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PUBLIC MEETING - BRISTOL
TODAY - Friday, May 29
18:30 - 21:30
SPEAKERS: Alex Gordon (NO2EU candidate SW)
Gawain Little (NO2EU candidate SE)
Dave Nellist (NO2EU candidate W Midlands)
VENUE: GWR Staff Association Club
Bristol Temple Meads Station Approach (The Incline)
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The Times: May 29, 2009
Peter Stiff
National Express back on the rails after an upgrade - Such is the impact of the recession on the country’s railways, with passenger growth faltering as would-be commuters stay at home without jobs, perhaps the rail companies would be better off jacking it all in.
At least that might be the case for National Express, whose East Coast Mainline franchise has been particularly badly hit of late, with the possibility of the Government taking control.
But shares in the group rose 21¼p to 320p yesterday after Morgan Stanley suggested that the transport group may have an opportunity amid the adversity if it scrapped its UK rail business and just focused on buses.
The US investment bank calculates that exiting its rail business would cost the company only £6 million more than the £169 million impact that sticking it out is likely to have.
It added that coupled with a rumoured rights issue at about the £400 million mark, which would lower its leverage to about the sector average, the group’s valuation could look very attractive at 7.7 times earnings.
Given that Morgan Stanley believes that with no further concerns about rail or for its balance sheet a valuation of ten times earnings would be justified, it has upgraded the stock to “overweight”.
However, it has cut earnings forecast for the sector by 6 per cent for 2009-10 and by 11 per cent for 2010-11, because of a more pessimistic forecast for UK rail. It now expects passenger growth to fall by 4 per cent rather than 3 per cent, although this is offset by more optimistic assumptions on bus passenger growth of minus 1 per cent rather than a fall of 3 per cent.
The bank has subsequently downgraded both Go Ahead, up 14p to £12.71, and Stagecoach, down 5¼p to 122¾p, to “underweight”. However, it has upgraded its rating on FirstGroup, up 4¼p to 372¾p, to “equal weight” because of its North American school bus contracts.
Overall, the FTSE 100 index fell 28.69 points to 4,387.54 as investors grew more cautious about the state of the global economy.
No2EU – Yes to Democracy today confirmed a full schedule of election broadcasts this week and announced that former Labour MP Alice Mahon will declare her support for the No2EU coalition at a public meeting in Birmingham tonight.
Alice Mahon resigned from the Labour Party last month after 50 years of membership. She was the MP for Halifax from 1987 to 2005.
Mrs Mahon in her resignation letter said she could no longer be a member of a party "that at leadership level has betrayed many of the principles that inspired me as a teenager to join". Her letter, sent to former colleagues in her Halifax constituency, was sharply critical of Labour's failure to deliver a promised referendum on the EU "Lisbon Treaty".
"If that Treaty is ratified", she wrote, "we can say goodbye to any publicly owned services...... we will be handing over to private corporations, social services, education, transport and postal services. Even the NHS will be up for grabs".
Alice Mahon will be joined on the platform at Carrs Lane Church Centre in Birmingham at 7.30pm tonight by former Labour Coventry MP Dave Nellist who is standing on the No2EU slate.
No2EU’s election broadcast programme kicks off tonight and will roll out over the week:
Channel Five - Tuesday May 26, 6.55pm
S4C – Wednesday May 27, 7.25pm (Welsh language)
BBC one - Wednesday May 27, 10.35pm
BBC two - Wednesday May 27, 11.20pm
BBC Wales - Wednesday May 27, 10.35pm
BBC Scotland – Wednesday May 27, 10.35pm
ITV Scotland – Wednesday May 29, 10.30pm
ITV – Friday May 29, 10.30pm
ITV Wales – Friday May 29, 10.30pm
Bob Crow, No2EU Convenor, said: “Today we’ve seen that the spotlight is at last turning on the EU gravy train and the levels of greed amongst MEP’s which make our Westminster MP’s look like rank amateurs when it comes to lining their pockets at our expense. No2EU is standing for public services, democracy and workers rights against the gravy train and the sleaze and corruption of the bosses and bankers Europe.”
ENDS
Further information:
Brian Denny 07903 376 303
Geoff Martin 07818 513 435
Financial Times: May 26 2009
By Robert Wright, Transport Correspondent
It is one of the defining images of the rural US. Across mile upon mile of highway in the plains of the midwest, the rolling hills of the south-east or the forests of New England, huge trucks thunder, carrying goods from producers to customers or from distribution centres to retailers.
The names of the biggest trucking lines – JB Hunt, YRC, Schneider National and Ryder – become as familiar as the names of the fast-food chains in the roadside stop-offs.
For many truckers, however, in recent years long stretches of highway have been a less familiar home than the gatehouses and cranes of railroad companies’ intermodal yards, where shipping containers move between truck and rail. As the US economic boom was at its most intense two years ago, trucking lines started to make long-distance movements of containers and truck trailers to rail. The containers make only the short journeys to and from the railyard on a truck.
With fuel prices high, and drivers both scarce and reluctant to spend days away from home at a time, the system reduced the number of drivers needed, allowed the drivers to operate nearer home and often cut costs. The move also allowed environmentally conscious customers to say they were reducing their greenhouse gas emissions.
Bill Matheson, president of the intermodal division of Schneider National, which handles trips made by a mix of rail and truck, says that in summer last year shippers started to look at rail even for some shorter-haul trips in the eastern US. Fuel at $4 a gallon was accounting for – a historically high – half of the cost of an all-truck trip.
“That certainly made it a far more competitive argument to convert over to intermodal,” he says.
Yet now, he says, fuel prices have dropped sharply. Drivers are far easier to find as redundancies at truck and other companies bring more people on to the market.
Trucking company prices have also collapsed as traffic volumes have shrunk. Truck freight volumes in March this year were 12.2 per cent below the same month last year, according to the American Trucking Associations.
“Capacity right now is far exceeding the volume of demand,” Mr Matheson says. “So truck pricing is what I would call unsustainably low.”
The question is whether the present conditions will alter the long-term trend away from all-truck journeys and towards the truck-rail intermodal mix.
Anthony Hatch, an independent, New York-based railroad analyst, says truck capacity has remained far higher than expected given the falling demand, so prices have dropped sharply. Many shippers are playing off truck and rail against each other in search of a bargain.
“The price of oil has allowed a lot of the truckers to hang on,” he says. “There’s shifting back and forth [between truck and rail]. It’s pretty dynamic.”
Trucks are undoubtedly competing with rail better over shorter-haul routes.
Yet the change has still been less dramatic than might have been expected.
That is partly because intermodal business continues to make economic sense for trucking lines, according to Mr Matheson. Schneider’s intermodal operations require less capital investment than its long-haul operations, partly because short-haul trucks are cheaper and need no driver sleeping accommodation.
“If a driver is moving a 1,000-mile load, that driver is going to be tied up for two days to deliver it,” Mr Matheson says. “In intermodal, a driver typically will deliver three loads a day.”
There is also less short-term switching between modes, according to Mr Hatch, because the largest customers normally have long-term contracts with transport providers.
Instead, there continues to be a surprising amount of shift towards rail from customers as companies prepare both for an expected rebound in fuel prices, an economic recovery and to reduce their carbon emissions by using more rail.
Norfolk Southern, the US’s fourth-largest railroad, even reported a 2 per cent rise in domestic intermodal traffic for the first quarter this year when nearly every other form of traffic declined.
