Great Western Franchise Extension 2020 to?

dk1 · 30 Mar 2020

Mintona said:
Confirmed extension for First Group until 2023. Just had it through on an email. Although on a management contract until September.

Including the introduction of flexi season tickets, which I like the sound of.

Excellent news. Possibility of a 4 year extension too

RailUK Forums

JonathanH · 30 Mar 2020

This is the regulatory announcement.

https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1382816&cid=858

Further direct award for GWR
Released : 30.03.2020

FIRSTGROUP SIGNS NEW AGREEMENT TO
ENSURE CONTINUITY OF GWR SERVICES

FirstGroup plc (‘FirstGroup’ or ‘the Group’) has signed a Direct Award (the ‘agreement’) with the Department for Transport (‘DfT’) to continue operating Great Western Railway (‘GWR’) services from 1 April 2020, when the Direct Award under which services are currently being operated comes to an end.

The agreement runs until 31 March 2023, with a possible extension of up to one further year at the DfT’s discretion. The agreement ensures continuity of operation and will run concurrently with the DfT’s previously announced Emergency Measures Agreement (‘EMA’) for at least the first six months. FirstGroup’s experience of managing the route over many years will be crucial to restoring the service to full operation once the immediate crisis has abated, and will facilitate the ongoing transformation of GWR, through the biggest changes to the network in a generation.

Today’s announcement provides continuity for customers, employees and other stakeholders beyond the period of emergency measures currently proposed, as well as an appropriate balance of risk and reward between FirstGroup and the Government, supported by a contractual Forecast Revenue Mechanism (‘FRM’) which eliminates the majority of the revenue risk. GWR will build on the improvements it has delivered to services over the past five years, with a focus on connecting people and local communities looking to restore normality when the present restrictions on travel due to the coronavirus pandemic are over.

The agreement has a strong emphasis on improving regional connectivity, helping customers return to the railway by making rail a more convenient and environmentally-friendly way to travel. As part of this, GWR will bring additional trains into service to provide thousands of extra seats on regional routes across the network.

There will also be increased funding to improve services for local communities and at stations, and the introduction of a combination of new flexible ticket products for customers who do not commute to work every day, such as discounted part-time season tickets and the extension of paperless pay-as-you-go schemes.

Since 2015, GWR has successfully delivered new fleets of modern intercity and local trains comprising 785 new carriages, and introduced faster, more frequent services for customers across the network through the successful introduction of the largest timetable change in decades last December. GWR recently posted some of its highest ever passenger satisfaction scores and delivered the most improved punctuality scores in the UK last year.

Commenting, Matthew Gregory, FirstGroup Chief Executive, said:
“Whilst the immediate focus of GWR is to ensure that key workers, vital to the country’s response to coronavirus, can get to where they need to go, continuity of rail services will also be critical to a restoration of normal life when the present uncertain and difficult situation is overcome. In the longer term this new agreement will mean that customers can return to rail as their preferred choice of travel; with more seats, more services, better stations and more flexible ticketing to help reconnect the people and communities we serve.

“When the present emergency measures agreed with Government come to an end, today’s agreement will ensure that GWR will continue to deliver sustainable benefits for customers and an appropriate balance of risk and reward for our shareholders and the Government. We are proud of GWR’s achievements over the last few years, working with industry partners to transform the experience for passengers with new, faster and more environmentally friendly trains and a timetable offering record fast journey times to the major towns and cities on the route.”

Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Communications
Tel: 020 7725 3354
[email protected]

Contacts at GWR:
Dan Panes, Head of Communications
Tel: 0845 410 4444

Contacts at Brunswick PR:
Andrew Porter / Simone Selzer, Tel: +44 (0) 20 7404 5959

Notes
The new agreement for GWR begins when the previous Direct Award contractual arrangements end on 1 April 2020 and has a three year duration to 31 March 2023 with a possible extension of up to one year at the DfT’s discretion.

