Class 175 to GWR

[GoneSouth]

I don't see why not. We're paying either way.

Yes, it’s PFI by a different less toxic name

 

[Sly Old Fox]

This is why I’ve been saying for weeks that until GWR announce the 175s as coming, they aren’t, and this thread should remain in speculative discussion.

Quoted for posterity.

 

[43096]

Yes, it’s PFI by a different less toxic name

It isn’t.

 

[Clarence Yard]

This is interesting. Was the project not accurately costed beforehand?

Yes, it was but it still has to be signed off and money for rail is now tighter than it was before.

 

[JohnRegular]

I understand why it is the case, but regardless of the reasons why, is it not absurd that there has to be so much umming and ahhing about pressing trains that are 'going spare' into service to relieve crowded routes?

I can't believe that a system that allows this situation can possibly be an optimal one, or anywhere close to it.

 

[Wilts Wanderer]

I understand why it is the case, but regardless of the reasons why, is it not absurd that there has to be so much umming and ahhing about pressing trains that are 'going spare' into service to relieve crowded routes?

I can't believe that a system that allows this situation can possibly be an optimal one, or anywhere close to it.

I‘m not sure anyone can/would accuse the railway system of being that at the moment!

 

[John R]

I guess a bit of pressure on the leasing company to sharpen its pencil is no bad thing. After all, if it doesn’t land this deal, who else is going to take the stock?

 

[Towers]

Yes, it was but it still has to be signed off and money for rail is now tighter than it was before.

Likely looking at a reduced number of sets being transferred, then?

 

[Snow1964]

I guess a bit of pressure on the leasing company to sharpen its pencil is no bad thing. After all, if it doesn’t land this deal, who else is going to take the stock?

Do they need anyone else to take the stock, had about 22 years income, against an expected life of around 25 or 30 years.

Its a fairly small fleet, 70 vehicles (which is not that much if your leaseco has well over 1000 other vehicles.

The reverse argument is if they keep it off the market then there is more likelihood of getting a good price for alternatives on renewal (especially as there isn't a lot of choice if any operator wants more express DMUs this side of 2028).

Basic maths says if get around 3% extra income by leasing them out, will be worse off over time, if extra supply then depresses market price of all renewals by about 5%

 

[Clarence Yard]

Likely looking at a reduced number of sets being transferred, then?

No, it’s whether any are leased at all. The operating budget for the entire industry is currently being looked at - it is a very hard look.

 

[Tw99]

No, it’s whether any are leased at all. The operating budget for the entire industry is currently being looked at - it is a very hard look.

There have been press reports of really deep spending cuts having been asked of various departments, so I guess there's no surprise that rail is part of that. I imagine that other ministers will be observing the large amount of money recently given to rail staff, and arguing for less spend on rail in the upcoming budget, in favour of whatever their department is.

 

[Towers]

No, it’s whether any are leased at all. The operating budget for the entire industry is currently being looked at - it is a very hard look.

Oh dear. The alternative being limp on as-is, I presume?

 

[Anonymous10]

Oh dear. The alternative being limp on as-is, I presume?

Not quite , I'd expect cuts as the castles leave.

 

[Wolfie]

I don't see why not. We're paying either way.

I've not looked at the financial details but let's just say discounted cash flows and net present value..... HMT's absolute touchstones....

 

[coppercapped]

This is what irritates me about the leasing model - these units are over 20 years old so surely Angel Trains has made the money back on them by now but yet these units still have to be leased at cost!

There still seems to be considerable misunderstanding about the different types of leasing. This statement assumes that trains are leased from the various ROSCOs in a form of financial lease. This is not the case. I have written about this in other threads but at the risk of boring people...

...there are fundamentally two forms of lease:

• financial
• operating.

In a financial lease the lessor is fully paid out by the original lessee over the initial lease term. This effectively transfers ownership of the asset from the lessor to lessee at the end of the term. It is clear that this model cannot work for a situation where the duration of the franchise (the lessee) is much shorter than the book life of each vehicle.

In an operating lease, each period of hire is significantly shorter than the life of the asset. The owner of the rolling stock takes residual-value risk — that is, the risk of both the likelihood of that asset being relet at the end of any lease and also the price at which it will be possible to relet the asset.

Just to confuse matters, and as others have pointed out, I would mention that there are also different types of operating lease, depending on who is responsible for maintenance:

• Dry lease - the operator is responsible for all maintenance. Generally the leasing costs will be lower, but all the maintenance costs are the responsibility of the lessee.
• 'Soggy' lease - maintenance responsibility is split. Generally heavy maintenance remains a ROSCO responsibility with lower level maintenance being carried out by the lessee.
• Wet lease - all maintenance is the responsibility of the ROSCO, the lessor.

