Potential investors in new UK rail projects have responded with scepticism to a government call for proposals for new rail projects that could be privately-financed.
The Department for Transport in March launched a call for “market-led proposals” (MLPs) for rail projects that could be financed without government support.
However, at a DfT “Rail Investment Opportunity Day” (RIOD) on Monday (14 May) in London, industry figures raised concerns over issues such as how investors in long-term rail projects could have sufficient visibility given the short length of train operating companies’ (TOCs) rail franchises and protection of intellectual property.
Addressing a panel of DfT managers, John Laing’s UK asset director Andy Pearson asked how the 20-year time frame likely for projects to be privately financed “fits in with the current rail structure” in which rail franchises generally last for seven years.
He noted that projects that have been mooted as candidates for private investment, such as the western rail link to Heathrow Airport, would be likely to have a long-term timeframe if they include construction and operation.
His concerns were echoed by Sellick Rail rail industry consultant Rebeka Sellick, who said that the only way of “squaring the circle” would be for the government to introduce longer franchises so they match the lengths of projects being privately financed.
One industry observer who spoke to Inframation said that this is a valid concern in theory because for example an investor in a new rail line could potentially lose out if a franchise is not renewed. However, he added that it was unlikely that the government would leave a new rail line unused and noted that rolling stock companies currently invest in trains that are leased to TOCs with short franchises.
Other concerns included the possibility of commercially sensitive proposals being subject to Freedom of Information laws and therefore made known to the public, which was raised by Alistair Lenczner of engineering consultancy Expedition.
DfT Head of Funding Strategies, Group Finance, Malcolm Lowe said that increasing franchise periods to match lengths of privately financed projects could be problematic because it would make revenue forecasting difficult for train companies. He also noted that privately-financed projects would not necessarily be long-term.
“There’s no lower limit; it could just be a clever widget that makes the railway run better,” he said.
An industry observer who spoke to Inframation noted that one reason for infrastructure investors’ apprehensions about plans for private investment may be the novel way MLPs are being solicited, in contrast to previous privately-financed transport projects. Rather than the government outlining a project and then accepting bids, the private sector is being asked to come up with the proposals, meaning they could come up with an idea only for the government to press ahead with the idea with a different private sector partner.
Philip Nias, corporate commercial manager at Network Rail, said possible projects that could be candidates as MLPs include the Heathrow western rail link, the Digital Railway project, the Brighton Main Line upgrade and projects to build stations and depots. Network Rail, which owns and operates most of Britain’s railway infrastructure, is working with the DfT on the process for seeking and assessing MLPs.
The Brighton Main Line project involves improving reliability and punctuality on the Brighton-London route in 2018 and 2019. The Digital Railway project is a plan to modernise signalling and train control so that trains can run closer together at higher speeds while maintaining safe braking distances.
The DfT has previously outlined hypothetical projects that could be candidates for private investment including a new rail route running connecting a new housing development, a traffic management system and a local branch line. The DfT has also cited new links to Heathrow Airport and a line re-establishing the rail link between Oxford and Cambridge as potential candidates for private investment.