Singapore shakes up subway operator

SINGAPORE: The city state is studying options for subway operator SMRT Corp, including having the company sell its trains to the government, and plans to propose recommendations as soon as the first quarter of next year, according to sources

Possibilities under discussion include SMRT, which has a market value of S$2.4 billion (US$1.7 billion), selling its physical assets to the government so that it can focus on operating subway services.

State investment company Temasek Holdings is also considering whether it needs to keep control of SMRT, though it has no immediate plans to sell its 55% stake.

SMRT has faced public criticism for service disruptions in the past four years even as it expanded its network. Singapore Transport Minister Khaw Boon Wan appointed an engineering specialist in October to advise on rail transformation and said the government was discussing changes in the industry structure to bring about “better alignment of incentives”.

“There is so much news recently about the trains breaking down, so that’s why the government is stepping in,” said Roy Chen, an analyst at CIMB Securities Singapore. “SMRT will be a beneficiary from an asset sale to the government because it can unlock capital and improve capital efficiency.”

Singapore’s Land Transport Authority, which designed the subway system and regulates train and bus operators, and Temasek are both involved in the study.

In July, thousands of commuters were stranded across more than 50 stations on two main train lines, leading the government to fine SMRT S$5.4 million.

The Land Transport Authority said discussions with SMRT on the transition to a new rail financing framework were still ongoing.