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date 24 November 1999
source Shadow Strategic Rail Authority
type Press release

Franchising Director, and Chief Executive of the Shadow Strategic Rail Authority, Mike Grant today announced invitations to start negotiations for replacement of the first group of rail passenger franchises Chiltern, Connex South Central and Great North Eastern . This follows an invitation to train operating companies on 10 August 1999 to submit ideas for replacement of their franchises.
Franchise replacement is aimed at ensuring:

Improvement in the quality of passenger services
Better performance
Investment in extra services
High quality rolling stock providing additional capacity
New infrastructure
Easier access to the railway
Better integration with other forms of transport.

Initial proposals have been submitted by the current franchise holders, but other interested parties are also being invited to prequalify to participate in this process which is expected to lead to submission of firm proposals in the new year.

Decisions on the award of the first batch of replacement franchises are expected early next summer, although no deadline has been set. If no suitable replacement franchises can be agreed, existing franchisees retain their contractual rights as long as they do not default on their obligations, or until alternative arrangements are agreed with the Franchising Director.

Invitations for the second group of replacement franchises are expected in the first quarter of next year. The objective is to replace most shorter franchises (expiring by 2004) within about two years.

Explaining the objectives of the franchise replacement process, Mike Grant said:
" My aim is to secure long term franchises that provide high levels of performance for passengers. I want to see proposals that will provide additional capacity coming on-stream as early as possible, and in exchange
for this, I am prepared to consider franchise terms which would last between 10 and 20 years. I shall also be looking forward to receiving proposals from other interested parties."

Welcoming todays announcement, SSRA Chairman, Sir Alastair Morton, commented:
" Todays announcement is the first step to building stronger train operating companies able to invest their own capital and to co-invest with Railtrack and others for the benefit of passengers, while also considering the needs of freight customers.

" Operators are already struggling to cope with increased demand and now need more incentive to commit to longer term investment in their businesses. The initiative the Franchising Director has launched today charts the way forward to better service for passengers and will provide the investment the railway needs."

There will be a pre-qualification process for interested parties and application should be made to Nick Newton, the Executive Director, Franchise Management, at the Shadow Strategic Rail Authority, Goldings House, 2 Hays
Lane, London SE1 2HB (tel: 0171 940 4200) in the first instance. Interested parties should note that the pre-qualification period for the first group of franchises has been set for December 6th 1999.

Notes for Editors

1. Mike Grant has already announced that he will accept proposals from:
Existing franchisees for their own franchise or for a modified franchise
area, ceding to or acquiring services from another franchise
Franchisees already operating services elsewhere on the network
New entrants to passenger rail franchising.
2. Negotiations will start out on the assumption that new franchises will:
Have a high level of commitment to performance, investment, quality,
training and safety
Last for between 10 and 20 years, with termination or renegotiation
possible after reviews every five to seven years
Probably have a changed profile of subsidy or premium.
The assessment of proposals will focus on the level of investment risk for the franchisee, as well as taking account of that to be undertaken by Railtrack and train leasing companies. The Franchising Director must conclude that the new terms offer value for money, otherwise, the existing franchise runs through to expiry.
3. The Franchising Director will be evaluating proposals against criteria
set out in the Instructions and Guidance set by the Secretary of State.

These include:
Commitment to improved performance
Extra or accelerated investment
Better compensation arrangements
Value to the taxpayer
Initiatives to promote integrated transport
Track record of the franchisee
Willingness to give passengers a greater voice.

4. Chiltern Railways operates services along the M40 corridor between Birmingham and London. It carries a mix of commuter, business and leisure travellers.

Connex South Central operates predominantly commuter services to London from Surrey and Sussex, as well as services to Gatwick and Brighton, and South Coast services between Bournemouth, Brighton, Hastings and Ashford.

Great North Eastern Railway operates a fast, frequent service linking Kings Cross with parts of East Anglia and the East Midlands, Yorkshire, Humberside, the North of England and Scotland.
5. The Franchising Directors letters of 10th August 1999 and 7th October 1999 are attached.