The world recession may have slowed the shift in long-haul traffic to rail from road, Mr Matheson says, but few shippers believe trucking companies’ current, rock-bottom prices will stay so low long-term.
“We have shippers who understand this is not sustainable,” he says. “We are still finding interest in intermodal.”
Reuters: May 25 2009
Reporting by Radu Marinas; editing by Stephen Nisbet
BUCHAREST - Romania will axe 3,700 railway jobs this year, mostly workers close to retirement, Transport Minister Radu Berceanu said on Monday, as part of moves to restructure outdated and highly-subsidised state firms.
The layoffs follow a series of production and labour cutbacks across the country in recent months as the global financial crisis spread to eastern Europe, triggering economic recession and forcing several countries to seek outside help.
Romania's economy is expected to continue to contract in the second and third quarter after financial woes forced it to secure 20 billion euros in IMF-led loans earlier this year. "This is just the first step we are taking to solve the tough situation of Romanian railways," Berceanu told reporters after meeting trade unionists' leaders who endorsed the plan which promised full pensions for the displaced older workers.
Romania's state railways, which officials have said operate at only half the productivity of the European Union average, currently employ about 75,000 people.
Berceanu said new measures would include an assessment, on a case by case basis, of train stations and non-performing routes, coupled with additional spending cuts.
An initial restructuring plan calling for 12,000 railway workers to be laid off triggered union protests earlier this year.
Nouvel Observateur: 21.05.2009
The general secretary of CGT railworkers Didier Le Reste claimed on Thursday that liberalisation of railfreight has provoked "a spate of proven incidents and accidents" calling "into question private freight operators.”
Contradicting the Secretary of State for Transport, Dominique Bussereau, Didier Le Reste stated on France-Info that "since the opening up of rail freight to competition, we have had a spate of incidents and avoidable accidents, which bring the private freight operators into question.”
Earlier on Europe-1 channel, Secretary of State for Transport Dominique Bussereau had stated that there was "no" security breach, and that "privatisation and these incidents have nothing in common" in the wake of the accident between two freight trains, in Charente, which has greatly disrupted the movement of TGV between Paris and the Southwest.
Didier Le Reste himself itself noted that "when a public enterprise is managed on private sector criteria, the red line ie the financial return, we can see that behind it are also looking for the reduction of operating costs, production, and this also affects the level of training of railway employees."
"Rail safety cannot become a variable adjustment of liberal policies, in the name of competition and liberalisation as they are pushed by the European Union," warned the General Secretary of the CGT railworkers.
"I hear of great leaders of private operators at European level that the constraints associated with rail safety is now such that they can not do business as they heard on the rails", he said.
For the union, "it is necessary to establish the policeman of the rail control structures under the authority and responsibility of public authorities with means to enable the working time, the level of training, and conditions of security and network operations" he said.
See also:
l'Humanité: 21 May 2009
Pierre-Henri Lab
A collision between two freight trains caused a major disruption to rail traffic on Wednesday between Paris and Bordeaux. The railworkers’ trade unions have complained it was a result of liberalisation.
A Black Wednesday for rail users who planned to visit Bordeaux yesterday from Montparnasse station in Paris. Rail traffic was completely halted all morning in both directions. Overall, on this day before the Ascension weekend public holiday in France, 20,000 passengers suffered delays or cancellations according to SNCF. Train movements were not able to resume until Thursday at about 13.00 hours. Normal traffic was only resumed yesterday morning.
The cause of this incident was a collision between two freight trains in the early hours of Thursday morning, near Angouleme in the Charente. According to a union official from the CGT railway section in Bordeaux, the accident occurred south of Angoulême in the Livernan tunnel. A trainload of tractors, obviously poorly-secured, hauled by ECR (Euro Cargo Rail), a subsidiary of German railway company Deutsche Bahn, shifted "fouling the adjacent line”. Travelling from Paris to Bordeaux, the convoy "clashed" when passing another freight train belonging to SNCF. The injured SNCF driver was hospitalized. He suffered a broken wrist. The collision also caused extensive damage. The SNCF locomotive was badly damaged, with torn cables, while the derailment of an axle caused a deformation in the track further delaying the resumption of traffic. These facts highlighted the violence of the collision. "What would have happened if it had been a passenger train? We fear that people would have been injured or worse!" said Didier Le Reste, CGT general secretary.
Surprisingly, the ECR train had been involved a few moments before in an earlier incident, but didn’t stop. Thus, the press release from the CGT Bordeaux section reported "a first strike" occurred with another freight train. Although less serious, this collision had not forced the two trainloads to stop. However, when changing drivers at Angoulême station, the new SNCF driver, noticed the damage and refused to leave.
Commenting on the crash, the rail unions have called into question the liberalisation of railway traffic. "The pursuit of profit is leading companies to cut back on jobs, working conditions, operational procedures and training," is the accusation from SUD-Rail, the third largest union at SNCF. The same point is made by CGT, the majority union. Its General Secretary, Didier Le Reste calls for the creation of "a railway policeman", which "under the auspices of the government, similarly to what exists for road transport, would be responsible for verifying in real-time the length of the working day, the working conditions, operational and safety standards of train drivers."
The Secretary of State for Transport has rejected any link between liberalisation and the rail accident. Interviewed yesterday on TV channel France 2, Dominique Bussereau spoke of "human error" when loading the train in Germany, announced an investigation and promised sanctions.
However, this accident is not an isolated event but the latest in a long series involving private competitors of SNCF. On 26 April 2008, a train owned by the Veolia company ran out of control through Montauban railway station at over 60 km/h. Without the presence of mind of SNCF staff, who at the last moment managed to divert it, it would have struck a crowded TER (regional) passenger train.
BBC News: 22 May 2009
By Brian Wheeler
Political reporter, BBC News
Just when you were beginning to think that Eurosceptics were all died-in-the-wool right-wingers, along comes Bob Crow.
NO2EU believes the EU is destroying workers' rights
The RMT rail union chief is a bastion of the Old Left, now detached from the Labour Party, and he is hopping mad about the European Union, which he believes is destroying workers' rights through its promotion of privatisation.
Speaking at the European election campaign launch of a new political alliance NO2EU - Yes to Democracy, on the steps of the Department of Health in Whitehall, he blames the EU for everything from threatening the jobs of workers in the NHS, through a new directive on breaking up monopolies, to attacking trade union collective bargaining and the right to strike.
The group wants British withdrawal from the EU, attacking its "completely undemocratic institutions" - the European Commission and the European Central Bank - and what it sees as the corrupt Brussels "gravy train".
NO2EU was born out of the "British Jobs for British workers" protests at the Lindsey oil refinery and its aim is to provide working class voters and trade union members with a left wing alternative to the British National Party.
'Not being represented'
Mr Crow, who is the new party's lead candidate in London, said that - unlike the BNP - he was "not against workers coming into the country" but he was against "two workers from different countries competing against each other on different rates of pay".
"It is the system that is wrong," he adds.
"We are against the export of jobs and factories from the UK, but we also want unity" - Dave Nellist, NO2EU candidate
He says his party's executive committee fully backed the setting up of a new political party to take on Labour and the other major parties and he says he is comfortable with spending his members' money on what is, by any measure, a huge political gamble.
"Our union believes our members are not being represented at the moment," he argues.
If N02EU manage to get any MEPs elected, they say they will not take their Brussels wage or spend much time in the European Parliament.
