Pacer leasing costs

[northwichcat]

In 2006 The Guardian claimed Angel Trains charged Northern a total of £5,400 per Pacer carriage per month, which equates to £129,600 per annum: http://www.theguardian.com/business/2006/jun/29/transportintheuk.travelnews

Angel Trains said it charged rail operators roughly £1,800 a month to lease a 20-year-old two-carriage Pacer train, which is found on many regional lines. It charges roughly a further £3,600 a month for engineering and maintenance.

Have Pacer costs dropped since then? If the leasing costs haven't reduced it would mean that since 2004 Northern have paid £102m in leasing costs for Pacers.

In comparison LM claimed their 69 x class 172 carriages was a £93m investment to the rail industry http://www.londonmidland.com/your-journey/journey-planning/a-new-era-for-the-snow-hill-lines/ or £1.34m per carriage.

 

[martynbristow]

Erm wouldn't surprise me
But what does your lease from angle get you.
Keeping among ageing items running isn't cheap

 

[3141]

I assume that £1.34 million per carriage for LM's class 172s is the cost of building them. That makes the cost of a three-coach unit around £4 million. The cost to LM will be the leasing charge it pays to the owning ROSCO.

On your figures, Northern will have paid £1,036,800 over the eight years since 2006 to lease a two-car Pacer.

I'm not sure what conclusions we might draw, except that running trains is expensive.

 

[WillPS]

Still a lot considering the ROSCO paid literally nothing for them at privatisation.

 

[martynbristow]

The guardian article makes interesting reading
Basically the *banks* claim they make only a modest profit ~2.5% which is a little over modest.
But who has 6bn to throw around.
Its clear there needs to be more competition in the market but where will it come from.

 

[WelshBluebird]

Tbh it is a joke that any of the BR era stock has to effectively be rented despite the full cost already having been met. The only ongoing cost should be for maintenance etc.

 

[Drsatan]

By 2019, I won't be at all surprised if Northern announce that the entire fleet of 142s will be purchased for £10, seeing as their construction costs would have been written off on numerous occasions. There is a precedent though - Stagecoach bought the 483s used on the Island Line for £1 from HSBC Rail in February 2007.

Of course, the situation whereby TOCs pay for stock that, in financial terms, has been written off, is entirely of the DfT's creation. The Railways Act of 1994 established the ROSCOs, then the DfT held an inquiry which concluded, to the best of my knowledge, that ROSCOs were simply following their own business model.

 

[61653 HTAFC]

Tbh it is a joke that any of the BR era stock has to effectively be rented despite the full cost already having been met. The only ongoing cost should be for maintenance etc.

Indeed, but remember that without the profit motive people (or organisations rather!) simply cease to function!

The cost of leasing BR-era stock is just one of many flaws, if not with privatisation per-se, then definitely with the method used here... :roll:

 

[yorkie]

Still a lot considering the ROSCO paid literally nothing for them at privatisation.

Except part of the problem is that the people who initially bought them at privatisation paid under the odds, but the business were later sold for a higher price, as it was realised that TOCs were being, and could continue to be, fleeced. See www.parliament.uk/briefing-papers/SN03146.pdf for example:

6.3 Angel Trains
Angel Trains (formerly known as Angel Train Contracts) was bought for £696 million by GRS Holding Company Limited in January 1996. GRS was a consortium comprising Prideaux & Associates (a railway consultancy company), Babcock & Brown and Nomura International plc. The funding was arranged and underwritten by Nomura International plc, the UK-based, wholly-owned subsidiary of Nomura Securities Co. Ltd.

Shortly after the original sale GRS sold their right to part of Angel Trains income for some £690 million. In December 1997 GRS sold the remainder of the business to the Royal Bank of Scotland Group for £395 million, thereby valuing Angel Trains’ business at some £1.1 billion, a gain of £389 million. In June 2008 RBS sold Angel to a consortium led by Babcock & Brown (and including Deutsche Bank and Australian investment funds) for £3.6 billion.

The current owners of rolling stock will want to get back their 'investment' irrespective of whatever the real value of the assets they purchased are!

 

[northwichcat]

I assume that £1.34 million per carriage for LM's class 172s is the cost of building them. That makes the cost of a three-coach unit around £4 million. The cost to LM will be the leasing charge it pays to the owning ROSCO.

On your figures, Northern will have paid £1,036,800 over the eight years since 2006 to lease a two-car Pacer.

I'm not sure what conclusions we might draw, except that running trains is expensive.

The Northern franchise started in September 2004 so is almost 10 years old.

