Statement re East Midlands and West Coast compe...

Statement re: East Midlands and West Coast Partnership rail franchise competitions

FirstGroup plc (‘FirstGroup’) and Trenitalia UK Limited (‘Trenitalia UK’) are pleased to announce that they will bid together for the East Midlands and West Coast Partnership rail franchise competitions due to be awarded in 2018. Trenitalia is the passenger rail transportation company part of FS Italiane Group.

First Trenitalia East Midlands Rail Limited, the joint venture between FirstGroup and Trenitalia UK, has today submitted an expression of interest to the Department for Transport in respect of the East Midlands rail franchise competition.

Commenting, Steve Montgomery, First Rail Managing Director said:

"We are pleased to announce that we will be partnering with Trenitalia to bid for the upcoming East Midlands and West Coast Partnership rail franchises. We have a strong track record in delivering continued modernisation and investment, alongside industry partners, through our rail operating companies Great Western Railway, TransPennine Express and Rail Operator of the Year, Hull Trains.

“Both ourselves and Trenitalia have extensive expertise of running commuter, regional and long distance services such as those that make up the East Midlands franchise. Their knowledge will add further depth and understanding as we develop our proposals to deliver passenger benefits that take full advantage of the significant investment that government and the industry are making in the region’s rail infrastructure. Our proposals will keep people moving and communities prospering.

“Similarly, Trenitalia have transformed the customer experience on Italy’s railways through their high speed Frecciarossa routes. They will be a world class bidding partner as we develop proposals to deliver excellent services for West Coast passengers and work closely with HS2 Ltd to deliver the best solutions for the new HS2 service whilst reducing crowding on the existing network and generate economic growth up and down the country.”

Commenting, Barbara Morgante, CEO of Trenitalia, said:

“We are delighted to announce our partnership with FirstGroup, with whom we will participate in the recently announced East Midlands and West Coast Partnership bids. We believe that the experience, competence, innovation and skills of our two companies, developed in international markets, represents a perfect mix to vie for these challenging bids. Trenitalia is ready to bring all its competencies to the partnership, both from a technical and commercial side, developed in the highly competitive Italian market. Our proposal will be driven by our highly customer focused vision. Our recent agreement-in-principle for the acquisition of c2c also serves to transform us from a potential new comer into a convincing, and effective, player in the UK market, and will strengthen the Trenitalia-FirstGroup partnership.

“This partnership is a second milestone in our plan to expand in the UK rail passenger market, in line with the internationalisation plans of the entire FS Italiane Group.”

Notes

1.   The next East Midlands franchise will start in July 2018 and will encompass major infrastructure enhancements and improvements in the franchise area.

2.   The West Coast Partnership franchise was announced on 4 November 2016, combining the current InterCity West Coast services with the development and introduction of High Speed 2 services. The new franchise will be responsible for services on both the West Coast Main Line from 2019 and designing and running the initial high speed services from 2026. The franchise will run for the first three to five years of operation of HS2.

3.   First Rail Holdings Limited (‘FRH’) and Trenitalia UK have entered into a joint venture agreement governing First Trenitalia East Midlands Rail Limited, which amongst other terms provides that, in the event of a default by either shareholder, the other shareholder will have the right to acquire the defaulting shareholder's shares for fair value, such amount not being subject to any cap. As a consequence and by application of Chapter 10 of the Listing Rules (in particular paragraph 5R (3A) of Annex 1 to Chapter 10), the Group is required to comply with Listing Rule 10.4.1. In compliance with that obligation, the Group provides the following information: under the joint venture terms FRH holds 70% of the equity in First Trenitalia East Midlands Rail Limited and Trenitalia UK holds the remaining 30%, with Trenitalia UK acquiring its shares from FRH for an aggregate consideration of £30, which has been satisfied from Trenitalia UK's existing financial resources. First Trenitalia East Midlands Rail Limited has no trading history and has gross assets of £100.

4.   FRH and Trenitalia UK have also entered into a joint venture agreement governing First Trenitalia West Coast Rail Limited to participate in the West Coast Partnership franchise competition, which amongst other terms provides that, in the event of a default by either shareholder, the other shareholder will have the right to acquire the defaulting shareholder's shares for fair value, such amount not being subject to any cap. As a consequence and by application of Chapter 10 of the Listing Rules (in particular paragraph 5R (3A) of Annex 1 to Chapter 10), the Group is required to comply with Listing Rule 10.4.1. In compliance with that obligation, the Group provides the following information: under the joint venture terms FRH holds 70% of the equity in First Trenitalia West Coast Rail Limited and Trenitalia UK holds the remaining 30%, with Trenitalia UK acquiring its shares from FRH for an aggregate consideration of £30, which has been satisfied from Trenitalia UK's existing financial resources. First Trenitalia West Coast Rail Limited has no trading history and has gross assets of £100.

5.   Both FirstGroup and Trenitalia hold 'Pre-Qualification Questionnaire Passports' with DfT Rail Executive which shows that they have satisfied basic financial and other competence criteria and allows them to submit franchise bids to Government. In December 2015, Trenitalia became the first new entrant to be awarded a PQQ Passport by the Department for Transport and since then is pursuing a number of franchise opportunities.

6.   In January 2017 Trenitalia reached an in principle agreement to acquire the c2c franchise.

Trenitalia is the passenger rail transportation company part of FS Italiane Group, a major industrial player with an increasing international presence, and growing profit (the net income rose +53.1% in 2015 over 2014). FS Group runs 8,000 trains a day, serving 600 million passengers and carrying 50 million tons of freight a year, over a network exceeding 16,700 kilometers. The group’s objective is to develop a large-scale mobility and logistics project capable of contributing to the country’s economic growth. The holding company, FS Italiane, controls companies active in specific core businesses – all of which, in terms of safety levels and technological standards, are European leaders. Trenitalia, the group’s rail transportation company, is one of Europe’s top railway operators, and manages passenger transport with its long haul connections, both on high speed (Frecciarossa) and conventional lines, as well as regional and metropolitan services. On January 11th 2017 Trenitalia has reached a principle agreement with National Express to acquire the c2c franchise. Other companies belonging to the FS Italiane Group include RFI, Busitalia, Italferr, Mercitalia, Ferservizi, Italcertifer, Centostazioni, GS Rail, FS Sistemi Urbani, Netinera Deutschland, TX Logistik and Thello.

FirstGroup plc (LSE: FGP.L) is the leading transport operator in the UK and North America. With £5.2 billion in revenues and 110,000 employees, we transported around 2.2 billion passengers last year. Each of our five divisions is a leader in its field: In North America, First Student is the largest provider of student transportation with a fleet of around 47,000 yellow school buses, First Transit is one of the largest providers of outsourced transit management and contracting services, while Greyhound is the only nationwide operator of scheduled intercity coach services. In the UK, FirstGroup is one of Britain's largest bus operators running a fleet of some 6,200 buses, and we are one of the country's most experienced passenger rail operators, carrying around 140 million passengers last year.

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