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Wednesday 19 April, 2000

Shadow StrategicRail

2nd FranchiseReplacemt.Round

Shadow Strategic Rail Authority
19 April 2000

Building a Better Railway:
New Entrants Qualify for Second Franchise Replacement Round

The SSRA has qualified eleven companies to participate in replacement
discussions for the South West Trains, Central Trains, and the proposed Trans 
Pennine Express, passenger rail franchises. In each case the incumbent
operator is included. Three parties Nederlandse Spoorwegen (Dutch national
railways), Serco and Group 4 are new to UK heavy rail franchising.

The companies listed below applied to the SSRA in response to the latters
invitation on 8 March.  They are now to put together proposals for replacement
of the franchises for which they have pre qualified.

The companies selected to go forward are:

South West Trains:      Stagecoach (incumbent)
                        Connex Rail (franchisee of South Eastern and
                        South Central)
                        First Group (franchisee of Great Eastern,
                        North Western, Great Western)
                        GNER Holdings Limited (subsidiary of Sea              
                        Containers and franchisee of GNER) 
                        Nederlandse Spoorwegen
                        Group 4

Central Trains:         National Express (incumbent)
                        Group 4

In the case of the Central franchise any detailed proposals from Group 4 will
have to be competitive with those from National Express Group (NEG), the
incumbent.  If not the Franchising Director has various options, including
continuing the incumbents existing franchise for the remaining 3 years 11
months or, if better value can be demonstrated negotiating a longer term
franchise with NEG.

Trans Pennine Express       Arriva (owner of Northern Spirit, which operates  
                            services likely to be included in this franchise)
                            Connex Rail
                            First Group 
                            GNER Holdings Limited 
                            National Express
                            Virgin Rail
                            Via GTI
                            Group 4

The selected companies are given 60 days in which to prepare detailed
proposals for consideration by the SSRA,  whereupon a shortlist of
counterparties will be invited to proceed further in the replacement process. 
It is expected that replacement franchises will be offered later this year. 

Announcing this latest stage in franchise replacement Mike Grant, Franchising
Director and Chief Executive of the SSRA said:

I am greatly encouraged by the number and quality of the companies seeking to
participate in this, the second round of franchise replacement negotiations -
some of whom are new to rail franchising.  The fact that we are inviting
modifications to the franchise map should generate a number of innovative
proposals, the financial and practical viability of which we will explore in
detail with the parties. 

We are now looking for proposals which best meet our expectations for
improvements for passengers through ambitious service quality and investment

For the Central franchise if Group 4 does not come up to scratch, the National
Express Group will have the task of persuading us that its proposed
development of the franchise merits the longer term.  We will set them a tough

Notes to Editors

1.The Franchising Director can exercise his rights to allow the existing
franchises to run their course and re-tender in 2004 instead should acceptable
replacement terms not to be agreed.

2.On 8 March, the SSRA announced details of the franchise propositions on
which the second round of franchise replacement negotiations would be based:
Replacement of the existing South West Trains franchise, with the option to
include or exclude services between Waterloo and Salisbury / Exeter.

Replacement of the Central Trains franchise, with an option to include or
exclude services which extend north west and west of Shrewsbury, including
those that extend into Birmingham. Proposals should also provide, within the
franchise, for the creation of a separate business unit focused on serving the
West Midlands travel-to-work area.

Creation of a new Trans-Pennine Express franchise comprising the inter-urban,
fast services currently operated by Northern Spirit Limited.

3. A fourth area, Wales and the borders, is under discussion but requires
further study before the nature of the proposed  franchise is announced.

4. The objective of the current programme of negotiations is to replace most
of the shorter franchises (expiring by 2004) within two years.

5. A third batch of franchise negotiations is expected to follow in the
summer, drawing further on the responses received to the Franchising Directors
earlier invitation for strategic proposals from the industry.

6. The shortlist for the first group of replacement franchises  GNER,
Chiltern, Connex South Central was confirmed by the Franchising Director on 14

7. Parties that are not currently operating rail franchises  Dutch Railways,
Serco, Group 4, would be required to acquire the necessary operating and
safety licences before they could operate a new franchise. 

 Important Notice

This news release is issued by the Franchising Director and its contents have
been approved for the purposes of section 57 of the Financial Services Act
1986 by KPMG Corporate Finance.

KPMG Corporate Finance is a division of KPMG which is authorised to carry on
investment business by the Institute of Chartered Accountants in England and
Wales. This news release has been prepared for general information purposes
only and is not intended to form the basis of any investment decision or
constitute an offer or invitation to bid for any passenger rail franchise or
to acquire shares in a train operating company. Neither this news release nor
any copy of it should be taken into or distributed in Canada, France, Japan or
the United States except in accordance with an applicable exemption. The
distribution of this news release in other jurisdictions may be restricted by
law and therefore persons into whose possession this news release comes should
inform themselves about and observe any such restrictions.

KPMG Corporate Finance is acting for the Franchising Director and will not
regard any other person as its client in relation to passenger railway
franchising or be responsible to anyone other than the Franchising Director
for providing the protections afforded to clients of KPMG Corporate Finance
nor for advising any other person on the contents of this news release or any
matter referred to in it. 

Media Enquiries:  SSRA Press Office  020 7654 6339/6294/ 6387/ 6234

Further information and announcements by the SSRA are contained on our


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