HS2

04.03.16

Network Rail scopes out sell-off of electrical power assets

Network Rail has triggered the potential sell-off of its electrical power assets in a consultation to test the industry’s interest in buying thousands of its overhead lines, substations and pylons.

The organisation, which owns around 120 power substations and thousands of cables, could sell its parts of its power network in a bid to plug its £42bn debt. It could result in private firms buying these assets and running them on Network Rail’s behalf, which the organisation’s chief, Mark Carne, said brings “no passenger disadvantage”.

Network Rail’s boss told the Daily Telegraph that the UK has a “highly complex network” boasting a “whole range of different possibilities for the way in which the electrical market could participate”.

He added in a statement this morning: “Our approach is all about financial discipline, with a renewed focus on our core activities while being open and innovative about new sources of finance to fund our growing railway.”

Other assets being put up for sale or long-term concessions include telecoms, surplus land, depots, car parks, advertising signage, stations and freight yards. A further £1.8bn is expected to be raised from 7,500 commercial property sales over the next three years.

“While no decisions have yet been made, if there are investors or others with expertise in key areas who can help us do that, then we should look to embrace those opportunities,” Carne said.

The consultation and market testing exercise was launched following a review by accounting company KPMG started six months ago, and comes just a few days ahead of the long-awaited Shaw Report – which is expected before the chancellor’s Budget on 16 March.

But Carne ensured that nothing will be sold off unless he can “demonstrate firstly that it’s value for public money”, and that power firms can demonstrate to him that “they can operate those assets in a way which is superior and better to the way we operate them”.

The Network Rail boss also said the sounding exercise was designed to “maximise commercial opportunities and inject private capital into the railway to help fund investment”.

He also made the case for streamlining Network Rail’s “overly complicated” operations, allowing it to focus solely on maintaining track, bridges, tunnels and level crossings.

This is largely in line with Network Rail’s separate and ongoing market exercise into selling off its 18 major stations. It recently hired Citigroup bankers to sound for investors that could potentially run parts, or all, of the stations – or even just run it in concessions, similarly to the London St Pancras model.

Lord Ahmad of Wimbledon recently told Lord Bradshaw in a Parliamentary question that nothing is certain yet, but that Network Rail is “exploring new models for station management and ownership with the goal to bring improvements”.

“They have engaged Citigroup as advisors to consider a range of potential options but no decisions have been taken at this early stage. Any decisions on such potential future options will take account of the ‎findings of Nicola Shaw's report into the longer term shape and financing of Network Rail,” he added.

Clashing with the Shaw Report

Carne does not expect that selling the company’s power network will contradict with the imminent Shaw recommendations. He told the Daily Telegraph: “I think we’re all agreed that having smaller organisations that deliver services that are much more closely aligned to what passengers and customers want is a good thing to do.

“So I feel very confident that we’re going to be completely aligned with her [Nicola Shaw’s] findings in that area.”

At a rail event yesterday in the Westminster Forum, the head of the Shaw Team, Emil Levendoğlu, told attendees that despite general perceptions, they should not be looking at the report as a review into re-privatising Network Rail.

He guaranteed that the team is looking at all sides of the debate, with dozens of consultation events taking place across the country and over 10,000 written responses feeding into the final report.

While stakeholders won’t agree with every element of Shaw’s recommendations, Levendoğlu said her mission is to gain broad consensus across the industry.

Asked about the report by the Daily Telegraph, including if major routes such as Greater Anglia and Wessex could be sold off, Carne said he will not “pre-judge what [he thinks] the outcome of it will be”.

“We have a very clear strategy about how we want to improve the performance of the company and provide a better service to passengers and I think it’s right that we crack on and do that,” he added.

“We all acknowledge that the old way of funding the railway has got to change. Attracting more private investment into rail projects is an absolute pre-requisite for the future of the railway.”

The Department for Transport has also come forward saying it is not ruling out any options in the report, arguing it will “not be dogmatic” about Network Rail’s future.

Comments

David   04/03/2016 at 09:44

Wait, what? They're privatising the overhead lines? Long-term financing indeed... (not)

Ian Dinmore   04/03/2016 at 11:23

No surprise here, but was it initiated by the DfT/ORR or NR themselves? Why sell and not lease to provide a regular income which increases with demand? NR own a very substantial and secure communications network as well, how much could be raised from the sub letting of this to Mobile Network Operators?

