How is rolling stock funded

Status
Not open for further replies.

pethadine82

On Moderation
Joined
16 Jun 2012
Messages
229
I have seen some brand new rolling stock and also funding for infrastructure, now I understand not all comes from the tax payer. How exactly is this funded. Does the Bank of England print more money in the form of Bonds and adds it to the debt pile . I know Biden is going huge with infrastructure spending and this will be issued in terms of bonds. I listened to a summary of Jerome Powell's and Janet Yellen's testimony and it does seem that they are very much committed to infrastructure spending and what the US does normally follows on here, however if inflation rises (the fed have said they will let it run at 2%) then will the commitment to fund new infrastructure projects here in the future be mothballed ? Love to hear thoughts from others here as I can't think of a more greener way to travel than by train.
 
Sponsor Post - registered members do not see these adverts; click here to register, or click here to log in
R

RailUK Forums

Joshua483

On Moderation
Joined
4 Apr 2021
Messages
57
Location
Wokingham
I have seen some brand new rolling stock and also funding for infrastructure, now I understand not all comes from the tax payer. How exactly is this funded. Does the Bank of England print more money in the form of Bonds and adds it to the debt pile . I know Biden is going huge with infrastructure spending and this will be issued in terms of bonds. I listened to a summary of Jerome Powell's and Janet Yellen's testimony and it does seem that they are very much committed to infrastructure spending and what the US does normally follows on here, however if inflation rises (the fed have said they will let it run at 2%) then will the commitment to fund new infrastructure projects here in the future be mothballed ? Love to hear thoughts from others here as I can't think of a more greener way to travel than by train.
ROSC (Rolling Stock Leasing company's) buy most of the rolling stock and the rest is ether TOC ( Train Operating Company) or a intervals (Rarely) or a Charity (Rarely) or the Government (Rarely).
 

py_megapixel

Established Member
Joined
5 Nov 2018
Messages
4,703
Location
Northern England
The conventional model, which has been adopted ever since privatisation, is that a company called a ROSCO (Rolling Stock Operating Company) such as Porterbrook or Eversholt, usually in conjunction with a bank or other lender, places an order with a manufacturer (such as Bombardier or Alstom). The TOC (Train Operating Company) then pays the ROSCO a regular charge to lease the rolling stock. Any given order of rolling stock will be built to the specifications of a particular TOC, and that will be the TOC that leases it at first.

There have been some notable recent orders that have been financed differently. The 800s and 801s for the Intercity Express Program were specified entirely by the Department for Transport (with the exception of TOC branding), but are owned by their manufacturer, Hitachi, via the consortium Agility Trains. The class 700s for the Thameslink upgrade have a similar model.

I believe the Scottish and Welsh governments have also partially funded and specified rolling stock orders for their specific regions.

I don't know of any orders which have been paid for directly by the TOC or by a charity, though that's not to say they don't exist, I just haven't heard of them.
 

Joshua483

On Moderation
Joined
4 Apr 2021
Messages
57
Location
Wokingham
The conventional model, which has been adopted ever since privatisation, is that a company called a ROSCO (Rolling Stock Operating Company) such as Porterbrook or Eversholt, usually in conjunction with a bank or other lender, places an order with a manufacturer (such as Bombardier or Alstom). The TOC (Train Operating Company) then pays the ROSCO a regular charge to lease the rolling stock. Any given order of rolling stock will be built to the specifications of a particular TOC, and that will be the TOC that leases it at first.

There have been some notable recent orders that have been financed differently. The 800s and 801s for the Intercity Express Program were specified entirely by the Department for Transport (with the exception of TOC branding), but are owned by their manufacturer, Hitachi, via the consortium Agility Trains. The class 700s for the Thameslink upgrade have a similar model.

I believe the Scottish and Welsh governments have also partially funded and specified rolling stock orders for their specific regions.

I don't know of any orders which have been paid for directly by the TOC or by a charity, though that's not to say they don't exist, I just haven't heard of them.
The South Wales Metro rolling stock is party owned by the TOC and it is mainly wagons brought brand new by charity's.
 

