without limitation, the
repayment of certain financial indebtedness of the Group and the
financing of the Group's investment plan. See "Use of Proceeds".
Interest:
The Notes will bear interest from 25 May 2016 at a rate of 1.875
per cent. per annum payable annually in arrear on 25 May in each
year commencing 25 May 2017.
Status:
The Notes are senior, unsubordinated, unconditional and unsecured
obligations of the Issuer.
Form and Denomination:
The Notes will be issued in registered form in the denomination of
EUR 100,000 and integral multiples of EUR 1,000 in excess thereof.

The Global Note Certificate is to be held under the New
Safekeeping Structure.
Optional Redemption:
Upon the occurrence of a Put Event (as defined below) Notes will
be redeemable at the option of the Noteholders on a date or dates
specified prior to their stated maturity, as further described in
Condition 7 (Redemption and Purchase).
Tax Redemption:
The Notes may be redeemed at the option of the Issuer in whole,
but not in part, for taxation reasons, in accordance with
Condition 7 (Redemption and Purchase).
Negative Pledge:
The terms of the Notes contain a negative pledge provision as
further described in Condition 4 (Negative Pledge).
Cross-Default:
The terms of the Notes contain a cross default provision as further
described in Condition 10(c) (Cross-default of Issuer or
Subsidiary).
Rating:
The Notes are expected upon issue to be rated Baa2 by Moody's.
Withholding Tax:
All payments of principal and interest in respect of the Notes by or
on behalf of the Issuer will be made free and clear of withholding
taxes of the Czech Republic unless the withholding of such taxes is
required by law. In that event the Issuer will gross-up the payment,
subject to certain exceptions, all as described in Condition 8
(Taxation).


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Governing Law:
The Notes, the Fiscal Agency Agreement, the Deed of Covenant,
and the Subscription Agreement are governed by English law.
Listing and Trading:
Application has been made for the Notes to be admitted to listing
on the official list and trading on the Luxembourg Stock
Exchange's regulated market.
Clearing Systems:
The Notes have been accepted for clearance through Euroclear and
Clearstream, Luxembourg with the following ISIN and Common
Code:
ISIN: XS1415366720
Common Code: 141536672
Selling Restrictions:
See "Subscription and Sale".
Risk Factors:
Investing in the Notes involves risks. See "Risk Factors".
Financial Information:
See "Selected Financial and Operating Information" and
"Financial Statements and Auditor's Reports".




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RISK FACTORS
Any investment in the Notes is subject to a number of risks. Prior to investing in the Notes, prospective
investors should carefully consider risk factors associated with an investment in the Notes, the Group's
business and the industry in which it operates, together with all other information contained in this
Prospectus including, in particular, the risk factors described below. Words and expressions defined in
the "Terms and Conditions of the Notes" below or elsewhere in this Prospectus have the same meanings
in this section.
The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes.
All of these factors are contingencies which may or may not occur and the Issuer is not in a position to
express a view on the likelihood of any such contingency occurring. Factors which the Issuer believes
may be material for the purpose of assessing the risks associated with the Notes are also described below.
The factors described below are not an exhaustive list or explanation of all risks which investors may face
when making an investment in the Notes and should be used as guidance only. Additional risks and
uncertainties relating to the Group that are not currently known to the Issuer, or that the Issuer currently
deems immaterial, may individually or cumulatively also have a material adverse effect on the Group's
business, results of operations or financial position.
Risks Related to the Group's Business
Failure to renew contracts between CD and the Czech Regions for regional passenger rail transport
and the State for long-distance passenger rail transport, or changes in compensation payable
pursuant to these contracts, could have a material adverse effect on the Group's business, results of
operations, credit rating or financial position
A substantial part of the revenues of the Group's Passenger Transport Business, both in terms of regional
transport and domestic long-distance transport, represents compensation paid to CD by the Czech
Regions or the State.
Regional Passenger Transport
CD provides regional passenger transport pursuant to long-term contracts entered into with the Czech
Regions including the city of Prague. CD's passenger transport business is unprofitable on a stand-alone
basis, as tariffs are set below economically reasonable levels to keep prices set at a level affordable to end
users, which does not cover the cost of the service to CD. In addition to tickets sales, revenues are
generated from compensation received from the regions of the Czech Republic (the "Czech Regions")
and from the Ministry of Transport of the Czech Republic (the "Ministry of Transport"). The Czech
Regions compensate CD for verifiable losses which CD incurs when providing regional passenger
transport at prices that are set by the State or the Czech Regions. Approximately one third of the
compensation payable by the Czech Regions to CD is funded by the State from the State budget pursuant
to the Memorandum on Ensuring Stable Financing of Public Regional Passenger Rail Transport entered
into between, among others, the Czech Republic (the "State") and the Czech Regions in 2009 (the
"Memorandum") (see "Description of the Issuer ­ Material Contracts" and "Description of the Issuer ­
Pricing, Compensation and Tariff Regulation" for more information). Due to the high density of the
network and low occupancy rates, regional rail transport is, to a large extent, dependent on this
compensation.
Most of the long-term contracts entered into between CD and the Czech Regions regarding the provision
of regional transport services are to expire in 2019. Pursuant to the long-term contracts between CD and
the Czech Regions, six of the Czech Regions may undertake tenders on a competitive basis in the next
eight years which represented approximately 38 per cent. of train-kilometres in 2010. As of the date of
this Prospectus, the only Czech Regions that have undertaken such public tenders are the Liberec Region,
the South Bohemian and the Ústí Region.
On 9 March 2016, the government of the Czech Republic (the "Government") approved a resolution
outlining the funding mechanism for the Czech Regions and their respective regional passenger rail
transport for the period between 2020 and 2034. The approved document retains the current funding
mechanism, i.e., the Czech Regions will receive from the State budget the same amount as before
(adjusted for inflation) and are not obliged to undertake tenders on a competitive basis (however, they
may choose to do so), but newly requires the Czech Regions to arrange a minimum number of services