Instead, they will man the barricades at picket lines across Europe, says Mr Crow, campaigning for workers' rights.
"Our main role will be out there among working people, giving them our support and helping to save their industries from privatisation."
'Clean hands'
The new group is an alliance of the RMT, the Socialist Party, the Communist Party, the Indian Workers' Association and the Alliance for Green Socialism.
It is running a full slate of candidates on 4 June, including Dyal Singh Bagri, President of the Indian Workers Association, Solidarity's Tommy Sheridan and trade union convenors from the Lindsey oil refinery and protests at the 2012 Olympics site.
The party's lead candidate in the West Midlands is former Militant Labour MP Dave Nellist.
Asked what the difference was between NO2EU and the seemingly ever-growing list of parties competing for the Eurosceptic vote on 4 June, he says: "We are not barmy.
"We are against the export of jobs and factories from the UK, but we also want unity. We don't want to start a war with France or Italy."
Mr Nellist, who says he only ever claimed an average factory worker's wage when he was in Parliament, claims it can tap into public anger with mainstream politicians over the expenses scandal, saying: "We come into politics with clean hands."
Building: 22 May 2009
By Emily Wright
...there’s a train a-coming. Well, not a train so much as a £34bn programme to upgrade the UK’s rail network. Building magazine looks at where the money will be spent.
If you mention the rail industry, many people will immediately think of overcrowded trains, timetables randomly punctuated by engineering works and a pricing structure that is as mysterious as it is extortionate.
All of those grumbles are well founded in fact, but they are also the symptoms of a system in rapid transition. The rail sector expects to triple output over the next three years, and billions of pounds will be invested over the next five. To deliver this programme, it is seeking thousands of construction workers – which is great news for the industry in these tough times.
Simon Kirby is director for infrastructure investment at Network Rail. He says: “We will be investing billions in projects over the country and will take on thousands of high-calibre people to make this happen.”
But there’s a catch. Britain’s straitened public finances mean that projects may be delayed. And Network Rail is introducing computerised systems to check the state of its track, which means that many companies looking for a piece of the action will have to ramp up their IT skills. But given the industry’s desperate need for work, these are hardly dealbreakers for most firms.
The scale of the work
A big chunk of this work is related to Crossrail: at £15.9bn this is the biggest rail project of recent times. However, it will by no means be the only one. Last month, Network Rail, the company responsible for building and maintaining the UK’s 9,800-mile rail network, embarked on a £34bn programme to enhance the system over the next five years.
The government awarded these funds to help the group meet an ambitious list of targets. The programme, which is known as Control Period 4, includes the following projects:
* The £5.5bn Thameslink scheme, which should be completed by 2015
* The £600m Birmingham New Street redevelopment, to be competed in 2014
* The £450m expansion of King’s Cross Station, to be completed by 2013
* The £423m refurbishment of Reading station, to be completed by 2015
* The £250m east coast mainline upgrade
* 25 light rail schemes in cities by 2010.
In addition to these large projects, 250 small stations are to get a makeover by 2014 and 916km of track is to be renewed each year for the next four years. This has been described by Ian Coucher, Network Rail’s chief executive, as an “unprecedented investment”.
The rail sector could provide work in the longer term, too. For instance, there is particular excitement surrounding the possibility of a high-speed rail link between London and Manchester. The two main political parties support the proposal, particularly the Tories, who see it as an alternative to a third runway at Heathrow.
If the project goes ahead it will stimulate massive investment – early predictions suggest that up to £2bn will be needed to fund projects to enhance rail capacity in and around Manchester alone. The Department for Transport is also in the process of creating a company to assess the feasibility of building a separate high-speed rail line between London and Scotland.
Apart from work building railways, there are the wider opportunities that it will create. In areas where infrastructure is renewed or upgraded, further development – in the form of housing, office, retail and leisure schemes – will follow. These types of schemes may be predominantly on hold at the moment, but they are worth keeping an eye on for when the market recovers.
Delays expected
This all sounds good in theory, but there is no guarantee that things will run smoothly in practice. For one thing, there are doubts over whether all of Network Rail’s work will go ahead as planned, owing to budgetary constraints. The £34bn figure is 8% less than the group originally said it would need to meet the government’s demands, and although it is still committed to hitting its targets, it is doing so on a smaller budget and will have to rein in costs over the next five years. Network Rail admitted that the 8% funding cut meant some projects on its wishlist did not make last year’s target list, but argued that as these projects were no longer on the table this should not have a direct impact on the delivery of the projects that were.
However, this only shrunk the funding shortfall from £2.6bn to £1.2bn and there are still concerns over how that will be made up. The Construction Products Association (CPA) says Network Rail will have to make savings of 21% between 2009 and 2014. Exactly where the money will come from is unknown, but there are fears that it could mean a cut back on work.
“There could well be a hole in this budget,” says Christian Woolmar, a former transport correspondent at The Independent. “My prediction is that if this happens, being bailed out won’t be an option. People will say, ‘like most sectors, rail will have to take a hit’, and this will mean work is cut back.”
“We are working on phasing out manual work by introducing technology. we’ll need workers who can read this data, analyse it and work out how to fix problems”
Network Rail
In October 2008 when the Office of Rail Regulation first announced there would be a spending gap of almost £3bn, Bill Emery, its chief executive, hinted that more efficient staffing methods could help make up the deficit. And Norman Baker, the Liberal Democrat transport spokesperson, said the focus on making Network Rail more efficient should not result in the scaling back or complete abandonment of extension and enhancement plans. “It’s essential that these savings come from better management practices and greater efficiency, not by cutting back on schemes that increase railway capacity,” he said.
There are also fears that Crossrail may not go ahead under a Tory government, which would come as a blow to firms that have geared up to work on it. The Conservatives cast doubt on its future earlier this month when they said they would review all large projects if they won the next election. A debate in the House of Commons just over a fortnight ago placed the spotlight on the scheme as Philip Hammond, shadow secretary to the Treasury, said of the project: “Does the government have no conception of the scale of the hole that it has dug? Every single programme and project will have to be reassessed and re-evaluated.”
Getting on board
Even if all these projects do go ahead, winning work will not be straightforward. Rail demands a specific skills set anyway, but now there is an added complication. Network Rail is spending £1bn on overhauling its IT systems, and this means that anyone working with it will have to have state-of-the-art computer skills. This applies particularly to track work, which requires advanced mathematical and engineering abilities.
A Network Rail spokesperson says: “There is a lot of boring work to be done in rail – manually checking every inch of track, for example, which is long-winded, dull and inefficient. We are working on phasing this sort of work out by introducing technology to do it instead. Then we’ll need workers who can read this data, analyse it and work out how to fix problems.”
He adds that this will not happen overnight, so firms have plenty of time to make sure engineers and consultants have the necessary expertise. Current Network Rail staff will be retrained under a government-funded programme.
Technical skills can be learned. But if you are a main contractor, getting a foot in the door will still be a problem. Most major firms with the right skills are well established in the sector, which means most large jobs on large schemes are already sewn up. Halcrow, Atkins and Amey are at the top of Network Rail’s pile, thanks to their history of delivering these sorts of projects.
Other large firms looking to break into the market are up against exceptionally tough and deeply entrenched competition. “There are a lot of opportunities, but they are harder to pick up for large contractors that are not already operating in this market,” says Noble Francis, economics director at the CPA. “You can’t easily switch from normal development to infrastructure, as it is so specialised.”
