The Role of ROSCO's and their future

[F Great Eastern]

I just have been reading up details on the profits of ROSCO's and I'm amazed at how much money they make, they seem to have huge margins compared to the Train Operating Companies and surely this is something that needs to be addressed going forward.

What I don't know is now that they own all the trains, and money is tight in this country, how on earth are we ever going to get rid of them or bring their rates down to a more sustainable level. For me this was one of the big mistakes of privatization of the railways, it is a shame that our friend of the railways, Bob Crow does not come out and criticize these greedy merchants, as they seem to be taking out much more cash than the greedy TOC's he despises.

 

[Simon11]

I just have been reading up details on the profits of ROSCO's and I'm amazed at how much money they make, they seem to have huge margins compared to the Train Operating Companies and surely this is something that needs to be addressed going forward.

What I don't know is now that they own all the trains, and money is tight in this country, how on earth are we ever going to get rid of them or bring their rates down to a more sustainable level. For me this was one of the big mistakes of privatization of the railways, it is a shame that our friend of the railways, Bob Crow does not come out and criticize these greedy merchants, as they seem to be taking out much more cash than the greedy TOC's he despises.

I'm no expert but your could either try to encourage more competition with more rosco however there are lots of barriers to the business. More competition could end up with too much stock and thus sitting unused.

I'd prefer the government to own all the new trains from now on, hence slowly begining to save money. The risks are tiny, as there's always tocs that need stock. I would assume it would be too expensive to buy back existing stock.

 

[F Great Eastern]

Too much stock? That sounds like some kind of dream, right now we have the opposite problem although I acknowledge is not really down to ROSCO's and more because of the fact that we've had delays with the Thameslink, IEP orders and the fact we've seen orders blocked, delayed and announced but then cancelled a short while later.

There really needs to be a total overhaul on both the procurement of rolling stock and the leasing companies who own it, as ordering stock is taking far too long, tenders are taking years and years and plagued by indecision, delays, reviews and in most cases the TOC's take a lot of bashing for overcrowding when they are victims of what I believe is a broken system.

Then costs are far too high when you have the likes of Angel Trains and Porterbrook all taking out a good amount over 100m every year in leasing charges, and those figures are only going to go up.

 

[jopsuk]

the creation of the ROSCOS was the most mishandled aspect of privatisation in my opinion. In certain ways they provide a useful function- in that they help ensure rolling stock continuity between franchises. But the deal they got with the British Rail stock was ridiculous, and their continued ability to make silly profit on that purchase, was short sighted at best.

 

[LNW-GW Joint]

now that they own all the trains

A number of recent big deals have bypassed the original Roscos - eg IEP and Thameslink.
But even then it will be financiers who own them, which amounts to the same thing.

 

[Yew]

I've got to say, if the BR/DFT/The Government had retained stock, (and possibly BREL) Then I think I would be much happier about the Privatised model. Unfortunately the Govenrment seems the think that DOO and TVM's are a way to cut costs, not eliminating obvious ineficciencies in our structure.

 

[Wath Yard]

I just have been reading up details on the profits of ROSCO's and I'm amazed at how much money they make, they seem to have huge margins compared to the Train Operating Companies and surely this is something that needs to be addressed going forward.

When you say profits do you mean profits or dividends? If profits, then what percentage do they reinvest?

 

[yorkie]

I just have been reading up details on the profits of ROSCO's and I'm amazed at how much money they make, they seem to have huge margins compared to the Train Operating Companies and surely this is something that needs to be addressed going forward....

You may be interested to hear that this matter was investigated by the Competition Commission at the request of the DfT a few years ago:

http://www.competition-commission.o...tigation/final-report-and-appendices-glossary

It was a hot topic in railway magazines (Modern Railways, Rail etc) at the time.

It was not good reading for the people at the DfT who requested the investigation.

As for how to beat the ROSCOs - just do what SWT did with the 458s. Though not many TOCs are actually in a position to do that, admittedly.

 

[Tiny Tim]

There's never going to be any real competition between the ROSCOs, trains are colossally expensive investments, nobody's going to buy a few extra ones in the hope of undercutting another ROSCO, it's just too risky. There's only one way to right the situation: Return the rolling stock to government control. Another step on the inexorable path back to nationalisation. The government 'sold' the trains to the ROSCOs at privatisation, it can buy them back. I'm sure we're about to hear some half-arsed ideas that fail to address the problem fully. This is a situation that requires a simple, radical solution. Just because it involves spending a lot of money doesn't make it the wrong answer.

 

[SF-02]

Like PFI's it benefited, and still does, the Govt/Civil service's friends rather than the end user/taxpayer.

 

[NSEFAN]

There's never going to be any real competition between the ROSCOs, trains are colossally expensive investments, nobody's going to buy a few extra ones in the hope of undercutting another ROSCO, it's just too risky. There's only one way to right the situation: Return the rolling stock to government control. Another step on the inexorable path back to nationalisation. The government 'sold' the trains to the ROSCOs at privatisation, it can buy them back. I'm sure we're about to hear some half-arsed ideas that fail to address the problem fully. This is a situation that requires a simple, radical solution. Just because it involves spending a lot of money doesn't make it the wrong answer.

I personally would like to see the railways privately run, but paid for and specified by the government (in a similar manner to London Overground). This would give the guaranteed service the public wants, whilst also having the efficiency and accountability more prevalent in a fully private system. As many have said on here, there is little point in having rolling stock privately owned because it doesn't actually save the system any money, so there might as well be a government asset-management quango to hold onto stock and invest in new trains.

It's funny how a bunch of enthusiasts have managed to solve a huge efficiency problem in the industry in the space of less than 24 hours, when the DfT has had many years to get this right!