At privatisation for the operating lease model (mainly the 'soggy' lease variety) separate pricing structures were adopted for capital and operating costs with each component accounting for around 50% of the total rent.

The lease charges covering the cost of capital are based on a model covering the cost of financing a modern equivalent vehicle over its life. This includes a depreciation allowance permitting the lessor to have amassed sufficient funds in order to purchase replacement trains. A simple financial lease does not make any allowance for depreciation meaning that when the vehicles need replacing somebody has to come up with a large lump of money to buy the replacement trains. If this source of this money is to be the government then one can wait a long time for approval.

Non-capital lease charges (the operating part of the lease payments) cover expenditure on heavy maintenance and other ongoing costs to keep the vehicle serviceable throughout its life. In the run-up to privatisation a BR team prepared estimates to the likely cost associated with the maintenance derived from historical data with allowances built-in for ageing, corrosion and other potential liabilities. The October Modern Railways states that the owner of the Voyager trains will fund a £60 million refurbishment of the Cross-Country fleet. This money comes from the lease payments made over the years and does not have to be levered out of the Treasury's clutches.

So, the apparent high rents paid for the few remaining geriatric BR Classes 150 to 158 and early 16X, as well as the Class 175s, are not surprising — they cover the costs of keeping them working and are also contribute to the costs of buying their replacements. Between them, the 10 or so ROSCOs have financed the replacement of all the other BR era trains.

If we could get with nationalisation that the current gov is talking about to a position where new units were leased for a certain number of years and then ownership passes to the national operator after then we wouldn't have these issues - stock which has passed into public ownership could be moved around the network and used where needed without the worry of agreeing a new lease for £x per year.

There are significant other costs involved in moving trains around the network which have nothing to do with lease costs. Driver training costs - which seems to be very difficult these days - maintenance staff training, adapting maintenance depots and spares holdings for the moved stock and so on and so forth.

I'm not suggesting that we get rid of the leasing model completely as it isn't reasonable to expect the government to fund new rolling stock upfront but there must be a better way of doing this!

 

[The_Train]

Which were the 2 units that caused misery at March last week? And did they eventually make it to Ely?

 

[TheBigD]

Which were the 2 units that caused misery at March last week? And did they eventually make it to Ely?

175101+116

They were eventually dumped in March Up Yard. Should be rescued today (I think) and dragged to Ely.

 

[The_Train]

175101+116

They were eventually dumped in March Up Yard. Should be rescued today (I think) and dragged to Ely.

Thanks so much

 

[Teds]

Two units certainly arrived today although I could not see the unit numbers. Top and tailed by 37 510 and 37 218. 5Q48 March Up Yard GBRF to Ely MLF Papworth Sidings https://www.realtimetrains.co.uk/service/gb-nr:K21065/2024-10-07/detailed.

 

[Nicholas Lewis]

No, it’s whether any are leased at all. The operating budget for the entire industry is currently being looked at - it is a very hard look.

Last week ORR passenger figures show there is still a hefty mismatch between train miles run and journeys benchmarked back to 2019 and GWR is one of the outliers although with the most diverse operation of all operators its difficult to benchmark it to others. Lets hope the Passenger in Chief Haigh lives up to all her speeches and doesn't turn into a hatchet SoS which even the Tories shied away from.

 

[Benjwri]

Last week ORR passenger figures show there is still a hefty mismatch between train miles run and journeys benchmarked back to 2019 and GWR is one of the outliers although with the most diverse operation of all operators its difficult to benchmark it to others. Let’s hope the Passenger in Chief Haigh lives up to all her speeches and doesn't turn into a hatchet SoS which even the Tories shied away from.

Although as pointed out to you in that thread as well, GWR is less of an outlier when you consider Vehicle Kilometres, rather than the train kilometres.

 

[BillStampy]

Two units certainly arrived today although I could not see the unit numbers. Top and tailed by 37 510 and 37 218. 5Q48 March Up Yard GBRF to Ely MLF Papworth Sidings https://www.realtimetrains.co.uk/service/gb-nr:K21065/2024-10-07/detailed.

175101 + 175116, the ones who've failed twice on their way to Papworth already, seems that they've given up on them!

 

[simonmpoulton]

Funny that units which have sat around for months with little to no maintenance or running would have issues. Like everything mechanical they tend to work better when maintained and used regularly!
If/when this is finally signed off with GWR I can see there being teething problems until they get on top of the maintenance again.

