Alternative route
Taylor Woodrow asks if private finance is the right model to fund UK high-speed rail.
Rail infrastructure in the UK will require a significant amount of investment in order to meet rising demand and to keep busy lines running.
Much of that investment is currently publicly funded, including the £47 billion that Network Rail is expected to receive for operations and maintenance in Control Period 6 (Apr 2019Mar 2024), and the estimated £ 55.7bn cost of building Phases 1 and 2 of High Speed 2 by 2033.
But in order to reduce this heavy reliance on financial support from government, there is a growing trend in the UK and elsewhere to seek private investment in infrastructure where steady and long-term returns are available.
This policy shift was confirmed by the UK Government in March when it issued its formal call for Market-led Proposals (MLPs) to be submitted by the private sector for proposed railway enhancements on the conventional rail network, such as the Heathrow Southern Link, that are financially credible without direct taxpayer funding.
The UK could also choose to follow in the footsteps of France in terms of funding highspeed rail, where private finance has been used extensively to deliver Europe’s largest ever high-speed rail project between Tours and Bordeaux.
The Tours-Bordeaux South Europe Atlantic (SEA) high-speed line opened in July 2017 and comprises 212 miles of new track, including new connecting branches.
With running speeds of up to 200mph, journey times between Bordeaux and Paris have been reduced from three hours and 15 minutes to just over two hours, with 24 million passengers expected to be carried on the route by 2025.
The line was built by the LISEA consortium and was funded by the largest public-private partnership (PPP) contract ever undertaken in France’s rail sector.
Of the 7.8bn Euro total cost of construction, LISEA contributed 3.8bn Euros, the French Government and the European Union 3bn Euros, and national operator SNCF 1bn Euros.
LISEA has also been awarded a 50-year
concession to operate and maintain SEA, which commenced in June 2011, making it the first private company in France to ever manage high-speed infrastructure.
Its mission is to effectively, professionally and safely manage the line for train operating companies which in turn pay a toll to LISEA. LISEA is also run for the benefit of the territories served by SEA high-speed line, while ensuring the line’s performance until 2061.
Hervé Le Caignec, chief executive officer of LISEA, explains: “The specifications of LISEA’s concession agreement have enabled the State to limit its financial contribution while having the assurance of the construction, operation and maintenance of a high-quality public infrastructure.
“One year after its launch, the results prove that the SEA high-speed line is playing a leading role in regional and national economic development by increasing the territories’ attractiveness and creating new mobility patterns.”
VINCI is a leading player in concessions and construction, operating in some 100 countries. VINCI Concessions owns a 33% shareholding in LISEA, alongside CDC (25%), Meridiam (22%) and Ardian (20%).
Henry Snow, chief financial officer of VINCI Concessions’ UK subsidiary, says the success of the LISEA consortium could make an interesting case study for financing high-speed projects in the UK, using a similar formula.
He adds: “VINCI Concessions is one of the largest concession companies in the world and is proud of its success in integrating the delivery of the Tours-Bordeaux HSL in partnership with VINCI’s construction arm.
“VINCI continues to follow developments in infrastructure markets throughout the world, actively considering prospects for new investments. We are excited by the prospects for the rail industry in the UK and look forward to seeing new projects come to market.”
This view is also shared by Jez Haskins, business strategy director for Taylor Woodrow, which is the civil engineering division of VINCI Construction UK, and a part of the VINCI half of the Balfour Beatty VINCI Joint Venture that has been awarded two key construction contracts for HS2.
But with no precedent so far set in the UK for this type of funding package, he feels it is time for the Government to begin considering its options.
He says: “These are exciting times for UK rail and Taylor Woodrow. There is a palpable buzz in the air in our office in Birmingham, where the team feels it is part of something very special.
”We hear that there is no shortage of ready and willing institutions prepared to finance viable infrastructure schemes in the UK.
“This, coupled with the Government via the DfT’s ‘Market-Led Proposals’ and NR’s ‘Open for Business’ proposals which are actively encouraging third party promoted projects, means that one day, a high-speed privately funded rail scheme may just become a reality.”
The results prove that the SEA is playing a leading role in regional and national economic development. Hervé Le Caignec, Chief Executive Officer, LISEA