This doesn’t mean large firms should turn their backs on the sector. Highly technical schemes may be inaccessible, but main contractors have a chance of securing non-infrastructure work in surrounding areas.
For subcontractors and project managers, by contrast, direct opportunities in the rail sector are far easier to come by. With so many projects starting in the next couple of years, involving everything from platform extensions to refitting stations, replacing track and laying lines, subcontractors will be needed up and down the country.
“The outlook is good for subbies,” says Francis. “There will be significant work continuing for the next few years, a lot of which is still to be allocated. They just need to be aware of who is doing these projects to make sure they don’t miss out.”
And the outlook is even better for project managers. Network Rail is seeking them out as part of its recruitment drive – a rarity at a time when cutbacks and redundancies are commonplace.
Network Rail’s five-year plan will create at least 1,000 project management jobs. Most of these positions will involve working on new lines in Scotland, the redevelopment of Birmingham New Street and Reading stations, and enhancing the rail network to support the London Olympics, Crossrail and Thameslink.
Despite the challenges, there is no doubt that the rail sector is one of a minority of construction sectors that looks set to grow through the recession. The sheer volume of projects means that, though competition for work will be tough, there is little fear of a mad scramble to pick up scraps.
“This is the first recession we’ve been through since the railways were privatised, so we are in unchartered waters,” says Christian Woolmar. “But the investment looks secure and there is work in the pipeline that could offer a real safe house for the construction industry in what would otherwise be extremely difficult times ahead.”
Other opportunities
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The London Underground is one of the world’s biggest metro systems. It comprises 12 lines and 269 stations, and has been controlled by Transport for London since 2003.
Two consortiums, Metronet and Tube Lines, are responsible for repairing, maintaining and extending the London Underground. Metronet comprised Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy and RWE Thames Water, until it went into administration in July 2007. In May 2008 all its contracts were transferred to TfL control.
Its PPP contract to upgrade, replace and maintain infrastructure on the nine lines is worth £17bn over a 30-year period. An initial 7.5 year phase, starting in 2008, includes the following projects, some of which are under way, but with several yet to start and opportunities to win work still available.
* Providing 205km of new track
* Renewing 166 points and crossings
* Introduction of upgraded signalling systems
* Refurbishing 150 stations
* Introducing new trains on the Victoria and Metropolitan lines
* Refurbishment of District Line trains
Tube Lines is made up of a consortium comprising Amey and Bechtel. In April 2003 it started a 30-year PPP contract to upgrade, replace and maintain infrastructure on the Jubilee, Northern and Piccadilly lines. This contract is worth £4.4bn, and £2.5bn was ploughed into projects due to be completed within the first 7.5 years. These are:
* Renewal of 200km of track
* Resignalling the Jubilee line this year and the Northern line in 2011
* Increasing the length of Jubilee line trains
* New signalling for the Piccadilly line in 2014
Total expenditure on the London underground network from now until 2017/18 is expected to be £12.8m.
* £12bn on upgrading stations
* £11.5bn on renewing the existing rail network, replacing tracks, signalling systems and bridges
* £9.2bn on day-to-day maintenance
* £2.2bn on projects such as Crossrail
The firms to know
Amey Rail, Atkins, Babcock, Balfour Beatty, Carillion Rail, Bechtel, Halcrow, Jarvis Rail, Kier, McAlpine, Mowlem Railways
A procurement briefing
Network Rail uses a range of contracts depending on the individual project. These contracts include design and build, design and construct, ICE target cost and framework contracts.
Procurement is broken up into three sections: maintenance, national delivery services and major projects and investments. The last includes buildings, civil engineering and track work.
Network Rail uses a shared supplier qualification process called Link-up. This system, which is administrated independently by Achilles Information, is used to pre-assess any supplier on the rail infrastructure side. Every potential supplier must then be evaluated by commodity specialists before it can be considered for tender lists. Each potential supplier is assessed to see if it can meet Network Rail’s business requirements. Those that cannot are dropped from the supply chain.
Suppliers are not permitted to work unsupervised on “controlled infrastructure” without an approved contractor assurance case.
Network Rail encourages suppliers to use electronic tendering. The company has its own online tendering tool which it believes improves the process.
The Times: May 18, 2009
Carl Mortished
Rail transport is on the cusp of a decade of upheaval, with mergers, takeovers and new investors from the airline industry and elsewhere, according to the chief executive of one of the world's leading train manufacturers.
National rail companies will absorb their weaker neighbours and a new generation of private operators will invest in high-speed trains to exploit new infrastructure built with hundreds of billions of dollars ploughed into rail networks by governments, Philippe Mellier, the head of Alstom Transport, said.
“If you want to see the future of our industry in 30 years, look at what happened in the airline industry over the past 15 years,” Mr Mellier said. “Fifteen years ago every country had its own airline. They still keep their own names. Swiss is German, Austrian Airlines is German, Alitalia is French. We will see consolidation.”
The rail infrastructure industry is riding the crest of a mighty wave of government cash — pump-priming packages worth countless billions intended to create jobs and pull remote regions out of the economic mire with carbon-neutral transport. From Buenos Aires to Beijing, governments are committing taxpayers to a rail renaissance. Even in the United States, up to $13 billion (£8.6 billion) of government money will provide the seed capital for ten high-speed train corridors as President Obama wraps his Keynesian stimulus spending in a climate-friendly cloak. And the government spending plans are creating a lengthy backlog of orders for Alstom and its rivals — Siemens, of Germany, and Bombardier, of Canada.
The French company booked €7.4 billion (£6.6 billion) in train orders in the nine months to the end of December, a fifth more than in the same period in 2007. In the teeth of the economic crisis at the end of last year, rail orders rose by 61 per cent. “Our market is going to be more resilient than other markets, even if the economic crisis is very long,” Mr Mellier said. “The fundamentals are going to stay for the long term — energy security, the environment and the need to contain the [economic] crisis.”
It is big money — billions and for long periods — and it is highly political, Mr Mellier acknowledged. The person taking the decision to buy is often a politician with an electoral mandate lasting, at best, five years
and who will never cut the ribbon on the new train. “You need political courage to say I am going to invest billions and I am not going to benefit politically from the result,” he said.
However, government anchor funds are exciting huge interest by entrepreneurs and financial institutions keen to exploit the expanding high-speed rail infrastructure. Although Britain has partially retreated from its disastrous experiment in private sector rail, other countries are dipping their toes. “We are being approached by investors looking at this [high-speed] model,” Mr Mellier said. “This is a sector that is attracting attention. You can read the future.”
His forecast will be echoed tomorrow by Sir Richard Branson, who will urge the Government to allow private sector firms, such as Virgin Rail, to build new track and stations in competition with Network Rail, the state monopoly owner of Britain's track infrastructure. Moreover, the Virgin chief is making his pitch for a bigger piece of the UK's train set at a politically delicate moment. Lord Adonis, the Transport Minister, is advocating rail expansion, including High Speed 2, which would link Birmingham and Manchester to London and High Speed1, the Channel Tunnel rail link and its terminus at St Pancras International.
However, at present there is no public money available for such gargantuan projects and Sir Richard is hoping to prise from Network Rail smaller, profitable rail infrastructure schemes, such as new track that would enable trains on Virgin's West Coast Main Line to access St Pancras and connect with Eurostar trains.