As previously announced on Monday 23 March, FirstGroup welcomes and has accepted the comprehensive response of the UK Government to provide emergency support for the country’s vital rail networks during the coronavirus pandemic. These measures will provide continuity and certainty for all DfT-let rail franchises through EMAs which will last six months or longer if required. For the duration of the EMAs, the Government will take revenue and cost risk, and franchise operators will be paid a fixed management fee with the potential for a small performance-based fee.

At the conclusion of the EMA period, GWR will operate services as a franchise with revenue risk shared with the DfT through a Forecast Revenue Mechanism (‘FRM’) governed by today’s agreement, which also makes provision for a revenue rebasing exercise as required. The FRM will apply if revenue variances differ from target in the bid assumptions, outside of a nil rate band, and is available from the start of the agreement. Payments or receipts occur when actual revenue is 1.5% higher or lower than the expected FRM revenue, at 90% of the revenue difference.

At the conclusion of the EMA period, GWR will also comply with the normal performance and customer satisfaction regimes; will subsequently introduce a new Service Quality Regime and has agreed customary profit share arrangements with the DfT. Following the end of emergency measures, FirstGroup expects to earn a margin around the average of typical industry ranges overall during the award period. Under the agreement, GWR will continue as a subsidy train operating company, reflecting the new fleets of trains and the significantly expanded timetable.

FirstGroup, as parent company to GWR, will provide subordinated contingent loan facilities of £10m (£5m of which is bonded) and a performance bond of £10m to GWR, as well as a cash-collateralised season ticket bond of c.£35m. A wide range of scenarios were considered as part of the modelling to assess the award, including with respect to pensions, passenger demand and to the risk sharing mechanisms provided by DfT, and the Board of FirstGroup is of the view that there is an appropriate balance of risks and rewards in the agreement.

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 3.1.

Figures presented in this announcement are not audited. Certain statements included or incorporated by reference within this announcement may constitute ‘forward-looking statements’ with respect to the business, strategy and plans of the Group and our current goals, assumptions and expectations relating to our future financial condition, performance and results. By their nature, forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors that cause actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Shareholders are cautioned not to place undue reliance on the forward-looking statements. Notwithstanding the mitigations and emergency measures already disclosed by the Group, the overall impact of the coronavirus pandemic will have on the financial performance and prospects of the Group in the near as well as the medium to longer term remains extremely unclear. The situation is evolving very rapidly and while every effort has been made to verify the accuracy of the information in this announcement, the impact coronavirus is having on the performance of the Group means such statements should be treated with extra caution. Except as required by the UK Listing Rules and applicable law, the Group does not undertake any obligation to update or change any forward-looking statements to reflect events occurring after the date of this announcement.

About FirstGroup
FirstGroup plc (LSE: FGP.L) is a leading provider of transport services in the UK and North America. With £7.1 billion in revenue and around 100,000 employees, we transported 2.2 billion passengers last year. Whether for business, education, health, social or recreation – we get our customers where they want to be, when they want to be there. We create solutions that reduce complexity, making travel smoother and life easier.

We provide easy and convenient mobility, improving quality of life by connecting people and communities.

Each of our five divisions is a leader in its field: In North America, First Student is the largest provider of home-to-school student transportation with a fleet of 43,000 yellow school buses, First Transit is one of the largest providers of outsourced transit management and contracting services, while Greyhound is the only nationwide operator of scheduled intercity coaches. In the UK, First Bus is one of Britain's largest bus companies with 1.6 million passengers a day, and First Rail is one of the country's largest and most experienced rail operators, carrying 345 million passengers last year.

Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on Twitter.

About GWR
Great Western Railway (GWR) provides high speed, commuter, regional and branch line train services. We help over 100 million passengers reach their destinations every year – across South Wales, the West Country, the Cotswolds, and large parts of Southern England.

We’re currently seeing the biggest investment in the network since Brunel so we can offer more trains, more seats, and shorter, more frequent journeys and continue the network’s heritage of helping connect more businesses to new and prosperous markets. Through a series of initiatives we aim to be a good neighbour to the communities we serve and are committed to making a positive social impact in those regions. Learn how we're Building a Greater West at GWR.com. GWR is a FirstGroup company.

