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Author Topic: New rail franchise deals bring northern train improvement promise (BBC News)  (Read 13115 times)
stuving
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« Reply #15 on: December 09, 2015, 23:24:41 »

Because there seemed little immediate prospect of run-on orders and the concept really only being a UK (United Kingdom) thing, the first batch of trains would have carried much of the development costs so they would be more expensive.  The clever thing would have been for DfT» (Department for Transport - about) to negotiate a reduction in the cost of their order if other UK orders were to follow. Anyone know if they did this?

The East Coast order and its option were quite a bit cheaper than the initial GW (Great Western) one. Hitachi may well have seen the whole programme as high risk at the start, and its timing relative to the financial world's little difficulty in 2007/8 added to that. If there is a cost difference between different SET (Super Express Train (now IET)) users, then the franchise payment mechanism can I guess equalise that.
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ChrisB
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« Reply #16 on: December 10, 2015, 10:07:03 »

Instead of deflecting away from your error by making assumptions about my presumed assumptions, why not just fess up and say, oops I was mistaken about the AT300 order.

They, or a successor franchisee, will be leasing the AT300s.

That assumption above I was referring to. I accept that the ROSCO» (Rolling Stock Owning Company - about) is ordering & investing in these trains. Your assumption is that you have NO idea how FGW (First Great Western)/GWR (Great Western Railway) arranged the lease/payment for these. They may have secured them for longer than their franchise. A wise commercial move possibly.

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JayMac
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« Reply #17 on: December 10, 2015, 10:26:11 »

They may have secured them for longer than their franchise. A wise commercial move possibly.

So, if we go with this latest assumption, that First Group have secured a lease for these AT300s beyond 2019, what exactly do they do with them should they not retain the Greater Western franchise? How is it a 'wise commercial move' to possibly be paying lease fees for rolling stock they can't use. Are you suggesting that beyond 2019 a Greater Western franchisee (if it's not First Group) will have to pay First Group who in turn pay Eversholt?

And don't suggest they could take them to TransPennine Express or another future franchise. Until yesterday it wasn't known if First Group would be running TPE (Trans Pennine Express). Your 'wise commercial move' seems more like commercial folly to me.

The AT300s have been ordered for London to the west services. That is, I confidently predict, where they will be beyond 2019, regardless of who the franchisee is. And that franchisee will be paying lease fees to Eversholt only. First Group will have no hold over them.

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ChrisB
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« Reply #18 on: December 10, 2015, 10:28:26 »

That's better. Yes, that is of course a possibility too. But you don't *know*.
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eightf48544
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« Reply #19 on: December 10, 2015, 10:32:00 »

Another rumour I've just picked up suggests Arriva may look to Stadler GTWs for 14X replacements.

There is a thread where I suggested this previously but i can't find it.

Although whether articulated units with a through gangwayed power car in the middle would be too radical for the DfT» (Department for Transport - about)/ORR» (Office of Rail and Road formerly Office of Rail Regulation - about) is open to question.
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chuffed
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« Reply #20 on: December 10, 2015, 10:46:20 »

Can i just gently say to ChrisB and BNM that I am sure we would all appreciate a little less heat and a little more light in your robust exchange of views ?
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John R
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« Reply #21 on: December 10, 2015, 12:05:02 »

That's better. Yes, that is of course a possibility too. But you don't *know*.

Doesn't the DfT» (Department for Transport - about) normally stipulate that such contracts are to be novated to the new holder of the franchise. I would suggest it is highly implausible that they would be heavily involved in the procurement of the AT300s (as they have had to be to give the long term guarantee to Eversholt that there will be a use for them), and then give First an option or right to hold the government to ransom over their future.

If that were the case, then come the next franchise renewal, if First lost then they could take their toys away and leave a franchise without any trains for the SW. Or more likely sublease at a huge profit to the incoming franchisee which would make any competing bids unviable.

I'm aware that First did buy some HST (High Speed Train)'s a few years ago, but this was rolling stock that was lying idle at the time without a use, so the government couldn't exert the same hold over them. In hindsight this was probably one of the most commercially astute things they did, as I suspect it has been a major factor in First holding on to the franchise, whilst the "owned" HST's are required to provide the level of service now needed.

 
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ChrisB
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« Reply #22 on: December 10, 2015, 12:11:50 »

They certainly would on the 800/801s, but the AT300s (802s) were offered as an option by GWR (Great Western Railway) & could easily be differently contracted IMHO (in my humble opinion).
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JayMac
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« Reply #23 on: December 10, 2015, 12:20:47 »

The legal teams that advised on the AT300s contract say they will initially be leased by First Greater Western Ltd. That word initially does rather suggest there could be a different lessee in the future. IMHO (in my humble opinion) that initially refers to the period from introduction until the end of the current franchise in April 2019.
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4064ReadingAbbey
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« Reply #24 on: December 10, 2015, 14:46:19 »

It's also been reported that the cost of leasing an AT300 is substantially less than the equivalent government procured order which says a lot about the DfT» (Department for Transport - about).

