HISTORIC PRESS RELEASE : SRA Agrees Terms for Restructuring of Central Trains and ScotRail [March 2002]
The press release issued by the Strategic Rail Authority on 7 March 2002.
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.”