43096 · 30 Mar 2020

dk1 said:
Excellent news. Possibility of a 4 year extension too

4 year?! It’s really high time this franchise was tendered. Normally there are restrictions on how many times/how long you can award a particular contract without rendering under public procurement rules.

dk1 · 30 Mar 2020

43096 said:
4 year?! It’s really high time this franchise was tendered. Normally there are restrictions on how many times/how long you can award a particular contract without rendering under public procurement rules.

They seem to be running it just fine.

43096 · 30 Mar 2020

dk1 said:
They seem to be running it just fine.

That’s irrelevant - and highly debatable.

What DfT is doing is exceptionally poor procurement practice and probably not delivering best value for taxpayers. It’s now 7 years on Direct Award, with at least 3 more to come. That is utterly disgraceful.

Brissle Girl · 30 Mar 2020

43096 said:
4 year?! It’s really high time this franchise was tendered. Normally there are restrictions on how many times/how long you can award a particular contract without rendering under public procurement rules.

Given the Williams review it makes sense not to tender for a full 7 year contract. And we are not in normal times either.

LNW-GW Joint · 30 Mar 2020

43096 said:
That’s irrelevant - and highly debatable.
What DfT is doing is exceptionally poor procurement practice and probably not delivering best value for taxpayers. It’s now 7 years on Direct Award, with at least 3 more to come. That is utterly disgraceful.

Given "events", I doubt they had any real alternative.
The imperative is to keep services going and give DfT breathing space to sort out the longer term for the industry.
South Eastern (Govia) also got another direct award - 2 years.
I doubt if any of the financial terms agreed can be made to stick in the current circumstances.

HH · 30 Mar 2020

In my opinion covid-19 won't just be a huge, but time-limited, interruption to business, it will also be a long-term game changer. The amount of home-working that has been forced on us is likely to lead to step change once the dust has settled, and this will impact significantly on commuting numbers.

43096 · 30 Mar 2020

Brissle Girl said:
Given the Williams review it makes sense not to tender for a full 7 year contract. And we are not in normal times either.

LNW-GW Joint said:
Given "events", I doubt they had any real alternative.
The imperative is to keep services going and give DfT breathing space to sort out the longer term for the industry.
South Eastern (Govia) also got another direct award - 2 years.
I doubt if any of the financial terms agreed can be made to stick in the current circumstances.

I think you are missing the point: it’s not about the current crisis, but a repeated, on-going failure by DfT to properly re-tender the contract over many years.

The Ham · 30 Mar 2020

HH said:
In my opinion covid-19 won't just be a huge, but time-limited, interruption to business, it will also be a long-term game changer. The amount of home-working that has been forced on us is likely to lead to step change once the dust has settled, and this will impact significantly on commuting numbers.

However it could well be that rail travel starts fairly robust whilst road travel falls off a cliff.

In that if you and your other half are working in the office 3 days a week each then you may share a car and one of you use the train one day a week (say was £80 in petrol, now £40 in petrol and £20 on a train ticket, puts the cost savings of running one car)

Likewise if you're not driving to work everyday then the purchase cost of the car becomes a larger cost to bear in the days you are traveling and so public transport is more likely to win out.

Also with the only way to buy stuff being online it's going to be a fairly big change to going back to actually going to shops to get things, especially given that you are more likely to be WFH and so will be in for the delivery. That will reduce some leisure travel, especially if smaller towns see many shops just not reopen at the end of this (which puts the cost of going and getting it up, making the delivery charge better value).

If this lasts for 6 months, then there's going to be quite a few people with lease cars who will not get a new car until this is over. However with the potential of the restrictions being eased and tightened several times they may get used to doing without for quite sometime whilst having some normality before everything is over.

My guess is that my office based job will likely be one of the last things to return to normal, whilst building sites and shops may go back before me so as to get the economy moving without significantly increasing the risk of spread to the point that the NHS can't cope.

Nicholas Lewis · 30 Mar 2020

43096 said:
4 year?! It’s really high time this franchise was tendered. Normally there are restrictions on how many times/how long you can award a particular contract without rendering under public procurement rules.

Given action government is taking in providing cash to all and sundry without any checks and balance this at least has transparency and a proven outcome. Also im sure it offsetting any claims First are trying to make over SWR or TPE.