 

[Meerkat]

I guess a bit of pressure on the leasing company to sharpen its pencil is no bad thing. After all, if it doesn’t land this deal, who else is going to take the stock?

It’s a relatively balanced game of chicken.
If Labour won’t pay the price demanded then the ROSCO lose income.
However the ROSCO will probably be saying/hinting “pay the price we want or we scrap them. How do you think photos of working trains getting scrapped whilst GWR is overcrowded fit into your ‘better public services’ promises?”

 

[Bikeman78]

Funny that units which have sat around for months with little to no maintenance or running would have issues. Like everything mechanical they tend to work better when maintained and used regularly!
If/when this is finally signed off with GWR I can see there being teething problems until they get on top of the maintenance again.

I already have the popcorn on standby. 175101 has never worked very well since the most recent reform. It has vehicles from three different units.

 

[172007]

It’s a relatively balanced game of chicken.
If Labour won’t pay the price demanded then the ROSCO lose income.
However the ROSCO will probably be saying/hinting “pay the price we want or we scrap them. How do you think photos of working trains getting scrapped whilst GWR is overcrowded fit into your ‘better public services’ promises?”

Really there should be a dedicated thread to fleets off lease and awaiting an uncertain future. Class 350/2, MK5A and class 175. Any other fleets?

The time has come i suspect that we can't discuss class 175 future to GWR in isolation.

The internal discussions with Rosco's and the DFT / Shadow GBR must be quite interesting when it comes to the class 175 and what happens.

24 year old unit. Didn't BR work on a basis that it rook 25 years for a unit to pay for itself then the other costs were operational only.

Class 350/2 are 15 years so 10 years until historically they are paid for.

Rosco's must be looking or talking to each other and working out who will blink first and how that affects lease costs going forward. Will the 175 be bargain basement and the 350/2 only get a 10 year lease negotiated. Will Beacon be getting twitchy about expensive items sat on their books still costing them large amount of money due to such new rolling stock and they offer a good deal that helped the class 175 lease bid.

 

[Wolfie]

Really there should be a dedicated thread to fleets off lease and awaiting an uncertain future. Class 350/2, MK5A and class 175. Any other fleets?

The time has come i suspect that we can't discuss class 175 future to GWR in isolation.

The internal discussions with Rosco's and the DFT / Shadow GBR must be quite interesting when it comes to the class 175 and what happens.

24 year old unit. Didn't BR work on a basis that it rook 25 years for a unit to pay for itself then the other costs were operational only.

Class 350/2 are 15 years so 10 years until historically they are paid for.

Rosco's must be looking or talking to each other and working out who will blink first and how that affects lease costs going forward. Will the 175 be bargain basement and the 350/2 only get a 10 year lease negotiated. Will Beacon be getting twitchy about expensive items sat on their books still costing them large amount of money due to such new rolling stock and they offer a good deal that helped the class 175 lease bid.

Re your last para ROSCOs, if they have any sense, will be bloody careful about talking to each other. The last thing that they need is to be accused of operating an illegal cartel.

 

[HamworthyGoods]

Rosco's must be looking or talking to each other and working out who will blink first and how that affects lease costs going forward. Will the 175 be bargain basement and the 350/2 only get a 10 year lease negotiated. Will Beacon be getting twitchy about expensive items sat on their books still costing them large amount of money due to such new rolling stock and they offer a good deal that helped the class 175 lease bid.

Operating in a cartel comes with a very high penalty…

 

[Clarence Yard]

Rosco's must be looking or talking to each other and working out who will blink first and how that affects lease costs going forward. Will the 175 be bargain basement and the 350/2 only get a 10 year lease negotiated. Will Beacon be getting twitchy about expensive items sat on their books still costing them large amount of money due to such new rolling stock and they offer a good deal that helped the class 175 lease bid.

They won’t be talking to each other unless they want the CMA on their back!

The only problem with the MEAV regime is that you accrue money for replacements and heavy repairs. If there are not going to be any replacements, you can reverse that accrual into your Profit and Loss, take the profit and pay your shareholders some decent dividends.

Scrapping older stock doesn’t necessarily cost you. In fact, given the above, the DfT’s decisions not to lease certain stock has probably increased the ROSCOs profits!

Newer stock can be kept on the balance sheet at a decent rate so you don’t lose mega bucks by not having them on lease. That’s what you pay your financial accountants to manage.

 

[Xavi]

Replacements would be capital expenditure, which is not normally accrued as a P+L expense. Cash reserves may be required though I suspect ROSCOs often borrow on the markets and include a mark-up on the cost of finance in the lease charges.