Manek Dubash   04/03/2016 at 11:29

NR already leases lineside trunks to mobile and fixed line operators for fibre runs etc. As for privatising the OHLE, this seems to me to be bonkers. No passenger disadvantage? We've already seen how the costs shoot up with every business interface that's added to the already over-fragmented rail system. This will be another. What happens when something fails, or weather forces a line down? How long will passengers have to wait while decisions are made as to whose fault it is, and who will pay for repairs? We've seen this happen time after time with other fixed assets -so let's make it even more complicated, and have the taxpayer and passengers pay for another set of shareholders' profits. Mad.

GW   04/03/2016 at 11:39

Madness. The lunatics are running the asylum.

Scottie   04/03/2016 at 12:35

Hmmm ! ,,,,,,,£42bn worth of Debt ! I wonder which Financial advisors analysts were engaged previously then to rack that up and take their substantial slice. So now Citigroup appointed to advise on this sell off ! The Rail Industry in this Country seems to fund an endless list of Consultants and other Leaches. This Gravy Train has definitely not been derailed yet it would appear. Let me think ,,,,,,,,,,,,, the Greed of which sector caused the Financial meltdown in the first place ,,,,,,,,,,,,,,,,,,,,,,,,,, Oh, It was the Bankers if I recall correctly. This really must be a shocking example of Capitalism gone Bonkers !

Buster   04/03/2016 at 12:50

Genius! Let's flog it all off again, but in smaller lumps this time, because the investment managers didn't quite skim enough from the public purse last time. Which merchant bankers (rhyming slang) will make the most this time? They must be queuing up round the block with ill concealed greed. As evidenced time and time again, with every layer of "management" comes additional costs for man-marking, profit, dividend payments etc. Have we so soon forgotten the utter abortion that was PPP on the Underground? There's nobody better to run the rail network than the owner, so why does the head of that organisation seek to bring in other companies with their own agendas? Disingenuous?

The Insider   04/03/2016 at 12:53

Network Rail needs a serious and significant shake up. Management is, for the most part, removed from reality and incapable (some might say incompetent) of improving things. Corporate HR amongst others is bloated and needs a shake up. The phrase coined inside Network Rail is: Its a great place to shirk! (I know. I work here)

Ian Dinmore   05/03/2016 at 15:58

Does anyone know if it was Network Rail or a gov.uk dept. which brought in Citigroup? As for selling off the OHLE - no, that not what is happening - it is the power distribution network that they own. Yes they do lease cable runs but do not lease the capacity of their own fibre optic network - they use less than 18% of it's current capacity and MNO's and Telecom. companies would give eyeteeth for that National Capacity!

Martin Hollands   05/03/2016 at 19:27

The loss of Corporate memory from the end of BR and the move to Railtrack is leading to a terrifying wave of deja vu. This is the sort of muddle headed thinking that happens when Operators give way to Accountants. Carne wants to concentrate on his core activity, well perhaps he ought to go out of his office and see what providing Infrastructure involves. NR is an infrastructure company that wants to divest itself of what? OH YES It's infrastructure.

Tubthumper1907   06/03/2016 at 08:07

Mr Carne & his team have no idea about running a safe modern railway that pays for itself. Money is being wasted hand over fist throughout the industry day in day out, most of it without them knowing but Mr Carne is adding to this waste by trying his best to bring in initiatives that just won't work & are costing millions. The industry needs a big shake up with someone from within who understands how the railway works (or doesn't work in this case) & not a failed oil industry boss who is just trying to do things to make a name for himself.

Nonsuchmike.   06/03/2016 at 15:40

All of the above.

Rail Realist   07/03/2016 at 16:37

Do we learn nothing from the past? The telecoms network was sold off once before - remember BRT - and it was a disaster and it cost NR around £1Bn to replace it. Remember the old Adage - if you don't own it, you don't control it

Jak Jaye   11/03/2016 at 14:55

Come back Dr Beeching all is forgiven!

Melvyn   25/03/2016 at 20:02

Having sold off the family silver they now move on to the copper ..!

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