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per day in order to qualify for the State budget funding. There is no assurance that the Czech Regions will
renew their contracts for the provision of regional passenger rail transport with CD after 2019. In
addition, pursuant to the terms of the Memorandum, the Czech Regions may choose to undertake tenders
on a competitive basis to choose the provider of regional passenger transport. The Liberec Region and the
Ústí Region have published in the Official Journal of the EU their intention to organize open tenders with
relation to specific regional routes for the period following the expiry of the existing long-term contracts
between CD and the respective Czech Regions in 2019. In February 2016, the South Moravian Region
approved a plan to purchase passenger train units worth CZK 7.0 billion (approximately EUR 259.0
million) which are to be operated after the long-term contract with CD expires in 2019 by an operator
which is yet to be selected by the region.
If more Czech Regions decide to undertake public tenders in the future, CD may not be successful in such
public tenders and therefore there can be no guarantee that CD would renew its current contracts. The
Group also cannot guarantee that any renewal of contracts or new contracts for the provision of regional
passenger rail transport will be on substantially the same terms or for the same scope of services as
currently provided. Any of these risks could have a material adverse impact on the Group's business,
results of operations, credit rating, cash flow, financial position or prospects.
Domestic Long-distance Passenger Transport

CD provides long-distance passenger rail transport pursuant to long-term contracts entered into between
CD and the State. The State compensates CD for the verifiable losses which CD incurs when providing
long-distance domestic passenger rail services at prices that are set by the State. Most of the long-term
contracts entered into between CD and the Ministry of Transport regarding the provision of regional
transport services are to expire in 2019. The Ministry of Transport has already taken steps in order to
open the long-distance passenger rail transport market to the competition, including publishing a time
sheet specifying which railway routes will be subject to public tenders. The time sheet anticipates that the
parties successful in such tenders will commence their service on the specified routes in the period from
2014 to 2028, depending on the route in question. As of the date of this Prospectus, the process of public
tenders for selection of the railway routes operators is delayed and no contract has yet been awarded by
the Ministry of Transport. As of the date of this Prospectus, only one contract regarding long-distance
transport on the Brno ­ Olomouc route has been extended until 2025. The Group cannot provide any
assurance that the renewal of the current long-term contracts will occur, that any renewal of contracts or
new contracts will be on substantially the same terms or for the same scope of services as currently
provided. Consequently, in any future tender, CD might not be awarded some or all tendered contracts.
CD's competitors in these public tenders may include Czech low-cost passenger rail operators, such as
the privately held companies RegioJet and LEO Express, as well as significant passenger rail operators
from neighbouring countries, such as German Deutsche Bahn and Austrian ÖBB. Should CD not be
awarded some or all tendered contracts, it may have a material adverse effect on the Group's business,
results of operations, credit rating, cash flow, financial position or prospects.
Czech regional elections taking place in October 2016 could result in a change in the public transport
policies and priorities of some Czech Regions
A substantial part of the revenues of the Group's Passenger Transport Business comprises compensation
paid to CD by the Czech Regions. It cannot be ruled out that the public transport policies and priorities of
the Czech Regions will change as a result of the Czech Regional elections which are currently scheduled
for October 2016. The newly elected regional governments may decide to prioritize other modes of public
transport (in particular the bus transport) over the railway transport or to organize competitive tenders on
the operation of regional passenger railway services. In the event of a change in a public policy, this could
result in a failure to renew contracts between CD and some Czech Regions for regional passenger rail
service and have a material adverse impact on the Group's business, results of operations, cash flow,
financial position or prospects.
The Group's substantial leverage and debt service obligations could adversely affect its business
