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Financing Trains for Thameslink

July 19, 2011 1:30 PM
By Roger Jackson
Originally published by East Midlands Liberal Democrats

With regard to the incompetence of the DfT, it is now emerging that a large factor in the difference between the Thameslink bids was not in the cost of building and maintaining the trains (thought to be within 1.5%) but in the rules of a PFI bid.

I quote Roger Ford's 'Informed Sources' :-

As with the Intercity Express Programme, DfT is buying a long-term total train service provision package for Thameslink. In such Private Finance Initiative (PFI) deals, the winning consortium raises the funding to buy the trains, build or modernise the depots and then maintains the trains for the life of the contract. It guarantees to provide a specified number of daily diagrams and this is what the Government pays for. So the cost per diagram has to include not only maintenance, and overhauls, but also the return on the capital invested in trains and depots. This also determines the composition of the bidding consortia for such deals. Siemens' debt is rated at A+ by Standard & Poor's compared with Bombardier at BB+. In this rating system, AAA is the top rating. Each step up in the rating reduces the cost of debt by around 25 basis points (0.25%). So with six steps between the two ratings, the Bombardier consortium would have been was facing at least an extra 1.5% a year on the cost of financing the deal compared with Siemens. Over a 20-30 year contract that difference compounds up and would be worth several hundred million pounds. In other words the Department for Transport systematically favours German Industry on the basis that their economy is stronger than ours; isn't this a self serving argument? Who's side are they on, or do we simply have the most incompetent government in the industrialised world?