Questions that the southWales
It is one of biggest infrastructure projects ever planned in Wales, but what is currently happening to the south Wales Metro project? Business editor Sion Bary explores
Firstly, what is the Metro? Well, it is the Welsh Government’s programme for an integrated public transport network across south east Wales.
And its planned next stage is electrification of the Valley Lines.
The Welsh Government’s arm’s length body, Transport for Wales, is overseeing the procurement for the design and building of electrification of the Valley Lines along with the next Wales and Borders rail franchise from October 2018.
And over the long term, with rail operating subsidies and further phases of the network, Metro could be worth £5bn. Who are the bidders? KeolisAmey is a joint venture between French transport giant Keolis and public service provider Amey.
Arriva Rail Wales is a bid from Arriva Trains Wales which is the current holder of the Wales and Borders franchise which runs until October 2018. It is owned by Deutsche Bahn.
Hong Kong-based MTR Corporation is one of the world’s leading transport companies with interests globally from Australia to Sweden.
Abellio Group operates bus and rail networks across Europe and is the international arm of the Dutch national rail operator.
Is a one in four chance a risk worth taking? Transport for Wales is to be congratulated for attracting the interest of four of the biggest names globally in transport.
They are currently in detailed dialogue with the bidders, ahead of them (the bidders) submitting final tenders.
Each bid is likely to run into millions of pounds.
So, for all the energy and determination of the respective bid teams, that is going to need financial sign off further up the chain of command.
And that opens up the scenario of say a group finance director sitting in a head office overseas asking: “Can we really commit resource and a significant amount of money when we are up against three other credible bidders?
“So, might we be better committing instead to other projects where the chances of success are higher?”
But will Transport for Wales shorten the odds? As you would expect they are not commenting on the procurement process, but there currently isn’t anything to suggest that they will rule any of the bidders out before inviting final tenders.
And while those tenders are scheduled to be submitted by July, don’t be surprised if that slips by a few months.
And we will not know the winning bidder until early 2018.
The cost and timetable Electrification of the Valley Lines, for which £734m has already been ring-fenced, is not expected to be completed until 2022-23 - if the winning bidder puts forwards a heavy rolling stock solution.
But in theory if a tram solution is approved it could see services commencing on some of the network from as early as 2021.
The funding for the project includes £125m from the UK Government, around £120m from the European Regional Development Fund (although not yet signed off) and the rest from the Welsh Government’s capital budget.
The Welsh Government is also seeking for the project to have a reduction or full exemption from VAT. It is in discussions with the UK Government on the issue.
Although there is a VAT provision in the Barnett Formula, it is not clear if it is flexible enough to account for big spikes in VAT incurred from large capital projects.
A spokesman for the UK Treasury said: “The Welsh Government’s block grant funding takes VAT payments into account.”
There is also a healthy contingency in the budget.
And while initial work has been carried out, a final cost of the project - and it could go up - will not be known until a full assessment is made on the costs of putting up the wires and required associated infrastructure work, such as increasing the height of bridges etc.
The vision In its publication, entitled Rolling out our Metro, the Welsh Government said: “Metro is a new transport system that will transform the way we travel around the Cardiff Capital Region.
“It will provide faster, more frequent, and joined-up services.
“Metro will bring benefits to passengers, link communities together and help transform the economy. It will have a positive social, economic and environmental, effect. It will also shape our region’s identity.”
And that means at least four services an hour from periphery stations like Treherbert, Aberdare and Merthyr.
But Metro in itself cannot transform the fortunes of some of the most deprived communities in western Europe.
Education and investment in the skills needed by employers is also vital, as part of an overarching economic strategy for the Cardiff Capital Region.
But, like many major government procurement processes, there is danger that the original vision could be lost in a complex point-scoring exercise.
So, the Welsh Government needs to ensure that Transport for Wales has that original vision at the heart of its assessments of the bids, even if the frequency of four services an hour into Cardiff from the periphery of the network is phased in overtime as passenger numbers grow.
Mode of transport Bidders have not publicly declared their hands, but they are understood to range from trams to heavy trail.
And could one of the bidders be backing the use of battery-powered heavy rolling stock?
But if so, would Transport for Wales have the appetite to commit the Metro to a mode of transport that has never been implemented on such a large scale?
And while it might be cheaper