6. The full list of 25 franchises, with start and finish dates, is shown below:

TRAIN OPERATING COMPANIES AND THEIR FRANCHISEES

Franchise Franchisee Franchise
Length Start Finish

Anglia Railways GB Railways Group Plc. 7 yrs 3 mth 1.97 4.04
Cardiff Railway Prism Rail PLC. 7 yrs 6 mth 10.96 4.04
Central Trains National Express Group PLC. 7 yrs 1 mth 3.97 4.04
Chiltern Railways M40 Trains Limited (John
Laing plc). 7 yrs 7.96 7.03
Connex South
Central
Connex Rail Limited
(subsidiary of Vivendi SA). 7 yrs 5.96 5.03
Connex South
Eastern
Connex Rail Limited
(subsidiary of Vivendi SA).
15 yrs 10.96 10.11
CrossCountry Virgin Rail Group Limited. 15 yr 3 mth 1.97 04.12
Gatwick Express National Express Group PLC. 15 yrs 4.96 5.11
Great Eastern FirstGroup plc. 7 yrs 3 mth 1.97 4.04
Great North
Eastern Railway
GNER Holdings Limited
(subsidiary of Sea Containers
Ltd.)
7 yrs 4.96 4.03
Great Western
Great Western Holdings
Limited (subsidiary of
FirstGroup plc).
10 yrs 2.96 2.06
Island Line Stagecoach Holdings plc. 5 yrs 10.96 10.01
LTS Rail Prism Rail PLC. 15 yrs 5.96 5.11
Merseyrail
Electrics
MTL Rail Limited (subsidiary
of MTL Services PLC). 7 yrs 2 mth 1.97 4.04
Midland Mainline National Express Group PLC. 10 yrs 4.96 4.06
North Western
Trains
Great Western Holdings
Limited (subsidiary of
FirstGroup plc).
7 yrs 1 mth 3.97 4.04
Northern Spirit MTL Rail Limited (subsidiary
of MTL Services PLC).
7 yrs 1 mth 3.97 4.04
ScotRail National Express Group PLC. 7 yrs 3.97 4.04
Silverlink National Express Group PLC. 7 yrs 8 mth 3.97 10.04
South West
Trains Stagecoach Holdings plc. 7 yrs 2.96 2.03
Thames Trains
Victory Railways Holdings
Limited (subsidiary of The
Go-Ahead Group Plc).
7 yrs 6 mth 10.96 4.04
Thameslink GOVIA Limited (Go-Ahead
Group and Via G.T.I. SA). 7 yrs 1 mth 3.97 4.04
Wales & West Prism Rail PLC. 7 yrs 6 mth 10.96 4.04
West Anglia
Great Northern
Prism Rail PLC. 7 yrs 3 mth 1.97 4.04
West Coast
Trains Virgin Rail Group Limited. 15 yrs 3.97 3.12

Important Notice
This news release is issued by the Franchising Director and its contents have been approved for the purposes of section 57 of the Financial Services Act 1986 by KPMG Corporate Finance.
KPMG Corporate Finance is a division of KPMG which is authorised to carry on investment business by the Institute of Chartered Accountants in England and Wales. This news release has been prepared for general information purposes only and is not intended to form the basis of any investment decision or constitute an offer or invitation to bid for any passenger rail franchise or to acquire shares in a train operating company. Neither this news release nor any copy of it should be taken into or distributed in Canada, France, Japan or the United States except in accordance with an applicable exemption. The distribution of this news release in other jurisdictions may be restricted by law and therefore persons into whose possession this news release comes should inform themselves about and observe any such restrictions.

KPMG Corporate Finance is acting for the Franchising Director and will not regard any other person as its client in relation to passenger railway franchising or be responsible to anyone other than the Franchising Director for providing the protections afforded to clients of KPMG Corporate Finance nor for advising any other person on the contents of this news release or any matter referred to in it.

Railhub Archive ::: 1999-11-24 SRA-001