 

[PHILIPE]

Isn't one of the ROSCOs owned by a Bank. Enogh said if you/re talking about greed.

 

[Pen Mill]

Rolling the clock back 20 years , how did BR finance the acquisition of stock ?

 

[AndrewP]

The model for the ROSCOs seem to be based on the need for mass replacement that was apparent when privatisation happened.

Going forward maybe the model should be replaced with one where the capital cost is apportioned over the natural asset life of the asset including periodic refurbs and upgrades and at the end of the lease the train is sold to the DfT for scrap value or simply transferred to them.

If there is still life left in the asset it can be returned by the ROSCO either as if it was a new unit (albeit with a much shorter expected life) or on an operating only basis.

This approach would be combination of building operation and car leasing and, if open book and gave the ROSCOs / funders a sensible return it could work.

 

[LNW-GW Joint]

Rolling the clock back 20 years , how did BR finance the acquisition of stock ?

It paid cash and it all went on the public borrowing requirement, hence severely rationed.
The government has no business owning rolling stock any more than it owns aircraft or buses.
The market is "rigged", partly by DfT policy, but also by our unique gauge and technical requirements.
The Roscos made/make a lot of money out of some fleets, but do you fancy taking the risk on a fleet of 180s or Class 67s, or DDA compliance, or ETCS fitment?

 

[DarloRich]

The Roscos made/make a lot of money out of some fleets, but do you fancy taking the risk on a fleet of 180s or Class 67s, or DDA compliance, or ETCS fitment?

Frankly - Yes, yes i do!

It is easy money for the ROSCO even on a fleet of 180's. Why? Because the money is easy. You can offer a wet or dry lease. Even a wet lease will earn you a decent reward.

A "wet" lease is financing a train, maintenance expertise and facilities , even a crew for the train. A dry lease is the finance of the train only.

Clearly the dry lease option transfers all of the risk onto the lessee while you sit back and count the cash!

 

[LNW-GW Joint]

Frankly - Yes, yes i do!

It is easy money for the ROSCO even on a fleet of 180's. Why? Because the money is easy. You can offer a wet or dry lease. Even a wet lease will earn you a decent reward.

A "wet" lease is financing a train, maintenance expertise and facilities , even a crew for the train. A dry lease is the finance of the train only.

Clearly the dry lease option transfers all of the risk onto the lessee while you sit back and count the cash!

But the point is they were unsuccessful trains and the Rosco took the hit while they were laid up in sidings, and on the repairs/upgrades needed.
Same with the 442s, 92s, Mk3 stock until recently etc etc.
It's not all coining in the cash.

 

[DarloRich]

But the point is they were unsuccessful trains and the Rosco took the hit while they were laid up in sidings, and on the repairs/upgrades needed.
Same with the 442s, 92s, Mk3 stock until recently etc etc.
It's not all coining in the cash.

they will make back more than they spend! I bet not one of them has ever failed to turn a decent profit.

 

[AlexS]

The Mk3/442s/90s etc were bought and paid for decades ago. Bar cost of refurbishment and exams which could be discounted if you no longer needed them or sold them on, they could have been cost neutral. But since someone had to make money out of them, they haven't been, and are being paid for all over again. The biggest travesty were things like the wrecked class 47s/mk2 coaches/slam door DMUs/EMUs which were effectively beyond life expired at privatisation still attracting a leasing fee at all!

 

[68000]

The Roscos made/make a lot of money out of some fleets, but do you fancy taking the risk on a fleet of 180s or Class 67s, or DDA compliance, or ETCS fitment?

ETCS fitment across all fleets will be funded by the taxpayer, not the ROSCO. This is currently happening with GSM-R

 

[HSTEd]

It paid cash and it all went on the public borrowing requirement, hence severely rationed.
The government has no business owning rolling stock any more than it owns aircraft or buses.
The market is "rigged", partly by DfT policy, but also by our unique gauge and technical requirements.
The Roscos made/make a lot of money out of some fleets, but do you fancy taking the risk on a fleet of 180s or Class 67s, or DDA compliance, or ETCS fitment?

The massive and chronic shortage of rolling stock that is unlikely to be solved any time soon means there is no risk.
The ROSCOs have the taxpayer over a barrel, if these trains are not fitted for ETCS or aren't rebuilt to be DDA compliant the taxpayer is left the choice between having no trains at all or paying for the modifications itself.

 

[dstrat]

It paid cash and it all went on the public borrowing requirement, hence severely rationed.
The government has no business owning rolling stock any more than it owns aircraft or buses.
The market is "rigged", partly by DfT policy, but also by our unique gauge and technical requirements.
The Roscos made/make a lot of money out of some fleets, but do you fancy taking the risk on a fleet of 180s or Class 67s, or DDA compliance, or ETCS fitment?

It would be a damn sight more efficient when you aren't taking HUNDREDS OF MILLIONS OF POUNDS out of the rail industry per year.

Lets not forget these sums are PROFIT - after any of the risk that you account for.

You've got to remember that these companies are investment vehicles - and that first motivation is to operate by cutting costs to enlarge profits - not by promoting expensive engineering to benefit the welfare of the railway.

If they operated to zero-profit condition that is assumed by actual competitive private markets then you'd have a point. But they don't. Get rid of them!

If anybody is going to extort money out of the TOCs, I'd rather it be the government, so reinvestment of all of this ghastly profit they make can actually be put into rolling stock as opposed to going towards somebody's private island.

 

[F Great Eastern]

http://www.angeltrains.co.uk/_common/updateable/documents/8fdc5993-fcac-423e-976e-c1914c7c187b.pdf

Look at the Revenue, Profit and profit margins on that. (page 7)

They have more gross profit than money they are spending.