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2002-03-07 SRA-001
Strategic Rail Authority

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SRA agrees terms for restructuring of Central Trains and ScotRail


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Strategic Rail Authority

SRA agrees terms for restructuring of Central Trains and ScotRail
_______________________________________________________________


date
7 March 2002
source Strategic Rail Authority
type Press release



The Strategic Rail Authority (SRA) has agreed terms with National Express Group for changes to the franchises they operate, which will secure their future stability and bring benefits to passengers. In particular, the deal provides for the financial restructuring and future development of the heavily subsidised but loss making ScotRail and Central Trains franchises for the remaining two years of those franchises.

For passengers, the deal secures the future of ScotRail and Central Trains services. In addition, it ensures that passengers will continue to benefit from the protection of all of those additional services, which exceed the minimum level required in the Franchise Agreements, for the duration of the franchises. These additional service commitments mean that over three million additional train miles will be guaranteed on the Central Trains and ScotRail franchises.

The deal also secures current levels of rolling stock for the remaining life of both franchises.

The SRA is to receive a cash payment of £59 million from National Express in return for a revised franchise payment profile on these two major regional networks. In securing this financial restructuring, the SRA has maintained the transfer of cost and revenue risk to the operator, except on those services
provided to the specification of the West Midlands and Strathclyde Passenger Transport Executives, where revenue risk continues to lie with the PTEs. This will ensure that the operator continues to be incentivised to improve services to passengers, whilst ensuring that SRA and taxpayer interests are protected.

The deal will provide £115 million of additional subsidy across both franchises until their expiry in 2004. It includes clawback provisions to ensure that, where financial results are better than forecast, a share of the profits reverts to the SRA.

Both parties have also reached agreement on a range of outstanding issues arising from the National Express take-over of the franchising businesses of Prism Rail PLC in September 2000.

In reaching this settlement with National Express, the SRA has completed the financial restructuring of all regional franchises at the outset of the franchise replacement process. The settlement will provide a firm foundation from which the franchises can run to term, and then be extended or replaced in an orderly market process.

SRA Chairman Richard Bowker said:
"It has long been clear that the financial basis for the regional franchises was
unworkable - a situation compounded by Hatfield and the foot and mouth
outbreak, which affected tourism revenue. The SRA and National Express
have worked together over the last six months to hammer out the right
solution for this problem. Negotiations have been rigorous on both sides. I am
convinced that the outcome is a great step forward for passengers, the SRA
and the operators. There is now a firm basis on which to plan for the future
development of the franchises before they are re let, or extended, on expiry in
2004, in line with the objectives of our Strategic Plan."

Notes to Editors

1. Central Trains operates an extensive network of rural, urban and interurban services right across the Midlands, as well as into Central and South Wales and East Anglia. In the West Midlands local services are supported by Centro (West Midlands PTE). The Central Trains franchise expires in April 2004 and the SRA has indicated that National Express negotiation of a two year extension may be appropriate for the franchise.

2. ScotRail operates the vast majority of the passenger rail services in Scotland, and its services extend across the border to Carlisle. It also provides certain through services between Stranraer and Newcastle, and the Sleeper services between London Euston and Glasgow, Edinburgh, Inverness, Aberdeen and Fort William. In the Glasgow area, ScotRail operates passenger rail services on behalf of Strathclyde PTE (SPT). The ScotRail franchise expires in April 2004.

3. The ScotRail franchise is funded by the Scottish Executive, which is also responsible for providing Directions on the future extension or replacement of the franchise.

4. In addition to the agreement on ScotRail and Central Trains, the SRA and National Express have agreed the following issues relating to the rail businesses that National Express acquired from Prism in September 2000:

National Express will continue to operate the West Anglia Great Northern franchise until March 2004; National Express will continue to operate the Wales & Borders and Wessex franchises until 1 April 2004 but the SRA intends to re-let these franchises before this deadline;

To fulfil the undertaking inherited from Prism to invest £20.5million in the c2c franchise, National Express will invest £8 million in total on capital improvements on the c2c and West Anglia Great Northern franchises;

To fulfil the outstanding £13.3 million of the £25 million that National Express undertook to invest across its franchises as part of the Prism acquisition, National Express will pay the SRA £3.5 million in cash.

National Express: William Rollason, Finance Director or Nicola Marsden,
Director of Group Communications: 020 7529 2000

Financial Dynamics: Andrew Dowler / Ben Foster: 020 7831 3113


Railhub Archive ::: 2002-03-07 SRA-001





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