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Railtrack's headline figure of £51.5million for expenditure under the 2000 Network Management Statement substantially exceeded expectations. One reason for the rise was the increase in the period covered from 10 to 12 years. Another was that, as Railtrack Chief Executive Gerald Corbett admitted, it was a ‘wish list, the total menu to choose from'.
Commenting on the NMS, Corbett chose to focus not on long term aspirations, but on the next five years ‘and what we could and should deliver'. Well, not exactly the next five years but the five years starting next year.
Why not this year? Because next year will be the start of the new control period, currently the subject of Regulatory review. Clearly, Railtrack's is using the NMS to put pressure on Rail Regulator Tom Winsor as he determines the financial regime underlying Railtrack's track access charges from 2001 to 2006.
In practice, £22.3billion of the £51.5billion is maintenance and renewal which comes out of track access charges anyway. And about £4.2billion of investment in enhancements is already committed. So our industry has to find £20billion over the next 12 years – or about £1.7billion a year.
But we should not forget that Railtrack's infrastructure is not the only home for railway investment. New or replacement train fleets also have to be funded, with passenger vehicles leaving little, if any, change out of a million pounds each. With all three of the original ROSCOs now owned by banks and building societies, trains could get priority over tracks.
Meanwhile Shadow Strategic Rail Authority Chairman Sir Alastair Morton has pointed out that Railtrack won't be able to fund the full 12 year wish list whatever financial regime Tom Winsor comes up with in his review.
Some money will come from central Government, more via local Government, but these sums will be relatively minor. And surely, the whole point of privatisation was to free railway investment from dependence on the state?
Yes indeed. However, private investment in hardware depends on the banks having confidence in their client's ability to service the investment, plus some collateral for the loan. And their clients can only be Railtrack, the Rolling Stock Companies and the new franchisees.
Sir Alastair reckons that franchisees with their 20 year replacement contracts are going to invest. By which, we assume, he means real capital expenditure rather than paying lease rentals or enhanced access charges from revenue. What he is looking for are strong companies with strong balance sheets.
But, the new replacement franchises will have one feature in common with the first round franchises – they will be asset free zones. What does a franchise own? Trains? No. Track? Only if it builds a brand new line. Stations? No. Depots? Yes, if it builds its own. So, not much collateral there.
In any event, what are replacement franchisees going to spend serious money on? Can we see the owners of First Great Western and Thames Trains putting up money to electrify the Great Western Main Line? Not likely. That would be akin to adding a conservatory to a rented house.
Anyway, where are these strong companies with strong balance sheets? Prequalification and short-listing for replacement franchises to date suggests that the SSRA will be dealing largely with the same old bus groups. And as you can see in this month's Informed Sources, the big bus groups have all lost a third or more of their value in the past year.
Bus group balance sheets show something else. Railway operations generate the majority of the income, but buses produce the bulk of the profits – approaching the 80%/20% ratios of Pareto's law. On top of which, falling subsidies are cutting the rail revenue line. Even at SWT, the first franchise to be let, and on the most generous terms, the subsidy profile is beginning to bite.
Sir Alastair's solution to this investment gap is the SPV. No, not the Special Petrol Vehicle used by Captain Scarlet to keep tabs on the Mysterons. Special Purpose Vehicles. No, not the multi role track maintenance machines – these SPVs are separately financed self contained infrastructure improvement projects bringing together public/private funding and project management.
To put it mildly, SPVs are anathema to Railtrack. From their point of view it is the equivalent of the local council, a developer and a construction group putting up a block of flats in the grounds of your mansion to overcome a local housing shortage.
More seriously, were an SPV to take on a major track capacity improvement project, it would have to be fitted into an already crowded possession plan and have substantial implications ranging from track access agreements to Railtrack's safety case.
This is not to say that SPVs should be dismissed out of hand – as Railtrack would like. But the concept does seem to be short on detail To give the concept some credibility, we need a ‘for instance'.
Are we talking about quadrupling the Rugby-Birmimgham corridor? Or grade separation at Hitchin? Reopening disused alignments? Rebuilding stations?
Overall, when it comes to infrastructure investment we still can't apply the Estate Agent shop window rule to the NMS. If you are serious about buying a house you need to know the size of mortgage your income will support before you shop around.
In the case of investment in Britain 's railways we suspect that once Tom Winsor has completed his review the affordable mortgage will less than the number Sir Alastair first thought of. And the revenue stream implicit in the Regulator's calculations is already spoken for.
Perhaps Gerald Corbett has the right idea in keeping Railtrack's corporate head down until he sees the colour of the SSRA's new money. But it cannot be good for the railway to be an on-going vision free zone in this way. Given the long lead time for railway projects, the SSRA must soon decide it's approach to the NMS2000 menu.