and prevent it from fulfilling its obligations with respect to its indebtedness and from obtaining
sufficient funding for investments in its assets and their maintenance
The Group has a substantial amount of outstanding indebtedness. As of 31 December 2015, the Group
had total loans and borrowings of CZK 37.2 billion.


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The level of the Group's indebtedness could have important consequences, including, but not limited to:
(i)
limiting the Group's ability to obtain sufficient funding to make crucial investments into
essential assets, primarily rolling stock, and into their maintenance; this may result in
obsolescence and deterioration of such assets, which may adversely affect the quality of service
provided to customers (including an increased risk of accident or injury), the ability of the Group
to compete in tenders for the provision of passenger rail transport services to the State and the
Czech Regions and might also result in a breach of certain agreements with third parties (mainly
insurance contracts and contracts with the State and the Czech Regions concerning the provision
of public service passenger transport), leading to increased liabilities of the Group, and may
cause members of the Group to lose their licences;
(ii)
making it difficult for the Group to satisfy its obligations with respect to its indebtedness;
(iii)
requiring the allocation of a substantial portion of the Group's cash flow from operations to the
payment of principal of, and interest on, indebtedness, thereby reducing the availability of such
cash flow for, and limiting the ability to obtain additional financing to fund, working capital,
capital expenditures, acquisitions, joint ventures or other general corporate purposes;
(iv)
restricting its operations through certain covenants in the Group's debt agreements; and
(v)
decreasing the Group's credit rating, limiting the Group's ability to borrow additional funds and
increasing the cost of any such borrowing.
Any of the above could have a material adverse effect on the Group's business, results of operations, cash
flow, financial position or credit rating and on the Group's ability to satisfy its debt obligations, including
the Notes.
The Group is involved in litigation and arbitration, the negative outcome of which may have a
material adverse effect on the Group, and there can be no assurance that any provisions created by
the Group in respect of such proceedings would be adequate to cover the potential losses
The Group is involved in several legal proceedings and in proceedings by Czech regulatory agencies. As
of 27 April 2016, the aggregate amount of all claims, for which the amount claimed against the Group has
been specified and of which CD management is aware, is CZK 9,174 million (see "Description of the
Issuer ­ Disputes" for more information).
Adverse monetary awards or judgments in litigation or arbitral proceedings, individually or in the
aggregate, could have a material adverse effect on the Group's business, results of operations or financial
condition. Further, such judgments or decisions might include restrictions on the Group's ability to
conduct business, which could increase the cost of doing business and limit the Group's prospects for
future growth. In addition, any potential loss in litigation or arbitral proceedings may result in negative
publicity for the Group and damage its reputation.
As of 31 December 2015, the Group maintained provisions in relation to legal, regulatory and
administrative proceedings in the amount of CZK 1,353 million. However, the Group has not recorded
provisions in respect of all legal, regulatory and administrative proceedings to which the Group is a party
or to which it may become a party. In particular, the Group has not recorded provisions in cases in which
the outcome is unquantifiable or that the Company currently expects to be ruled in its favour.
Additionally, the Group may not record provisions for the full amount of the claim, but rather for its
estimate of the likely outcome. As a result, the Company cannot give any assurance that its provisions
will be adequate to cover all amounts payable in connection with any such proceedings. The Company's
failure to quantify sufficient provisions or to assess the likely outcome of any proceedings could have a
material adverse effect on the Group's business, results of operations, financial condition, cash flows or
prospects
The Group is exposed to competition from other providers of rail transport, which may adversely
affect the Group's market position, results of operations or financial position
The Group has a dominant position in the rail transport market in the Czech Republic, with CD's market
share of 86.0 per cent. for the provision of passenger rail transport and CD Cargo's market share of 61.0


