FirstGroup & MTR take South Western franchise from Stagecoach
Stagecoach has lost the prestigious South Western passenger franchise it has held for more than 20 years to First MTR South Western Trains Ltd; a 70:30 joint venture between FirstGroup and Hong Kong-based MTR.
The new seven year DfT franchise runs from 20 August 2017 but could be extended by 11 months through discretionary powers.
There were no other contenders in this two horse race.
The new franchise will provide 90 new trains (750 carriages) for the Windsor, Reading and Waterloo suburban services by December 2020; 18 refurbished trains (90 carriages) ‘as new’ will be deployed on the Waterloo-Portsmouth line from December 2018.
By December 2020 the number of train seats on peak morning and evening services into Waterloo should be increased by 52,000. Services to a wide range of destinations are to be accelerated, and there will be at least 400 additional trains on Sundays.
Southampton Central station will be refurbished under £90m set aside for station investment; new station plans for Park Barn, Merrow and Wilton Parkway will be taken forward.
“Under the contract, the Franchise Operator will deliver £2.6bn real NPV in premium payments to the Government over the core (seven year) period. The joint venture shareholders will provide a loan of up to £30m, and £88m (of which 50% is bonded) in subordinated contingent loan facilities to the Franchise Operator, as well as a £15m performance bond and a season ticket bond of up to £80m,” explains FirstGroup.
“The NPV of forecast premium payments over the seven year core franchise period, expressed in 2017/18 prices and discounted using the DfT’s ‘real’ discount rate of 3.5%.”
First MTR will also stump up £80m of the planned £1.2bn investment.
The South Western franchise has long been the most lucrative TOC revenue source. The latest ORR analysis shows that it was the only franchise – out of 20 – to make a net contribution to state coffers in 2015-16 after payment of the (Network Rail) government grant.
That amounted to a £133m ‘surplus’ in the last financial year.
DfT says that the First MTR JV will be the 13th franchise award since 2013.
FirstGroup currently holds the Great Western and TransPennine Express franchises; FG also owns open access operator Hull Trains, runs London Tramlink and has a joint share (with Heathrow Express) in Heathrow Connect.
MTR (Mass Transit Railway) – better known for its Hong Kong metro operation – has run TfL Rail since May 2015; it will also be responsible for Crossrail when this become operational in 2018. A MTR Laing joint venture previously ran London Overground until November 2016.
South Western was the pioneer franchise which saw the first privatised UK operation in February 1996. Stagecoach held that franchise for more than twenty years, boosting passenger numbers more than twofold from 108 million in 1996 to over 230 million in 2017.