Skie

Member
Joined
22 Dec 2008
Messages
624
ROSCOS are usually large investment vehicles. It’s a long term source of income for a large initial outlay, like fleet hire but much larger outlay.

The Merseyrail 777 order is a relatively unique one. They’re paid for and owned by the PTE MerseyTravel, and being leased to Merseyrail. Once they’ve been paid off for the initial outlay, it’s a pure profit going back to the taxpayer rather than to a bank or pension fund. At the end of their operational life they can be sold on to help fund their replacements. Hopefully it works out, the current lease setup is just another way to syphon money away.
 

RailWonderer

Member
Joined
25 Jul 2018
Messages
556
Location
All around the network
I don't know of any orders which have been paid for directly by the TOC or by a charity, though that's not to say they don't exist, I just haven't heard of them.

Rare exeptions would be the 14 class 332s (now scrapped) and the 5 class 360/2 units that were both bought by Heathrow Airport directly from CAF and Siemens.
 

Rail Blues

Member
Joined
2 Aug 2016
Messages
608
Why did it take so long for alternatives to the three main Roscos to emerge? They had nearly two decades where they made huge profits out of knackered rolling stock, the Pacers and 483s being the most egregious examples.
 

43096

On Moderation
Joined
23 Nov 2015
Messages
10,866
Why did it take so long for alternatives to the three main Roscos to emerge? They had nearly two decades where they made huge profits out of knackered rolling stock, the Pacers and 483s being the most egregious examples.
As opposed to the huge prices being charged by the likes of Agility Trains when the ROSCO alternative would have been cheaper.
 

edwin_m

Veteran Member
Joined
21 Apr 2013
Messages
21,806
Location
Nottingham
The fundamental reason for this in the passenger market is that the operating franchises have varied between about 7 and 20 years in original term (many have been extended for various reasons, but they didn't know that would happen at the beginning). So if the franchise had to buy the trains they would have no certainty of finding a use for them if they didn't win the replacement franchise. Hence the model was set up where all the franchises leased their trains for the duration of their terms, unless replacement was planned part way through. At the end of the term the leasing company could come to an agreement with one or more of the new bidders, and could try to lease them elsewhere if the winning bidder didn't want the stock.

Originally this pushed leasing companies into ordering trains that were as versatile as possible - for example nearly all the electric fleets ordered at the start of privatisation were compatible or convertible with both electrification systems used in Britain and built small enough to fit on the routes with the most restrictive clearances. More recently leasing companies seem to have tried to lock in their products by going for bespoke requirements in the hope that the next franchise won't find anything better.
 

LNW-GW Joint

Veteran Member
Joined
22 Feb 2011
Messages
16,221
Location
Mold, Clwyd
ROSCOS are usually large investment vehicles. It’s a long term source of income for a large initial outlay, like fleet hire but much larger outlay.

The Merseyrail 777 order is a relatively unique one. They’re paid for and owned by the PTE MerseyTravel, and being leased to Merseyrail. Once they’ve been paid off for the initial outlay, it’s a pure profit going back to the taxpayer rather than to a bank or pension fund. At the end of their operational life they can be sold on to help fund their replacements. Hopefully it works out, the current lease setup is just another way to syphon money away.
Merseytravel still have to find the capital for the trains, and they go to commercial lenders for that.
And it's never "pure profit for the taxpayer" as they have to be maintained, and maintaining ageing assets these days is more expensive than throwing away and buying new.
The fleet deal with Stadler also includes long-term maintenance and depot/staff ownership, and also managing the transition from old stock to new.
Transport Scotland and Transport for Wales both went for commercial rolling stock deals, though they had the powers to fund directly.
There are many different funding models for acquiring new trains, and you weigh up the costs and risks and make a choice.

If you fly easyJet, or most other airlines, it's worth remembering that most of their fleets are leased.
In fact during Covid, there's been a scramble to sell and lease back even more of the airline fleets to aid cash flow during the travel restrictions.
There are good commercial reasons why businesses do not capitalise all their assets as the railway used to do.
 
Status
Not open for further replies.

Top