If the TOC had purchased trains they wouldn't incur leasing costs, just maintenance and running costs. They would also be able to sell the train at the end of the franchise.

So if Northern had purchased 79 x 2 car Turbostars as soon as they had won the franchise, half the costs could have been paid for by not paying the costs imposed by Angel for having the 142s, then as the trains would have at least 15 years life left in them at the end of the franchise they could sell them on and should that not cover the other half of costs, maintenance and interest on a loan used to buy the trains?

 

[muz379]

The Northern franchise started in September 2004 so is almost 10 years old.

If the TOC had purchased trains they wouldn't incur leasing costs, just maintenance and running costs. They would also be able to sell the train at the end of the franchise.

So if Northern had purchased 79 x 2 car Turbostars as soon as they had won the franchise, half the costs could have been paid for by not paying the costs imposed by Angel for having the 142s, then as the trains would have at least 15 years life left in them at the end of the franchise they could sell them on and should that not cover the other half of costs, maintenance and interest on a loan used to buy the trains?

Although Northern did not know for sure in 2004 that they would be running the franchise for 10 years , wasn't the original term for like 6 years . Plus had they purchased 79 turbostars they would have had to wait for construction and still leased trains in the meantime .
--- old post above --- --- new post below ---

Tbh it is a joke that any of the BR era stock has to effectively be rented despite the full cost already having been met. The only ongoing cost should be for maintenance etc.

I completely agree , the leasing of life expired rolling stock is a Major flaw in our model of privatization , and one that costs passengers massively both in having to travel in life expired carriages because there is no incentive to replace them , but also in cost in subsidizing the banks and big corporations who have stakes in leasing companies .

 

[northwichcat]

Although Northern did not know for sure in 2004 that they would be running the franchise for 10 years , wasn't the original term for like 6 years . Plus had they purchased 79 turbostars they would have had to wait for construction and still leased trains in the meantime .

I agree they couldn't have got new trains straight away but if bidders had prepared plans for new trains when they bidded, the order could have been placed before the franchise started.

Just done a Google and it looks like the franchise was originally a 7 year contract starting in September 2004 with the option of a 2 year extension. I think even before the WC fiasco the extension option has been taken up each time except for NXEA, which was DfT's response to them existing the EC franchise early.

 

[muz379]

I agree they couldn't have got new trains straight away but if bidders had prepared plans for new trains when they bidded, the order could have been placed before the franchise started.

Just done a Google and it looks like the franchise was originally a 7 year contract starting in September 2004 with the option of a 2 year extension. I think even before the WC fiasco the extension option has been taken up each time except for NXEA, which was DfT's response to them existing the EC franchise early.

true they could have submitted orders before the beginning of the franchise ,

The only other problem with outright purchasing of rolling stock is it needs massive capital which someone might not have necessarily be prepared to put at risk for a 3% return , Looking at NXEC it doesnt always work out well and even if whoever had stumped up that capital to buy the trains would have broke even by having the asset to sell if it all went wrong . Breaking even in investment terms is still a failure .

Personally My thoughts on the matter are that the DFT should do more to encourage bidders to put together plans to buy new rolling stock and make it a requirement of some franchises if necessary . Because it is obvious that the market on its own is not going to revert to that .

 

[northwichcat]

Personally My thoughts on the matter are that the DFT should do more to encourage bidders to put together plans to buy new rolling stock and make it a requirement of some franchises if necessary . Because it is obvious that the market on its own is not going to revert to that .

Well yes. Apparently the unbranded TVMs Northern have installed are under some condition where they are an asset of the franchise opposed to an asset of Northern Rail, so will automatically be sold on to the next franchise operator. Similarly Northern aren't going to remove the new ticket machines they installed in ticket offices when the franchise ends, so why couldn't rolling stock work on the same basis?

 

[muz379]

Well yes. Apparently the unbranded TVMs Northern have installed are under some condition where they are an asset of the franchise opposed to an asset of Northern Rail, so will automatically be sold on to the next franchise operator. Similarly Northern aren't going to remove the new ticket machines they installed in ticket offices when the franchise ends, so why couldn't rolling stock work on the same basis?

I personally think it is a good idea and would work pretty well . It could be written into franchise commitments that the next bidder buys the rolling stock off the old TOC . Or commits to make the loan repayments or however it is arranged .

I suppose the only problem I can see with it is that potential bidders would want a higher profit margin because they are risking more capital .The way the DFT is going at the moment with the drive to cut subsidies this higher profit margin would ultimately cost the passenger . And we all know what the unions and the media would make of that .

