High charges hit HS1 profits
HS1 Ltd continues to make steady progress but high finance charges accounted for nearly half the annual turnover and resulted in a big loss for the financial year ended 31 March 2016.
The concession to operate, manage and maintain HS1 Ltd is jointly held by the two Canadian public pension funds, Borealis Infrastructure and the Ontario Teachers’ Pension Plan, and it runs to December 2040. However, the actual operation and maintenance of the 68 mile high speed rail line between St Pancras and the Channel portals (plus three of its four stations) is sub-contracted to Network Rail (High Speed) Ltd.
The financial year 2015-16 was the first one in the new control period (CP2 which runs to 31 March 2020).The results partly reflected changes brought about by PR 14 (the 2014 ORR Periodic Review).
Turnover dropped slightly to £299.3m (2014/15: £302.1m), as did operating profit of £59.5m (2014/15: £60.8m). But finance charges of £146.2m (2014/15: £160.2m) and other charges resulted in an overall annual loss of £94.6m (2014/15: £94.4m).
Consolidated net borrowings increased slightly to £1.533bn (2014/15: £1.529bn).
EBITDA (earnings before interest, tax, depreciation and amortisation) was £180.4m (2014/15: £181.6m), made up of the following charges:
The investment recovery charge (IRC) £159.6m (2014/15: £149.9m); the net operations, maintenance & renewals charge (OMRC) £1.8m (2014/15: £13.9m); the net unregulated charge £18.5m (2014/15: £17.7m); and the stations charge £0.5m (2014/15: £0.1m).
The IRC is levied to recover construction costs over the concession life; the OMRC was down due to changes brought about by CP2; the net unregulated charge is for lease and property rentals at St Pancras International; and station results improved due to cancellation of credits enjoyed in previous years.
The number of passenger train paths billed increased 2.1% to 75,126 from 73,591. There are only two passenger train operators on HS1: the domestic operator Southeastern had 55,841 paths (2014/15: 54,465), and the international operator Eurostar had 19,285 paths (2014/15: 19,126).
HS1 also carries a very limited amount of freight traffic.
It is a little known fact but domestic passenger services are the main source of income for infrastructure company HS1 Ltd. 1,024 domestic train paths per week are underpinned by the government through a special arrangement and HS1 Ltd has certainty for one year ahead due to an advance agreement of the timetable (upon which billing is based).
Deferred government grants for 2015/16 amounted to £92.9m (2014/15: £92.9m), and an additional £1.678bn is due in future financial periods.