Because there seemed little immediate prospect of run-on orders and the concept really only being a UK (United Kingdom) thing, the first batch of trains would have carried much of the development costs so they would be more expensive.  The clever thing would have been for DfT to negotiate a reduction in the cost of their order if other UK orders were to follow. Anyone know if they did this?

That is a partial explanation for the high Train Service Provision payments. Don't forget that the DfT has purchased a number of nominal 'diagrams' for delivery by Agility Trains, not trains. Agility Trains has converted this to the number of train sets it thinks it will need and purchased these from Hitachi. This contract is not at all like normal leasing contracts - the only similar one is for the Thameslink stock which has also raised questions about the DfT's competence.

The Intercity Express Programme covers more than the supply of trains - it includes raising, and paying for, the finance for the design, development, testing, manufacture, shipping and assembly and for the supply, kitting out and operation of the maintenance depots. By the time the trains enter service the first payment will be made some 8 years after Hitachi was selected as the preferred bidder. Just think how big the interest payments alone will be on 8 years of borrowed money...

So even if the development costs were to be spread over a bigger number of train sets the reduction in the Train Service Provision payments will not be significant as the development expenses will be masked by all the other costs. In my experience the cost of development of a product is small compared with the costs of setting up the production line, training the manufacturing staff, buying the components and systems, ramping up production, shipping, marketing, cost of returns and so on and so forth.

But it would be interesting to see if the DfT can get a reduction in the Train Service Provision payments...or even if it would tell us about it!
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John R
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« Reply #25 on: December 10, 2015, 17:23:58 »

They certainly would on the 800/801s, but the AT300s (802s) were offered as an option by GWR (Great Western Railway) & could easily be differently contracted IMHO (in my humble opinion).
But as explained, it would not make any sense for the government or Eversholt to agree any other terms. Given the short nature of the franchise, GWR is effectively acting as the procurement vehicle, in the same way that Southern was used as a procurement vehicle for some recent emu orders.

Also, First could not commit to a financial contract of that magnitude for which there is no guarantee of use after 3 years. It's directors have a fiduciary duty to shareholders that would not allow them to sign off such a deal.   
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ChrisB
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« Reply #26 on: December 10, 2015, 17:50:25 »

So explain why (you think) the DfT» (Department for Transport - about) didn't arrange the supply of the AT300s the same way as they did the 800/801s? Any why?....

Also...Southern aren't keeping (many of) tjose emus, are they? Bad example?
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John R
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« Reply #27 on: December 10, 2015, 18:25:07 »

Possibly because even DfT» (Department for Transport - about) recognise that the method of procurement is completely discredited (as everyone has known for years.)

And I used Southern precisely because very few of those units ever ended up with the franchise. They were used as a procurement vehicle because of the impending changes in franchise ownership.  The last AT300s are delivered a few months before the Greater Western franchise is due to expire in April 2019. So with HST (High Speed Train)'s either needing significant work to keep them in use beyond the 2020 deadline, a deal had to be struck either a) to kick off the re-engineering or b) procure new stock. But no operator could commit to a long term lease, so there will be a guarantee somewhere that both enables and indeed requires them to hand them on to any successor franchisee. Similarly, the franchise competition in 2018 will require that the units are used.

We're clearly not going to agree on this, so why don't we just move on and let readers draw their own conclusion. But happy for you to have the last comment if you wish.

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ellendune
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« Reply #28 on: December 10, 2015, 21:21:28 »

The legal teams that advised on the AT300s contract say they will initially be leased by First Greater Western Ltd. That word initially does rather suggest there could be a different lessee in the future. IMHO (in my humble opinion) that initially refers to the period from introduction until the end of the current franchise in April 2019.
But the norm would be that they were then leased by whoever takes on the GW (Great Western) franchise after that if they are deemed a franchise asset. N leasing company would order for such a short period without such assurances. Of course First Group might be that new franchisee. 
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JayMac
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« Reply #29 on: December 10, 2015, 21:40:22 »

Which is what I said earlier. My highlighting of the word initially was to show that the legal teams recognise there may well be a different operator beyond April 2019.

I do suspect though that First Group will get another extension as recompense for Network Rail's failings. I just hope not.

This thread did drift after post #5 was made and I share the blame for that. Perhaps we can get back to discussing the goodies that the long suffering passengers in the north are to get with their new franchises.

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