Brissle Girl · 30 Mar 2020

In answer to 43096, I do agree to some extent, but since the 2012 West Coast franchise debacle, DfT has seemingly not had the capacity to cope with the number of franchise renewals that stacked up.

And the difficulty in having a proper competition these days, with bidders either dropping out/not willing to come forward because the risk/reward profile is seen as too unfavourable, or barred for not picking up the pension risk, means that it’s highly doubtful that the taxpayer will get the best value that franchising is supposed to bring anyway.

Given everyone believes franchising is now dead, with West Coast and East Midlands their last hurrah, it would have been absurd to have pushed on with a full franchise competition for GWR.

And don’t forget the franchise has undergone a hugely disruptive 5 years that made DA’s very sensible over that period. Practical considerations sometimes outweigh the political dogma of being seen to have a full market competition every few years.

LNW-GW Joint · 30 Mar 2020

43096 said:
I think you are missing the point: it’s not about the current crisis, but a repeated, on-going failure by DfT to properly re-tender the contract over many years.

Well I agree on that.
But it suited the DfT to keep kicking the can down the road, probably because of its favourite IEP project.
Where they did get round to re-tendering (this time because of its other favourite project HS2), we got Avanti instead of Virgin.
First Group win both times (although "win" might not seem so attractive just now).

Meerkat · 30 Mar 2020

Imagine what might have been on offer if a 15 year franchise had been offered in the first place!

nickswift99 · 30 Mar 2020

dk1 said:
They seem to be running it just fine.

Not if you look at LTV performance

Brissle Girl · 30 Mar 2020

Southeastern was properly tendered, but nobody put in a bid that was acceptable to the government for reasons that have been very well documented. There is no compulsion on a government to accept a contract in those circumstances.

LNW-GW Joint · 30 Mar 2020

The VTEC shambles got in the way of GW retendering, and so did Stagecoach's refusal to accept the DfT terms for SWT's extension (which gave us the failing SWR instead).
The DfT can be accused of a great deal, but they have never really been able to stick with the refranchising schedule put up in 2012 after the West Coast debacle.
We are once more in the "big bang" era of letting railway contracts, having attempted 8 years of "steady state" at 2-3 franchises a year.
Arguably, Cross Country has been the TOC worst affected by the direct award curse of minimal TOC investment and maximum DfT claw-back.
GWR at least got huge infrastructure investment and rolling stock re-equipment.

CptCharlee · 30 Mar 2020

Whats this new regional train fleet they mention. Is that a new order?

hwl · 30 Mar 2020

CptCharlee said:
Whats this new regional train fleet they mention. Is that a new order?

Probably the delayed 769s and 165/166 cascades.

JonathanH · 30 Mar 2020

CptCharlee said:
Whats this new regional train fleet they mention. Is that a new order?

165s displaced by 769s on LTV services would appear the most likely way to increase the regional fleet - doesn't have to be 'new' just ''additional' - the release didn't mention 'new'.

swt_passenger · 30 Mar 2020

Mintona said:
Confirmed extension for First Group until 2023. Just had it through on an email. Although on a management contract until September.

Including the introduction of flexi season tickets, which I like the sound of.

People liked the idea of flexi seasons on SWR, but IIRC they are of very limited use, with nowhere near the discount that’s applied to regular seasons...

Snow1964 · 30 Mar 2020

The official DfT release refers to increased capacity in Bristol and Exeter area. No indication on how this will be achieved: if it is higher frequency services, closer signal spacing, longer trains, longer platforms, trains with more seats per carriage, etc. There is no scale or size of the increase (although tens of thousands over a 1000 day contract could be as low as 20 per day), I’m assuming they don’t me 20,000+ extra seats per day

https://www.gov.uk/government/news/...otected-in-new-deals-for-gwr-and-southeastern

Quote : In the longer-term, tens of thousands of passengers are set to benefit from improvements including increased capacity at peak times, more front-line staff and more fares trials for passengers. The direct awards will allow services to be stepped up when the rail network returns to normal following disruption from COVID-19.

