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Thursday 10 August, 2000

Shadow StrategicRail

Stmnt re New Chiltern Agrmnt

Shadow Strategic Rail Authority
10 August 2000

Building a Better Railway: 
New Chiltern Agreement Brings £370 Million Investment 

The Shadow Strategic Rail Authority (sSRA) has signed heads of terms with M40
Trains Ltd as the preferred operator for a new Chiltern Railways franchise,
under which a capital investment programme involving Railtrack plc and M40
Trains, a subsidiary of John Laing plc, is planned to bring up to £370million
worth of investment and major benefits to passengers. 
M40 Trains owns Chiltern Railways Co Ltd, which currently operates passenger
train services throughout the M40 corridor between Birmingham and London, and
Aylesbury and London. The current seven year franchise would expire in July
2003: the new franchise will be for 20 years, with provision for shortening
the term if certain projects are not implemented. Proposals were invited in
December 1999 for this franchise, and three parties submitted proposals - M40
Trains, The Go-Ahead Group plc and Arriva plc. In March 2000, it was
announced that Go-Ahead and M40 Trains had been shortlisted for negotiations
on the replacement franchise. 
The sSRA has now signed heads of terms with M40 Trains, opening the way to
definitive, contractual negotiations. In the absence of final agreement on
those contracts, the existing franchise would continue. 

Early Benefits 
The heads of terms envisage a set of agreements later this year which will
provide users of the Chiltern network with the following benefits to be
achieved within the first four years: 
* Additional capacity by investing in two additional platforms at Marylebone
by October 2003, and in extra tracks (using existing railway land) between
South and West Ruislip, at Beaconsfield and between Bicester and Aynho
Junction by October 2002. 
* 50% more train miles overall on the Chiltern network, including doubling
the frequency of service between London Marylebone and Birmingham Snow Hill
from the current hourly level to half-hourly from October 2002.  
* Off-peak frequency between Marylebone and High Wycombe will increase from
four to six trains per hour.  
* London to Birmingham trains will be extended to Stourbridge (by 2001) and
Kidderminster (by 2002). 
* Journey time reductions of 12 minutes between London and Birmingham by
* Reopening the terminus at Moor Street, Birmingham to provide extra
* More capacity through additional signalling between Banbury and Leamington
Spa, a route of growing future importance for freight as well as passengers. 
* Improvements in operational performance - M40 Trains to commit to meeting
the sSRA's objective of 15 out of 16 trains running on time from April 2004,
underpinned with a doubling of the incentive payment and penalty regime. 
* Passengers' Charter - The 'trigger' at which season ticket holders are
compensated for poor reliability is to be raised to 99% at the start of the
new franchise (98% at present). The trigger at which passengers are
compensated for poor punctuality is to be 92% from April 2004 (compared to
90% at present). 
* By 2004, all Chiltern trains to be new or completely refurbished. New
rolling stock will be leased to meet growth in demand. 
* Station improvements - M40 Trains is to invest £27million in station
improvements and transport integration including additional car parking, and
security during the first five years of the franchise. Accessibility for
disabled passengers is to be improved significantly, with level access being
provided at all stations managed by Chiltern. M40 Trains is to invest up to
an additional £28million in station improvements over the remainder of the
franchise, depending on the final term of the franchise. 

The investment plans for the first five years are estimated to cost
£343million, of which £150million is to be invested by or in association with
Railtrack; £153million is to be for the purchase of new rolling stock to be
leased to M40 Trains; and £40million is to be funded by other investors
including the John Laing Group. 
Long Term Benefits

M40 Trains has undertaken to present plans to the SRA for infrastructure
improvements between Marylebone and Aylesbury via Amersham for review no
later than December 2003. Negotiations will be required with London
Underground to secure the upgrading of this route, involving considerable
investment of over £80 million including additional rolling stock. 
The franchise may be as long as 20 years depending on the outcome of a review
by the SRA in 2005, of the progress made by M40 Trains, on a list of further
enhancements to the franchise network. On the list are: 
* An interchange station at West Hampstead.  
* New services over the route between Aylesbury/Oxford and Bletchley/Milton
Keynes (closed in the 1960s).  
* A new route serving an M40 Parkway station and Oxford. 
* Examination of an extension north of Aylesbury, to a new Parkway station
for the M1 and M6. 
* Extra tracks between Tyseley and Dorridge on the approach to Birmingham via

The proposal includes funding for train protection systems, the details of
which are to be determined following recommendations from the Cullen inquiry. 
Chief Executive of the sSRA and Franchising Director, Mike Grant, said: 
'I am delighted to be able to announce a deal containing significant
passenger benefits for what is the first franchise to be announced in our
replacement programme. The decision to select M40 Trains as the preferred
operator followed a tough competitive process involving two strong sets of
proposals, but we are confident we have made the right decision. In
particular, we were pleased with the willingness of M40 Trains to bear a
greater burden of risk as far as the planned investment is concerned. Our
evaluation also included its record as an existing franchisee and its
commitment to further improvement. We consulted regularly with Centro (the
West Midlands PTE), concerning services into and from that area. 
'There has been significant passenger growth of around 15% per annum on
Chiltern since the start of the current franchise in 1996. By selecting a
preferred operator now we can proceed to put the mechanisms in place for the
increases in capacity required on the route over the next 10-20 years. We
have taken into account the willingness of M40 Trains to invest and the
length of franchise will enable the franchisee to earn an appropriate
Chairman of the sSRA, Sir Alastair Morton, said, 
'We have fulfilled our commitment to agree heads of terms on the first
replacement franchise by Summer 2000. The replacement programme is on target
for completion next year, three years before the 18 short-term franchises
would have expired. The way opens for substantial investment in this growth
segment of Britain's railways.' 
Note to Editors

Final subsidies/premia have not been set at this stage. Details will be
announced at the time of awarding the 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 6387/6339/6234/6294


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