1999-06-30 Train companies welcome positive lead from head of SRA (ATOC)

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date 30 June 1999
source Shadow Strategic Rail Authority
type Press release

Sir Alastair Morton today set out the priorities for the Strategic Rail Authority
as increased investment by Railtrack - multiplied by financing from other
sources - and flourishing franchises whose owners will stand up for their rights
and invest for improvement.

Speaking at a Chartered Institute of Transport conference in London, he said
that he had found in his first three months a "battered, historically under-funded,
previously non-growth system now in the process - the painful
process - of transforming itself into a modernised, growth oriented, larger and
better system."

Focusing on Railtrack's planned enhancement investment of £10-11 billion
over the next ten years, he said that, "a billion a year is not going to do the
business." He continued, "Railtrack makes its profits from a monopoly licence
carrying an obligation to provide track access. Shareholders bought the right
to enjoy the fruits of that licence on the basis that Railtrack must earn its
profits by fulfilling its conditions."

Railtrack, he said, must invest more, and also drive down its own costs and,
"through good programme design and delivery, the costs of the service it is
required to perform."

On the passenger franchises, Sir Alastair said that his initial reactions had
ranged from sympathy and pleasure at the improvements many had
introduced, through concern at performance gaps, to unease at the weakness
of their posture towards Railtrack.

In aggregate, before 2005 inter-urban operators would be profitable witho ut
subsidy, while the London commuter operators would be close to breaking
even. His aim was to see the franchises for these operators and perhaps a
few of the rest, "renegotiated, extended or re-let so as to be securely lodged
in the hands of franchisees who are determined to flourish without subsidies,
or with very limited subsidies paid under circumscribed performance
conditions; and who will stand up for their rights as customers and invest in
improving services."

He saw the three conditions precedent to this as:

Longer franchises, to permit capture of returns on investment.
Their emergence from subsidy not being seen as a continuing source
of 'tax' revenue to the Treasury via payment of premiums.
Franchisees agreeing to perform and invest to meet the demands of a
bigger and better network.

He did not doubt that, "if those three strategic conditions are satisfied the next
round of franchises can be valuable to their owners", though there may not be
as many of them and their geography may change somewhat - or not. He
warned that, "non-performers will be non-starters for the process".

Sir Alastair then surveyed briefly six sources of finance who, "in aggregate
must supply a multiple of the (greater) investment going onto Railtrack's
balance sheet." These were Railtrack themselves, the train operators, the
leasing companies, the service and equipment suppliers, the providers of
project finance and, "in the thick of the financing discussions", the SRA.

Turning to the importance of freight traffic on rail, he concluded that, "We have
a mission to promote rail as a satisfactory logistics supplier and to secure the
investment necessary for that."

Railhub Archive ::: 1999-06-30 SRA-001