The private sector excitement over rail has already spilled into Alstom's order book. The launch customer for the Automotrice à Grande Vitesse (AGV), the engineer's fourth-generation high-speed train, is not SNCF, the French national railway, but a consortium of wealthy Italian investors, led by the chairman of Fiat. Within a couple of years, a fleet of AGV trains, paid for with €1billion of private capital, will be jostling locomotives from Italian state railways as they race from Turin to Naples.
Mr Mellier sees logic rather than irony in the NTV and Virgin investments in high-speed rail. He said: “You have talented and shrewd business people coming into rail, on the one hand from the airline industry and, on the other hand, from the car industry. This is a strong signal.” He noted Air France's ambition to build its own network of high-speed rail links as it abandons efforts to compete on short-haul intercity transport.
The French airline no longer offers flights to Lyons and has drastically reduced schedules from Paris to other domestic cities.
“By having Air France, Virgin and potential newcomers from the airline industry, they will be very eager to have the type of business they are used to in the airline industry - yield management,” he said. That means focusing on marketing seats and maximising revenue from service, leaving the business of maintaining trains to someone else. “Everything is outsourced. It's going to be more and more the model of the airline industry. I want to be there to grab these opportunities.”
For Alstom, that means coping with the demands of customers outside the national railways, with their legacy infrastructure and rolling stock departments. It also means greater internal manufacturing efficiency. Mr Mellier wants to be able to deliver spare parts at short notice around the world in the manner of aircraft or jet engine manufacturers.
Alstom has recently agreed a joint venture investment in Transmash-holding, a Russian rolling stock engineer. Over the next two decades Russia will spend €200 billion repairing and upgrading a network that was left to rot when the communist state collapsed. It means building 1,000 locomotives a year for 20 years. The Alstom chief said: “It's a country spanning 12 time zones and Russians love to take trains. If there is growth anywhere in the world for the rail industry, it is in Russia.”
The Times: May 18, 2009
Carl Mortished
Deutsche Bahn is close to securing a concession from Eurotunnel that would allow the German national railway to send its high-speed trains through the Channel tunnel and offer direct services from Germany to London.
The German transport operator wants to develop freight and passenger routes into Britain using High Speed 1, the new fast track from the Channel Tunnel to St Pancras, but present safety regulations permit only Eurostar trains that are configured as two trains joined together with a locomotive at each end. To send its trains through the tunnel, Deutsche Bahn needs to gain consent for trains that do not have the special Eurostar configuration that can split in the middle.
Rail industry sources say that Deutsche Bahn is close to an agreement and is keen to develop direct services using its ICE fleet of high-speed trains to Britain. An industry insider said: “I would not be surprised if by 2012 you looked up at the departure board at St Pancras and saw Cologne and Frankfurt services operated by Deutsche Bahn.”
Deutsche Bahn's ambition will raise the stakes in the emerging struggle for control of the assets of high-speed rail in Britain. The European Commission last week gave the British Government permission to grant £5.2billion of state aid to London & Continental Railways (LCR), the government-controlled company that built High Speed 1 and redeveloped St Pancras station.
The approval of state aid wipes out an equivalent sum in LCR debt and clears the way for an auction of high-speed rail assets. In addition to High Speed 1, LCR owns a third of the Eurostar joint venture (the majority of Eurostar is owned by SNCF, of France, with 5 per cent held by Belgium's state railway) and the European Commission want the ownership of the track separated from the ownership of Eurostar.
Deutsche Bahn has signalled that it might like to buy the British stake in Eurostar, but there are other contenders, notably Air France/KLM. The Franco-Dutch airline sees StPancras and High Speed 1 not as a British railway but as an extended terminal of Charles de Gaulle airport, delivering passengers from a wealthy catchment area to catch Air France intercontinental flights.
SNCF may feel uneasy about sharing Eurostar with its powerful German rival. Speculation is growing that Deutsche Bahn may shift its focus to buying the High Speed1 track business if it gains access to the tunnel for its ICE trains. Meanwhile, a restructured Eurostar, controlled by SNCF, could develop into an unbranded train operator, providing services for airlines and other private sector investors.
London Evening Standard: 13.05.09
Robert Lea
First Great Western, the much-criticised Paddington-based train company, has received a secret £50 million bailout from the taxpayer.
Figures from FirstGroup today revealed profits from its rail operations plunged more than 20% last year.
But they would have been far worse were it not for a handout from the Department for Transport because recession-hit passenger revenue numbers are not coming in on budget.
The news indicates the extent of the crisis on the railways.
Stagecoach's South West Trains is in dispute with the department in a bid to claw back money while National Express is expected by many in the industry to have to hand the keys back to its King's Cross-based East Coast Main Line business.
At issue is the falling profitability of the rail companies serving London.
Job losses in the capital have put the brakes on expected commuter passenger growth and the economic crisis has also seen passengers who used to travel first class trading down to standard.
In addition leisure travellers have wised up to the rip-off fares on the railways and are now more likely to pre-book cheaper advance tickets rather than pay full whack "walk-on" fares on the day.
Sir Moir Lockhead, the FirstGroup chief executive who has been the victim of abuse from passengers who christened the Paddington services Worst Late Western, said today: "What we have is a very resilient business with very good protection."
What Lockhead means is that under the terms of its contract to run First Great Western, if passenger revenues begin to fall below the targets it said it would hit in its franchise agreement, then the department will use taxpayer money to make up the shortfall.
In the case of First Great Western, if that shortfall is worse than 94% of target then the department for Transport and the taxpayer pick up 80% of the cost.
Lockhead admitted in FirstGroup's financial year to the end of March that handout was worth £50 million to First Great Western, a franchise which was planned to be so profitable that from this year it is supposed to be making so-called premium payments back to the Treasury. The emergency handout arrangement for First Great Western continues this year.
It also begins to kick in for the first time at the group's other commuter franchise First Capital Connect running on the north-south Thameslink railway.
FirstGroup's rail businesses today reported profits for the year down from £120 million to £94 million with profit margins down by nearly a third to 4.4%.
The handouts have not stopped plans for FirstGroup to cut about 1000 staff on the railways.
FirstGroup's group profits, including its London bus and United States operations, grew by 30% to £200 million. Its dividend is up 10% to 18.75p.
...and there's trouble down the line for others
There is barely a London train company without its problems.
King's Cross: Profits are being wiped out on the East Coast Main Line, once reckoned to be Britain's most lucrative railway. Passenger revenue growth has slumped from 11% a year ago to just 0.3%.
National Express and its chief executive Richard Bowker, who used to run the Government's former rail franchise quango signed up to a contract in which it was expected to pay the Treasury £1 billion in excess profits over the next five years. But the contract does have a “revenue support” safety net for the Government to pick up the bill if income falls. Bowker is now widely expected to hand the keys back unless he can negotiate a new deal.
Liverpool St: Passenger revenue growth at National Express East Anglia has fallen to just 3.8%. Though the East Anglian train franchise is supposed to pay the Treasury £500 million in excess profits over the next five years it is already getting revenue support from the Government and a £180 million taxpayer handout to put on more peak commuter trains.
Fenchurch St: Passenger numbers are still growing at 4.6% a year on the National Express-run c2c line despite the jobs carnage in the City.
Cannon St/Charing Cross: Passenger growth has slowed to around zero on Southeastern, operated by Go-Ahead. Its passengers have borne the brunt of some of the largest year-on-year rises in commuter fares, raised to subsidise the new high-speed trains that will from later this year take east Kent commuters to St Pancras.
