Network Rail misses over one third of targets
Network Rail missed 30 out of its 84 planned enhancement milestones (for England & Wales) at the end of 2014-15, the first year of the new control period, CP5 (2014-19), according to ORR’s latest Network Rail Monitor.
The not-for-profit infrastructure company is committed to delivering over £12bn of enhancement expenditure during CP5.
Network Rail is also expected to be £234 over budget, and to underperform its regulatory targets by £426m by the end of the first financial year.
In England & Wales, the number of signalling renewals was 63% behind target (687 out of 1,877); switches and crossings renewals were 37% behind (635 out of 1,006); and plain line track renewals were 7% behind (1,056 out of 1,140). The underspend on capital expenditure renewals was £495m, and that on capital expenditure enhancements was £163m.
The ORR says the signalling problems were partly due to limited supply chain capacity. (Plain line track refers to track without junctions, crossovers or points).
The ORR says the impact was mainly felt on new services: “The most prominent example was the phase 2b of the North West Electrification project (Liverpool – Manchester, including Liverpool – Wigan), which missed the December 2014 completion date for the introduction of electric services. The infrastructure was not actually ready for authorisation until March 2015.”
It continues: “The high number of missed milestones has raised serious questions about Network Rail’s ability to deliver future projects on time. Some of these missed milestones, such as the Swindon resignalling and the Reading to Didcot electrification were communicated at short notice.
“These concerns can be summarised as follows: shortcomings in project design and development, including adequate rigour in cost estimating; late project delivery; shortcomings of how Network Rail delivers its part in cross-industry programmes such as Great Western Route Modernisation; and lack of evidence that Network Rail is managing the CP5 investment portfolio to achieve efficiencies.”
Regarding Network Rail’s financial performance (of being £234 adverse to budget), the ORR comments:
“The key drivers of the overspend include: higher schedule 8 costs, reflecting worse than expected train performance; higher than expected renewals costs partly due to delays in some efficiency initiatives; overspend across a number of enhancements projects; and the introduction within the year of the Tidy Railway and Vegetation Management programmes.”
(Schedule 8 payments are compensations Network Rail makes to train operators for unplanned service disruptions).
ORR produced a separate monitor for Network Rail in Scotland, where over £ 1bn is to be spent on enhancements during CP5. ORR finds that Network Rail will be £2m better than budget for 2014-15 (partly due lower than planned Schedule 4 payments – the payments made for planned service disruptions). However, Network Rail is expected to underperform (miss its regulatory targets) by £8m at the year end.
ORR says that ‘good progress’ has been made on some projects (notably the Borders Railways), but some regulatory milestones have been missed (unquantified and unspecified).
In Scotland, the number of renewals is behind target: signalling renewals by 51%; plain line track renewals by 46%; and switches & crossings renewals by 31%.
Responding to ORR’s annual assessment, a Network Rail spokesman said:
“Network Rail has recognised the scale of the challenge and has been openly reporting data regularly. There are clearly opportunities to improve following decades of under investment in the rail network. However, it is worth highlighting that we operate the safest passenger network in Europe and the railway asset reliability is the best it has ever been.”
Network Rail’s annual 2014-15 report (just published) shows that profit after tax fell by over 50%, and net debt increased by 15%. A fuller analysis will appear in the next issue of LTT.