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per cent. for the provision of freight rail transport, as of 31 December 2015, according to preliminary data
published by the Ministry of Transport.
Passenger Transport Business
CD has historically been the dominant provider of passenger rail transport, both domestic long-distance to
the State and regional to the Czech Regions. Based on the Group's current long distance transport
contract with the State, up to 15 per cent. of the Group's long-distance segment (measured according to
the 2010 schedule) may be gradually tendered each year, in order to allocate in tenders up to 75 per cent.
of the total transport timetable by 2019. The Czech Republic, acting through the Ministry of Transport,
has ordered 38 million train-kilometres of transport services for the 2010 schedule.
In connection with the opening of the passenger rail market in the Czech Republic, the Government
established a timetable for tenders of particular railway lines in Resolution No.758/2014 of September
2014. As of the date of the Prospectus, the Group expects four tenders, which represent approximately 5.5
per cent. of CD's total revenues from passengers in the year ended 31 December 2015. No tender has
been completed. The following tenders have been announced:
The first tender, for the Ostrava ­ Opava ­ Krnov ­ Olomouc line, which started in 2012 has
been cancelled by the Ministry of Transport ; and
The second tender, for the Plze ­ Most line, opened in 2015 and was stopped by the Czech
Competition Office, which decided that the contract cannot be executed.
Since no other tenders have been officially announced yet, the timetable established in Resolution
No.758/2014, is delayed and the Group expects operation of these lines to be delayed. Due to the on-
going liberalisation of the market for provision of passenger rail transport, other passenger rail operators
from the Czech Republic as well as from neighbouring countries have been challenging CD's dominant
position in certain areas and they may gain market share on the regulated or commercial routes in the
future.
For example, in September 2011, the privately held company RegioJet started operating its own regular
passenger service on the main train route in the Czech Republic between Prague and Ostrava, which had
until then been operated solely by CD, and privately held company LEO Express commenced operation
of its own regular passenger service on this route in November 2012. The Ministry of Transport
announced in February 2016 that regulation on the Prague ­ Ostrava route aimed at reducing the current
high traffic volume might be introduced, which may negatively impact the operation of regional
passenger transport and freight transport.
According to statements made by RegioJet, it is also looking to commence operating regular passenger
services on other routes which are currently exclusively operated by CD. Both RegioJet and LEO Express
are currently operating regular passenger services on routes between Prague and Staré Msto u Uherského
Hradist and between Prague and Kosice, Slovakia (via Ostrava). RegioJet is also operating a regular
passenger service on the route between Prague and Zvolen, Slovakia (via Ostrava) (see "Description of
the Issuer ­ Business Overview ­ Passenger Transport Business" for more information).
As a result, there is a risk that the number of public railway passenger contracts CD is awarded in the
future may decrease and the current long-term contracts in place with the State and the Czech Regions
might not be renewed or might be materially reduced or amended. It is possible that other passenger rail
operators, including Czech low-cost passenger rail operators, as well as significant passenger rail
operators from neighbouring countries, will increasingly compete on commercial and international routes
in the future. Any of these risks could have a material adverse effect on the Group's business, results of
operations, cash flow, financial position or credit rating.
Freight Transport Business
CD Cargo currently competes against other companies that provide rail freight transport, truck freight
transport and, to a smaller extent, ship carriers and providers of tube transport systems. The European rail
freight transport business is highly concentrated and CD Cargo's ability to efficiently compete in the
market may depend on its ability to form strategic alliances or other forms of cooperation with rail freight
operators in other neighbouring countries (see "Description of the Issuer ­ Business Overview ­ Freight
Transport Business" for more information). Should CD Cargo's competitors develop any technological or


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