 

[martynbristow]

Erm right so to try and tie it all togethere is the problem that the leasing companies are leading a limited amount of stock ... cutting supply, so now demand is high there's no competition.

How do you solve this problem?
The solution could be for leasing companies to order stock to undercut competitiors or provide extra.
The obvious flaw is the potential for non-standard stock to exist, and the issues of electrification.

Although I see this as a failure at government to manage the market.

When I visited Germany you didn't see battered buses rattling along the rails but new rolling stock purchased for that route.

 

[northwichcat]

When I visited Germany you didn't see battered buses rattling along the rails but new rolling stock purchased for that route.

Indeed. The Germans use a lot of route branded trains and you rarely see a route branded train on the wrong route but you do occasionally get an unbranded train filling in for a route branded one.

 

[martynbristow]

Well exactly but I was more referring to things like BOB which got improved stock.
We seem to go for massive franchises with very little tied to them
It just seems the a bit of a mess :/

 

[ainsworth74]

I personally think it is a good idea and would work pretty well . It could be written into franchise commitments that the next bidder buys the rolling stock off the old TOC . Or commits to make the loan repayments or however it is arranged .

A mechanism like that exists for infrastructure. It just is hardly used by anyone other Chiltern. Basically the TOC puts together the business case for an upgrade and Network Rail borrow the money to build it. The TOC then pays back Network Rail over thirty years through higher track access than would be usual on the bit of infrastructure they've bought.

Those extra track access charges transfer with the franchise not the owner. So if a TOC gets Network Rail to erect a bunch of new wires they'll only pay for them for as long as they hold the franchise (so if a franchise changes hands after six years the original owner of the franchise has only paid 6/30ths of the cost of the infrastructure). This is the way that Chiltern have been funding their highly successful Evergreen projects.

 

[starrymarkb]

Well exactly but I was more referring to things like BOB which got improved stock.
We seem to go for massive franchises with very little tied to them
It just seems the a bit of a mess :/

Most of German concessions are for 30 years, the railway company can buy new stock itself and get a return on it's investment or get a discounted lease because of the long term. Also the rail company is paid on a cost plus basis, fares go to the local Verkersverbund (similar to a PTE)

In the UK the DfT's short franchises and regular changes of policy and franchise mapping mean the lease companies won't order stock without a gaurentee from the DfT that the lease payments will continue for 30 years (otherwise they'll charge a rate where the train's cost will be paid for in 7 years costing £££££££ per month) -

 

[martynbristow]

Most of German concessions are for 30 years, the railway company can buy new stock itself and get a return on it's investment or get a discounted lease because of the long term. Also the rail company is paid on a cost plus basis, fares go to the local Verkersverbund (similar to a PTE)

In the UK the DfT's short franchises and regular changes of policy and franchise mapping mean the lease companies won't order stock without a gaurentee from the DfT that the lease payments will continue for 30 years (otherwise they'll charge a rate where the train's cost will be paid for in 7 years costing £££££££ per month) -

So the government made a hash if privatisation and is still making a hash of it

 

[northwichcat]

Also the rail company is paid on a cost plus basis, fares go to the local Verkersverbund (similar to a PTE)

And like in the UK that can result in fares being substantially different between areas. Munich Airport to central Munich by S-Bahn costs around 4 times as much as Berlin Schönefeld to central Berlin by either S-Bahn or Regio.

 

[class 9]

In 2006 The Guardian claimed Angel Trains charged Northern a total of £5,400 per Pacer carriage per month, which equates to £129,600 per annum: http://www.theguardian.com/business/2006/jun/29/transportintheuk.travelnews

Have Pacer costs dropped since then? If the leasing costs haven't reduced it would mean that since 2004 Northern have paid £102m in leasing costs for Pacers.

In comparison LM claimed their 69 x class 172 carriages was a £93m investment to the rail industry http://www.londonmidland.com/your-journey/journey-planning/a-new-era-for-the-snow-hill-lines/ or £1.34m per carriage.

If you read the article correctly, the figures are for a 2 car unit, so you can half your total.
I do agree that now the capital cost of the units has been covered many many times over, the only ongoing costs should be maintainance.

 

[Topgun333]

If you read the article correctly, the figures are for a 2 car unit, so you can half your total.
I do agree that now the capital cost of the units has been covered many many times over, the only ongoing costs should be maintainance.

It's been well documented that the ROSCOs made an almost immediate fortune out of privatisation of BR stock. It just wasn't realised at the time by the media.