17.01.18
Nottingham tram operator records losses of £48m following network expansion
The operator of Nottingham’s tram network has recorded huge losses that grew from £15m to £48.5m in the year to 31 March 2017.
In accounts released today by Tramlink Nottingham, it was found that the company recorded the loss despite turnover increasing from £44.5m to £60.6m over the same period.
Tramlink is a private finance initiative (PFI), meaning it is run by private companies, with the investment paid back over a certain period of time.
The number of passengers using the network has also ballooned from 11.5 million people to around 15.34 million between 2016 and 2017.
In a statement, Tramlink said that it was “delighted” with the positive response from the travelling public who had been instrumental in the rise in passenger numbers.
It also explained that the rise in turnover was the result of a full year of operations being achieved since the extended tram network opened in August 2015.
“The nature of PFI concessions is well-known and it is recognised that during the early years of any concession the project carries a high level of commercial debt reflecting the front-end cost of construction of the new infrastructure,” a spokesman explained.
“During the most recent financial period the company reduced its net debt by £4.8m and is forecast to continue to meet all of its contractual requirements including debt service over the remaining duration of the concession through to 2034.”
The accounts also show that despite gross profit increasing from £7.2m to £13.3m between 2016 and 2017, an “exceptional impairment charge” led to the company taking a £28.2m hit.
The £48.5m loss is made up of operating losses totalling £17.26m and £31.36m worth of interest payments.
Tramlink won the 22-year contract to run the service from Nottingham City Council in 2011, taking on a commitment to build new extensions to the city’s tram network.
The company is made up of partners including Vinci, Alstom and Keolis.
A spokesman for Nottingham City Council also stated it was “very pleased” with Tramlink’s performance, as passenger numbers had grown whilst turnover had also increased since the system expansion.
“We have robust arrangements in place which mean that over the course of contract, liabilities rest with Tramlink and they receive payments from us for running services to a set of performance-related targets," they added.
"Tramlink have been clear about their financial plans and we are confident in their ability to continue to deliver a successful tram service for the city.”