Victoria: Passenger numbers have dived on Southern Railways line, run by Go-Ahead, and passenger revenues are down about 10% on the Gatwick Express. Heavily subsidised Southern is to be relicensed from September.
Waterloo: Stagecoach has warned that South West Trains will slump to a “significant operating loss” unless the Government agrees to start bailing it out. It is supposed to be paying excess profits to the Treasury of £460 million in the four years from 2010. SWT also argues the millions it makes from station car parks should be not counted as railway revenue.
Euston: Virgin Rail's decade-long disaster on the West Coast Main Line continues. Disruption has restricted passenger growth to just 0.5% on the Virgin-Stagecoach joint venture which, at £1.2 billion over the next five years of handouts, is the most heavily subsidised train company on the network.
St Pancras International: Passenger numbers have collapsed 11% on the chronically loss-making Eurostar service.
Reuters: May 13 2009
By Pete Harrison
BRUSSELS - The European Commission approved on Wednesday a British plan to give 5.2 billion pounds ($7.9 billion) of state aid to the owner of Eurostar and Britain's first high-speed railway.
The clearance opens the way for the break-up of London & Continental Railways (LCR), which built the High Speed 1 link between London and the Channel Tunnel.
Thousands of tunnelers and engineers have already gone, leaving a company that owns 68 miles of high-speed track, a stake in the Eurostar service that runs on it, and some of Britain's most valuable development land nearby.
The British government will pay off LCR's debts so that it can reorganise the finance behind the 186 mile-per-hour (299 km per hour) railway and split apart the group's transport and infrastructure activities before a sell-off.
Possible buyers for Eurostar UK -- the British arm of Eurostar, which runs high-speed services between London, Paris and Brussels -- include Germany's Deutsche Bahn. The German rail operator expressed an interest in January.
Australia's Macquarie Bank and Deutsche Bank have also previously expressed an interest during an aborted bid for Eurostar in 2006 by financier Sir Adrian Montague and Goldman Sachs, industry sources say. As part of LCR's restructuring, charges for access to High Speed 1 will be reduced, in line with EU plans to inject more competition into high-speed railways by 2010 and ending Eurostar's privileged position on the route.
"The Commission regarded positively the unbundling of operation and infrastructure activities and the future significant reduction of access charges," the EU executive said in a statement.
"These measures are designed to promote the execution of an important project of common European interest," it said. (Reporting by Pete Harrison)
See also:
EUbusiness: 13 May 2009
(BRUSSELS) - The EU's top competition watchdog on Wednesday approved 5.2 billion pounds (7.9 billion dollars, 5.8 billion euros) of British state aid to develop Eurostar, including the high-speed rail service which links London with Paris and Brussels.
The money was used to construct a high-speed track between London and the English Channel before which Eurostar trains used to chug relatively slowly through southeast England after racing up from the French and Belgian capitals.
The operation notified by Britain involves public support, mainly in the form of debt cancellation, and puts in place a "sustainable financial structure" for the high-speed rail link. Proper independent monitoring of the whole process will be guaranteed.
The operation will also result in the unbundling of infrastructure and transport activities, and a significant reduction of access charges, thereby benefitting competition and users ahead of the forthcoming liberalisation of international passenger transport by rail in 2010.
The German national railway Deutsche Bahn has already said it is interested in buying a stake in Eurostar.
The European Commission assessed that "the restructuring plan complies with the prescription of the rescue and restructuring guidelines."
In particular, "the commission made sure that the restructuring involves sufficient compensatory measures in favour of possible competitors," the EU's executive arm said in a statement.
The EU decision includes "certain commitments" by British authorities to ensure proper monitoring of the whole operation.
Britain has agreed to discuss with the commission a list of independent financial advisers to assist with the monitoring process.
It has also committed to undertake the application of the so-called "one time last time" principle preventing the granting of additional restructuring aid in the future.
London and Continental Railways (LCR) is the developer of high speed rail link in England, which was delivered in November 2007.
LCR is also the owner of Eurostar (UK) Limited, which operates the Eurostar train service in the UK.
See also:
Dow Jones Newswires: MAY 13, 2009
By Alessandro Torello,
BRUSSELS (Dow Jones) --The European Commission Wednesday approved GBP5.17 billion of U.K. government state aid to support a high-speed rail link between London and the British Channel.
"The operation notified by the United Kingdom involves public support mainly in the form of debt cancellation and puts in place a sustainable financial structure for the high-speed rail link," the commission said in a statement.
London & Continental Railways is the company developing the high-speed train connections between London and the tunnel under the British Channel, and operates the Eurostar train service in the U.K. The tunnel then connects to the continental European high speed rail network in France.
RMT: May 12 2009
CALLING NOTICE: Britain’s biggest rail union, RMT, will be holding a press conference this Wednesday (13 May) at RMT Head Office to unveil the launch of a new political campaign aimed at securing the renationalisation of the crisis-torn East Coast line which is currently run under a franchise arrangement by debt-ridden National Express.
In the past week it has been reported that National Express has been in talks with the government on bailing out of their £1.4 billion franchise arrangement on the East Coast in favour of a copper-bottomed, management fee guarantee which RMT have described as a “massive financial reward for total failure.”
The East Coast line, which links London with Edinburgh via York and Leeds, carries 17 million passengers a year and employs 3,100 staff. It is Britain’s most lucrative train franchise.
Through their parliamentary convenor, John McDonnell MP, RMT are bringing together a coalition of MP’s with seats along the East Coast line to apply political pressure on the government for an orderly return to public ownership and control of the service. Newcastle Central MP Jim Cousins will be tabling an Early Day Motion to that affect on Wednesday.
Bob Crow, RMT general secretary, said :
“The chaos facing the rail industry from the looming collapse of major franchises is unprecedented and we are calling on the government to step in now and begin the process of renationalisation to restore order to the railways. At our press conference we will be setting out our plans to pursue that objective for the East Coast line as part of our wider campaign for a publicly-owned People’s Railway.
“It would be political suicide for the government to bail out National Express and offer them a copper-bottomed management fee guarantee in return for ripping up the East Coast franchise. That would be reward for complete and abject failure on an epic scale and the British taxpayers would be up in arms,” Bob Crow said.
ENDS
RMT: May 11 2009
Members of RMT clashed on saturday with members of the BNP in Carlisle as they were out campaigning for for RMT-backed No2EU-Yes to Democracy left-wing coalition which is contesting seats across the UK in next months Euro elections.
Police were called after the BNP reacted with hostility to No2EU campaigners handing out leaflets in close proximity to the regular BNP street stall in Carlisle. In an hour long standoff RMT/No2EU campaigners refused to be moved on by the BNP.
Shoppers told the No2 EU campaigners that they were delighted that at last someone had had the courage to stand up to the BNP on the streets of Carlisle.
ASLEF activist and No2EU candidate John Metcalfe said:
"The BNP have been leafletting Carlisle City Centre for months and obviously didn't take kindly to being exposed for the fascists that they are by our campaign. They were openly agressive and hostile and it didn't take long before the mask slipped and they started shouting fascist slogans."
Craig Johnston, from RMT Executive and another member of the No2EU slate, added:
"I have lived and worked in and loved the city of Carlisle for 45 years. No one is going to intimidate and harass me off the streets of my home town."
