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Railhub Archive
2001-10-31 DTR-001
Department of Transport, Local Government and the Regions


Byers issues guidelines for Railtrack bidders

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Department of Transport, Local Government and the Regions

Byers issues guidelines for Railtrack bidders

31 Oct 2001 00:00
source Department of Transport, Local Government and the Regions
type Press release

Transport Secretary Stephen Byers has today issued guidelines detailing the principal issues which he will consider before approving a scheme of transfer of Railtrack plc out of administration.

Stephen Byers said;

''These guidelines will help those formulating bids for Railtrack plc to understand what we are expecting of its successor as Network Operator. Although indicative at this stage, the guidelines clearly demonstrate our commitment to making the process of moving Railtrack out of administration as transparent as possible. These guidelines will be applied fairly to any proposal that is put before me including a proposal for a Company Limited by Guarantee. However, it is important that we use this opportunity to remodel the industry and ensure that the problems that bedevilled Railtrack''s stewardship of the network are not simply transferred to its successor.

''The Government welcomes the fact that there may be more than one proposal before the Administrator and I look forward to seeing the proposals that come forward and undertake to seriously consider any transfer scheme put to me.

''As I have said, we have developed what we regard as an attractive successor vehicle to Railtrack and intend to put a proposal to the Administrator for a Company Limited by Guarantee to take over Railtrack''s role as network operator.

''The important thing is to ensure that the successor to Railtrack which emerges from administration delivers for the travelling public''.

The guidelines include a requirement that potential bidders should demonstrate their ''ability to finance the activities of the proposed transferee in a cost effective manner including the proposed treatment of existing and future short and long term finance creditors and a demonstration that it will have a sufficiently high investment grade credit rating to raise the necessary finance for its activities''.

In answer to a parliamentary question put by Vernon Coaker MP (Gedline);

''To ask the Secretary of State what issues he will consider when exercising his powers under Schedule 7 of the Railways Act 1993 in approving the transfer of Railtrack plc out of railway administration.''

Mr Byers said:

Schedule 7 of the Railways Act 1993 makes provision for a transfer scheme mechanism to be used for the transfer of the undertaking of a protected railway company which is the subject of a railway administration order.

Paragraph 2(2) of Schedule 7 provides that a scheme made under that Schedule shall not take effect unless (in the case of the undertaking of Railtrack Plc) it is approved by the Secretary of State for Transport, Local Government and the Regions.

I will consider carefully all of the terms of any proposed scheme submitted to me by Railtrack Plc (acting by its administrators). However, in order to assist potential bidders for the undertaking of Railtrack Plc this answer sets out, by way of guidelines, the principal issues upon which I will need to be satisfied before approving a proposed scheme. These guidelines may change from time to time (in which case I will publish the revised guidelines) and they are not intended to be exhaustive and are issued as guidance.


My principal objective, in determining whether or not to approve a proposed transfer scheme, is to ensure that the operation of the network will, after the proposed transfer, be undertaken efficiently, safely and economically.

I also intend to ensure that I am satisfied on the following issues.

1. Efficiency and Viability

The technical expertise of the proposed transferee to operate, maintain, renew and enhance the railway network. This will include:

- presenting proposals for focussed and effective management (particularly in relation to contract management and planning, and a willingness to facilitate enhancement by special purpose vehicles or alternative structures for financing enhancements and developments which separate enhancement and development risk from operation, maintenance and renewal), and

- demonstrating that employees with appropriate skills will be retained and, where applicable, recruited;

A proper understanding of the projected liabilities of the transferee and the performance risks it faces;

A proper understanding of Railtrack PLC''s network operating licence and a demonstrable intention and ability to comply with it;

A proper understanding of the Government''s strategic plans for the railway industry and a demonstrable commitment to them (including the 10 Year Plan and the SRA''s Strategic Agenda);

A coherent and cost-effective business plan for -

- ascertaining the condition of the network assets and life cycle cost minimisation,

- implementing output based contracts for maintenance and renewal,

- facilitating the successful implementation of special purpose vehicles (or equivalent arrangements) delivering large scale enhancements and renewals, and

- the maintenance of an assets register, including a description of process and timetable.

Proposals for ascertaining the cost structure of the network business and the control systems to be implemented at both central and regional levels and how successful reporting mechanics are to be achieved.

A cohesive, achievable and cost-effective strategy for dealing with those renewals and small enhancements that are not to be delivered by special purpose vehicles (or equivalents).

2. Safety

An ability to run the network safely, with a clearly defined safety policy;

Evidence that the Heath and Safety Executive has confidence in the proposed transferee and that the relevant Safety Case will be in place immediately following the transfer;

3. Key Relationships

Proposals for creating, at regional level, relationships with railway passenger and freight service operators and other stakeholders.

Evidence of support from employees and their representatives;

Evidence of the confidence of relevant stakeholders in the industry, for instance railway passenger and freight service operators and suppliers of finance;

4. Financial viability and value for money

A demonstrated ability to finance the activities of the proposed transferee in a cost-effective manner (including its proposed treatment of existing and future, short and long term finance creditors, and a demonstration that it will have a sufficiently high, investment grade, credit rating to raise the necessary finance for its activities).

A coherent plan for the treatment of existing trade and other creditors.

A demonstration that its approach would ensure that effective maintenance and renewal takes place at the lowest practical cost.

Proposals for the transfer of liabilities which relate to the operation, maintenance, renewal and development of the parts of the network that are to be transferred.

In addition and to achieve my overall objective, I will have regard to the extent and nature of Government support that will be required to operate the network after the proposed transfer and the value for money that this would represent for Government. I will expect any proposal for a transfer to address very clearly the basis, extent and nature of support that will be required from the Government.

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Railhub Archive ::: 2001-10-31 DTR-001


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