Business
New National Rail Contracts for SWR and TPE
New National Rail Contracts for SWR and TPE.
About this update from Firstgroup Plc
[{"type":"text","content":"\n \n FIRSTGROUP SIGNS NEW NATIONAL RAIL CONTRACTS\nFOR SOUTH WESTERN RAILWAY AND TRANSPENNINE EXPRESS\n FirstGroup plc (‘FirstGroup’ or ‘The Group’) is pleased to announce the agreement of National Rail Contracts (‘NRCs’) with the Department for Transport (‘DfT’) for its South Western Railway (‘SWR’) and TransPennine Express (‘TPE’) train operating companies. The new NRCs will commence on 30 May 2021, when the current Emergency Recovery Measures Agreements (‘ERMAs’) come to an end.\n \n New NRCs for SWR and TPE have a two-year term to May 2023 with options to extend by up to two further years to May 2025\n FirstGroup bears no revenue risk and very limited cost risk under an annual budget agreed with DfT; there is also no significant contingent capital risk\n Annual fees on NRCs consist of a fixed management fee plus performance fee based mainly on the delivery of customer-focused performance metrics\n \n National Rail Contracts are a new contract structure for agreements between train operating companies and the DfT and the contracts for both SWR and TPE are among the first wave of NRCs to be announced. NRCs replace the previous revenue risk-based franchising system. The NRCs have a primary two-year term to the end of May 2023 for both SWR and TPE, and both have an option to be extended by up to two further years at the DfT’s discretion.\n Under the NRCs the DfT will retain all revenue risk and substantially all cost risk. For the Group’s 70% share of the First MTR joint venture for SWR the fixed management fee is £3.3m per annum and there is the opportunity to earn an additional fee of up to £9.9m which is the maximum attainable performance fee. For TPE the fixed management fee is £2.3m per annum and there is the opportunity to earn an additional fee of up to £5.2m which is the maximum attainable performance fee. The punctuality and other operational targets required to achieve the maximum level of performance fee are designed to incentivise the highest level of performance for customers.\n The NRCs achieve a more appropriate balance of risk and reward between FirstGroup and the Government. They carry no significant contingent capital risk, with the Group’s contingent capital for both the SWR and TPE NRCs totalling £15m, 50% of which is bonded. There are limited scenarios in which this contingent capital can be called up...