Bob Crow, RMT general secretary and convenor of No2EU, said:
"RMT members and No2EU supporters will not bow to intimidation from the BNP in Carlisle or anywhere else in the country. What today's incident proves is that the BNP are worried about the socialist message of No2EU and it's appeal to voters who are sick of the political elite in the UK and in the EU. No2EU is the only left-wing group challenging the BNP on the streets for the votes of the angry and the disaffected on June 4th. We will be stepping up our campaign in the coming weeks and offering voters a socialist alternative to the poison and hatred of the far right."
NO2EU - Yes to Democracy: 09 May 2009
Launch of South-West campaign on Monday 11th May, 5.30pm at the GWRSA Staff Club. All welcome
No2E –Yes to Democracy will be contesting the 6 South West seats in the European elections on June 4, 2009 on a platform of opposition to the Lisbon Treaty, against the EU-led privatisation of our public services, for workers’ rights and in protest at the corrupt EU gravy train.
At the Bristol launch, come and hear
Councillor Dave Nellist (West Midlands Candidate)
&
South West Candidates
Alex Gordon (RMT National Executive - Bristol)
Rae Lynch (Bristol NUT Committee (personal capacity))
Roger Davey (Swindon & Wiltshire Health Branch Unison Chair (personal capacity))
Monday 11 May, 5.30pm
GWRSA Social Club
The Incline
Temple Meads
Bristol BS1 6QQ
“Millions of working people feel abandoned by the main political parties which support EU diktats demanding the privatisation of our public services from the Post Office to our rail networks.”
Bob Crow, No2EU – Yes to Democracy convenor
For further details, contact
Robin Clapp (Bristol) 0775 9796 478 Sue Powell (Gloucestershire) 01452 412720
Mike Luff (Bristol) 0788 1417 218 Sean Brogan(Exeter) 01626 772 719
Nick Quirk(Plymouth) 07850 414 127
Scotsman: 08 May 2009
By FAY SINCLAIR
MOVES to renegotiate the East Coast Main Line rail franchise could open the door to rail companies across the country demanding cheaper deals than they had previously agreed with the government.
Analysts say if ministers give in to National Express's calls for the franchise to be renegotiated other rail operators "will beat a path to their door for similar treatment".
The Edinburgh to London contract carries 17 million passengers a year, but operator National Express is struggling amid falling passenger numbers and profits.
The company had been expected to make profits of around £30m a year from the franchise, but industry experts recently forecast that it could make a £6m loss in 2009.
In a bid to boost revenue, the company has announced an 11 per cent ticket fare rise which will come into effect on May 17.
GNER, National Express's predecessor on the East Coast, was forced to abandon the franchise after falling short of revenue targets.
Unless a deal is struck, it looks likely that National Express will have to walk away from the route too.
Industry insiders say any deal over the East Coast Main Line would lead to rival train operators demanding similar concessions.
Sir Richard Branson, chairman of Virgin Group, has made it clear he would insist on a fresh competition of the franchise if National Express could not pay the £1.4bn it agreed to give the government over the eight years to 2015.
Despite opposing renegotiation, many in the industry accept that National Express's problems are partly down to the government's recent policy of demanding high payments for the right to run lucrative services.
Analysts say making concessions in the dispute over the National Express East Coast franchise would put the Department for Transport's ability to collect agreed sums for other rail franchises at risk.
Stagecoach is due to pay £1.2bn over the life of its South West Trains franchise, and First Group is due to pay £1.3bn over 10 years for the Great Western franchise.
National Express chief executive Richard Bowker has argued the franchise was "agreed in a very different economic climate in 2007".
This week National Express revealed a much slower 0.3 per cent growth in revenue from the East Coast Main Line, down from 11 per cent last year,
and the firm is said to be "toiling" under the pressure of its £1.4 bn contract.
The UK's biggest rail union, RMT, warned it would be "political suicide" for ministers to agree concessions for National Express.
The RMT yesterday called for urgent action to nationalise the East Coast Main Line because the alternative – agreeing a cheaper franchise –would represent "complete and abject failure on an epic scale".
Railnews: 7th May 2009
FIRST Great Western’s star employee, Wayne Spence, has been presented with an MBE for going the extra mile for passengers.
Wayne Spence
Bristol Temple Meads platform supervisor Wayne was honoured in the New Year Honours list following 28 years of service to the trans-port industry.
Wayne is also the current winner of the ‘Do You Know a Star’ competition, in which thousands of customers vote for their favourite member of FGW who they felt deserved a customer service award.
As platform supervisor, he provides regular detailed information for passengers and has even been known to track them down in the station café to update them on service changes.
“Computers are okay when everything is running fine, but when things go wrong, especially when trains are being swapped around, you need people to help and advise passengers,” said Wayne, who is also a keen railway artist.
“That’s when I really come into my own. Lots of customers have been passing on their congratulations. It’s quite a boost to me and First Great Western,”
First Great Western’s managing director, Mark Hopwood, said: “Wayne is a shining example to all of us at First Great Western and it is fantastic to see his efforts rewarded in this way.”
RMT: May 7 2009
BRITAIN’S BIGGEST rail union, RMT, warned today of a meltdown on the rail network if the government fail to take decisive and urgent action to nationalise the East Coast line as debt-ridden franchise holder National Express lurches from crisis to crisis.
RMT said today that if the National Express East Coast franchise collapses it could lead to a domino effect hitting services right across the UK with the company being stripped of its East Anglia and c2c franchises. RMT is calling for an orderly return to direct public ownership.
On top of the National Express crisis, Stagecoach is currently in dispute with the DfT over its South West Trains franchise and Arriva is facing heavy losses on its Cross Country line. RMT estimates that the cumulative effect of collapsing franchises could blow a £2.5 billion hole in the government’s annual rail budget of £5 billion.
The East-Coast line, which links London with Edinburgh via York and Leeds, carries 17 million passengers a year and employs 3,100 staff. It is Britain’s most lucrative train franchise.
Bob Crow, RMT general secretary, said today:
“The chaos facing the rail industry from the looming collapse of major franchises is unprecedented and we are calling on the government to step in now and begin the process of renationalisation to restore order to the railways.
“It would be political suicide for the government to bail out National Express and offer them a copper-bottomed management fee guarantee in return for ripping up the East Coast franchise. That would be reward for complete and abject failure on an epic scale and the British taxpayers would be up in arms.
“What we have now is sub-prime companies running essential public services and that’s the consequence of rail privatisation. Rather than reading ransom notes from these companies RMT will be stepping up the political and public campaign to get shot of them,” Bob Crow said.
Reuters: May 5, 2009
Shares in British transport operator National Express rise 11.8 percent on weekend press reports that it has struck a deal with the British government to abandon its east-coast rail franchise.
Investec, which has a "buy" rating on the company, says the news is a "major positive for the company, potentially generating large upgrades and opening the door to refinancing".
National Express, which is not immediately available for comment, runs the east-coast, London to Edinburgh, mainline service, the UK's most expensive franchise, which has been hit by the recession's impact on passenger numbers and revenues.
The broker says it does not expect the Department for Transport to renegotiate other rail franchises, but believes the news is likely to benefit the sector overall on hopes that liabilities on over-aggressive franchise bids will now generally be capped.
Sunday Times: May 3, 2009
Dominic O’Connell
NATIONAL EXPRESS has struck an outline deal with the government to scrap its troubled east-coast train franchise, which should pave the way for a £400m rights issue and boardroom shake-up at the bus and rail group.