Major improvements to be delivered by GWR include the planned introduction of additional new capacity in the Bristol and Exeter areas

hwl · 30 Mar 2020

Snow1964 said:
The official DfT release refers to increased capacity in Bristol and Exeter area. No indication on how this will be achieved: if it is higher frequency services, closer signal spacing, longer trains, longer platforms, trains with more seats per carriage, etc. There is no scale or size of the increase (although tens of thousands over a 1000 day contract could be as low as 20 per day), I’m assuming they don’t me 20,000+ extra seats per day

https://www.gov.uk/government/news/...otected-in-new-deals-for-gwr-and-southeastern

Quote : In the longer-term, tens of thousands of passengers are set to benefit from improvements including increased capacity at peak times, more front-line staff and more fares trials for passengers. The direct awards will allow services to be stepped up when the rail network returns to normal following disruption from COVID-19.

Major improvements to be delivered by GWR include the planned introduction of additional new capacity in the Bristol and Exeter areas

or simply a few more cascaded 165/166s

Still the 2nd extra Temple Meads to Parkway IET per hour to add

JonathanH · 30 Mar 2020

Snow1964 said:
The official DfT release refers to increased capacity in Bristol and Exeter area. No indication on how this will be achieved

Does it all need to be announced on day 1 (actually day minus 2)? There might be all sorts of contracts to sort out first. Would you really have them announce all the plans publically before telling their staff?

northernbelle · 30 Mar 2020

The DA3 award is naturally less ambitious than DA2 with the focus turning towards improvement in the regional services - details to be clarified as and when appropriate.

Clarence Yard · 30 Mar 2020

14 diagrams of 165/1 turbo units (with no loss of 150/2 units out of the franchise) buys you a lot of extra capacity and additional services in the Bristol and Exeter area services.

Exact details of what and where are to be announced in due course.

Mitchell Hurd · 30 Mar 2020

Well some people might not be happy at GWR running for at least another 3 years but sorry - I think they've done a grand job. They've done more than introduce new trains!

Not sure if this is off topic but they could have had very few table seats in the 387's and IET's which would have obviously meant extra capacity. But more table seats mean they want passengers to enjoy their journey.

If it was me, I'd have GWR nationlised - it would mean the brand is here for good!

cactustwirly · 30 Mar 2020

Mitchell Hurd said:
Well some people might not be happy at GWR running for at least another 3 years but sorry - I think they've done a grand job. They've done more than introduce new trains!

Not sure if this is off topic but they could have had very few table seats in the 387's and IET's which would have obviously meant extra capacity. But more table seats mean they want passengers to enjoy their journey.

If it was me, I'd have GWR nationlised - it would mean the brand is here for good!

No it's because they used the same specification as GTR for the 387s, plus the 800s were specced by the DfT not GWR.
Anyway a lot of people prefer airline seats rather than tables.

Horizon22 · 30 Mar 2020

Snow1964 said:
The official DfT release refers to increased capacity in Bristol and Exeter area. No indication on how this will be achieved: if it is higher frequency services, closer signal spacing, longer trains, longer platforms, trains with more seats per carriage, etc. There is no scale or size of the increase (although tens of thousands over a 1000 day contract could be as low as 20 per day), I’m assuming they don’t me 20,000+ extra seats per day

https://www.gov.uk/government/news/...otected-in-new-deals-for-gwr-and-southeastern

Quote : In the longer-term, tens of thousands of passengers are set to benefit from improvements including increased capacity at peak times, more front-line staff and more fares trials for passengers. The direct awards will allow services to be stepped up when the rail network returns to normal following disruption from COVID-19.

Major improvements to be delivered by GWR include the planned introduction of additional new capacity in the Bristol and Exeter areas

I presume it's the additional "superfast" from Paddington for Bristol (already planned for May), and perhaps some turbos around Exeter.

Clarence Yard · 30 Mar 2020

The superfast Bristols are a DA2 delivery. For DA3 there are going to additional local services and more seats for the West, especially around the Bristol and Exeter areas.

Further details in due course.

Great Western Franchise Extension 2020 to?

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