Shadow Strategic Rail Authority

Sir Alastair Morton spells out plans for franchise replacement
_______________________________________________________________

date 17 September 1999
source Shadow Strategic Rail Authority
type Press release

Sir Alastair Morton, Chairman of the Shadow Strategic Rail Authority (SSRA)
completed his unveiling of the SSRA's plans for the replacement of the
existing passenger rail franchises in a speech to the Institution of Highways
and Transportation 's Presidential Conference in Chester today.

He confirmed the SSRA's invitation to existing and would-be franchisees to
negotiate for the replacement of existing franchises which have less than five
years to run by longer franchises, "in which there will be value for the
franchise owner, derived from longer terms and modified subsidy, in return for
commitments to high levels of investment and service."

He pointed out that, "existing franchises are the property of existing
franchisees, so long as they do not default on their obligations. Any new,
stronger and longer franchises will therefore require franchisees to agree to
give up their existing franchises to permit their development by the new
franchisee. Either they will do that when they conclude a satisfactory
negotiation with new investors and the Franchising Director or when the
existing franchise runs to expiry."

He stressed that the SSRA would decide the sequence of negotiation and that
it would be likely to start with a few franchises and accelerate the process
next year, but with no deadline. Bids could come from incumbent franchisees
bidding for the same franchise, with either the same or modified geography;
existing franchisees bidding for other franchises; or new entrants to the
industry.

New franchises would be likely to have a term of between 10 and 20 years,
with termination possible after reviews every five or seven years or in the
event of default. The SSRA must conclude that the new terms offer value for
money, or there would be no agreement and the existing franchise would run
to expiry. For existing franchisees, the credibility of their bids would depend
on current performance.

Sir Alastair also spoke about the importance of a proper process for capital
investment. Referring back to the poor structuring of the Channel Tunnel
project, which caused enormous management difficulties, Sir Alastair warned
that passenger train operators, freight companies and Railtrack must prioritise
their long list of investment projects and structure each one appropriately. He
said that the operators must be less passive and, "must demand without fear
that their monopoly supplier, Railtrack, deliver all their reasonable
requirements. It is the operators who have to satisfy the ultimate customers."

He concluded by once again spelling out his message to the industry: "It's all
about investment, investment, investment!"

Railhub Archive ::: 1999-09-17 SRA-001