Transport officials plan to replace the east-coast deal, struck with National Express just over two years ago, with a management contract, under which the company would operate the line for a fixed fee. It may then be relet to a new operator at a later date.
The east-coast line, which links London to Edinburgh via York and Leeds, carries 17m passengers a year and employs 3,100 staff.
National Express beat fierce competition to take it over, promising to pay nearly £2 billion in premiums back to the government over eight years. But recession has left the company struggling to make money from the route.
The government, led by rail minister Lord Adonis, has rejected requests for a renegotiation of the franchise.
Rail-industry sources said a meeting on Thursday between Ray O’Toole, National Express’s UK chief executive, and Mike Mitchell, the top rail official at the Department for Transport (DfT), resulted in an outline agreement for the franchise to be suspended and replaced with a contract under which National Express would receive a flat management fee.
Removal of the uncertainty should clear the way for a £400m fundraising by National Express . It has just over £1 billion in loans, with £484m to be refinanced by February.
A £400m rights issue is seen as the most likely option, but it is understood that some shareholders have demanded management change before agreeing to support an injection of new equity.
Insiders say Richard Bowker, National Express’s chief executive, may come under pressure from those unhappy at how the east-coast deal has played out. Bowker faces investors at the company’s annual meeting on Wednesday.
National Express would not give details of its discussions with the DfT. “All train-operating companies have regular meetings with the DfT and as a company we never talk about in public what we discuss in private,” it said.
The DfT said: “As we have made clear on numerous occasions we do not renegotiate franchises.”
See also:
Daily Telegraph: 03 May 2009
By Alistair Osborne
Richard Bowker, the National Express chief executive, will this week face investor calls to come clean over the future of its East Coast Main Line train franchise and the group's creaking balance sheet.
The bus and rail operator holds its annual meeting on Wednesday amid shareholder concern over Mr Bowker's punchy East Coast bid. National Express undertook to pay the taxpayer £1.9bn between now and 2015 for running the service, with payments rising from £86.9m to £140m in the year to March 2010. Such premium
payments were predicated on bullish forecasts for passenger growth, now hit by the recession.
The situation has been compounded by the requirement to refinance a €540m (£480m) loan by September 2010, which may require a similar sized rights issue.
However, investors will not back a cash-call until they are clear over National Express's strategy for curing its East Coast headache. Some investors may also call for Mr Bowker's scalp as the price for participating in any rights issue.
Weekend reports suggested that National Express was negotiating a deal with the Government to turn the East Coast franchise into a management contract – whereby the company merely covers its costs.
However, the Department for Transport appeared to suggest that any such deal could only be short-term, with the franchise being relet, because of its ongoing policy not to renegotiate franchises.
A DfT spokesman said: "As we have made clear on numerous occasions we do not renegotiate franchises."
National Express would only say: "We do not comment on rumours and speculation."
One senior rail industry source said: "With a refinancing coming down the track, National Express has only two choices: sell assets or do a rights issue. However, it would be difficult to do a rights issue with an open-ended liability like the East Coast, while retaining the same chief executive."
See also:
Guardian Online: Sunday 3 May 2009
Dan Milmo
National Express is in talks with the Department for Transport to scrap its east coast rail franchise after admitting that the £1.4bn contract is unsustainable.
It is understood that the rail and bus group is preparing to switch the franchise to a management contract, which will see it operate the London-to-Edinburgh route for a fixed fee. If a deal is agreed, National Express will become the first casualty of a downturn in the rail market that is threatening several franchises.
The group won the east coast franchise in August 2007, days after the French bank BNP Paribas signalled the beginning of the credit crunch. National Express committed itself to paying £1.4bn in excess profits to the government by 2015 with an annual payment schedule that rises from £85m last year to £395m by the end of the contract. However, the recession rendered the contract untenable and an outline agreement between the group and the DfT to scrap the franchise was reached last week. National Express is expected to follow the deal with a £400m rights issue to help reduce debts of more than £1bn.
The DfT and National Express declined to comment today but rail industry sources said they expected the contract to be retendered, with the management contract representing a short-term fix for the government. The National Express chief executive, Richard Bowker, said that the east coast franchise would secure a much smaller windfall for the taxpayer if it was put back on the market.
Meanwhile, the competition for another major franchise has narrowed to three companies exposed to the industry downturn after the government sidelined a train operator that has so far survived the recession unscathed.
It is understood that NedRailways UK, a subsidiary of the Dutch national rail service, has failed to convince with its bid for the Southern franchise that operates the London-to-Brighton route. The selection process for Southern appears to have been pared down to National Express, Stagecoach and Go-Ahead Group.
Tribune: April 30, 2009
by Keith Richmond
RAIL unions demanded a moratorium on job cuts, a freeze on shareholder dividends and a strategy to ensure Britain’s railways are managed in a way that “mitigates rather than exacerbates” the effects of the recession in crisis talks with Transport Secretary Geoff Hoon this week.
The meeting took place in the shadow of an embarrassing revelation that rail bosses are set to take bumper annual bonuses this month.
Jim Cornell, chairman of Network Rail’s remuneration committee, admits in a leaked letter that “in the present economic climate there are clearly additional sensitivities” about executive bonuses but then goes for broke: “The railway is performing at the highest levels of safety, punctuality and passenger satisfaction ever seen in Britain.”
Rail unions are furious that the plan to pay “double your money” bonuses to senior staff was revealed as workers are laid off as the firm rows back on its programme of track renewal.
RMT general secretary Bob Crow said: “It beggars belief that in the current economic climate Network Rail should be allowed to make massive cuts in essential work while paying huge bonuses to bosses carrying out the cuts.”
TSSA leader Gerry Doherty said: “I would expect the independent directors to agree the bonuses despite public outrage. Because the only difference between an independent director and a supermarket trolley is the trolley has a mind of its own.”
Transport expert Christian Wolmar said: “Claims by senior managers that they deserve six figure bonuses on top of generous salaries are based on the idea that the company is in the private sector and they are highly skilled managers at the cutting edge of capitalism who could easily get much better paid elsewhere.
“That is nonsense. Network Rail is a publicly funded organisation dependent on vast subsidies because the railways are, inherently, a loss-making industry.”
Shadow Transport Secretary Theresa Villiers says the Tories would give the Office of Rail Regulation power to veto bonuses.
Financial Times: May 2 2009
By Robert Wright
A senior transport industry executive is set to be the new chief executive of the company upgrading three of London Underground's most important lines, it was announced yesterday.
Dean Finch, chief operating officer of FirstGroup, the bus and rail company, is to take over from Terry Morgan at Tube Lines on June 1.
Mr Morgan had previously said he would leave Tube Lines, in charge of maintaining and upgrading track, stations and trains on the Jubilee, Northern and Piccadilly lines, on November 1 to become non-executive chairman of Crossrail, the company building the cross-London rail link.
Mr Finch takes over as Tube Lines approaches the deadline to finish complex upgrade work to allow trains on the Jubilee line to run faster and closer together.
The work is meant to be concluded by the end of this year.
Tube Lines is also involved in complex negotiations with London Underground and the arbiter of its 30-year contract over its funding needs for the second 7½-year period of its contract, starting in July 2010. The arbiter has said the company needs £5.1bn-£5.5bn, while Tube Lines asked for £7.2bn and London Underground said the work should cost £4.1bn.