R A I LT R AC K - The Railways Archive

developing
We are ready to invest
the significant capital
needed to deliver the
outputs, and to take
on the associated
market risks
74
6.9 continued
In establishing a categorisation of schemes for discussion with
partners and other stakeholders, we have considered two
fundamental issues.
• Whether we expect to be sufficiently in control of the
sale of outputs,with the value of sales linked to end-user
demand.
If so, we propose that the arrangements we enter into with
the user should be capable of reflecting a transfer of an
appropriate amount of the demand risk to us,and that we
should be able to earn a corresponding higher return on the
capital invested,subject to the overall success of the scheme .
Where this is not possible, either because the transaction
costs of establishing a satisfactory risk transfer outweigh the
benefits of such an ar rangement,or because of the nature of
the outputs is such that it is difficult for us to effectively
control their use, we propose a 'contractor' model in which
we continue to invest and retain construction risk, but
recognise that we would earn a standard rate of return.
• Whether we and our customers are likely to be able to
establish a financially viable business case for each
investment without public sector funding.
Where we believe this to be the case, this Plan assumes that
we will conclude an agreement based on the features
described in the paragraph above.We plan to deliver such
schemes without the need for agreements with public sector
funders to provide additional financial support.Where a
viable business case cannot be established on this basis, but
the proposal provides outputs which enhance the capability
or capacity of the network to meet our forecasts of
underlying volume growth potential and/or customer- and
funder-reasonable requirements, we will need to agree the
funding of the commercial deficit.However, the need for
additional funding does not of itself lead to a position where
we could not take demand risk.On a scheme-by-scheme
basis,the features described under the first criteria will still
apply to varying degrees and the partnership arrangement
involved in each case will be established to allocate
appropriate shares of risk.
Explaining the packages
On the following page, we give a summary of the
enhancement proposals that we intend to deliver to achieve
our vision.These represent a significant increase in
investment,compared to our previously published plans.
These schemes,and the public sector implications,require us
to conclude arrangements with the Government and the
Regulator about the framework which allows us to share
more in long-term demand risk and which also reflects the
choice of options for network enhancement that require
additional funding. We look forward to its completion during
1999 so the results can be reported in the 2000 NMS.
The costs set out in this Plan are our current best view
but will be subject to refinement during the detailed scheme
development stages.
To simplify presentation, we have categorised proposed
schemes as described opposite .These categories represent
our view of how each sits against the criteria of risk-sharing
and funding requirements.The categories are carried through
into the relevant part of the routes section of this
document.
Way forward
We believe all of the enhancements set out in this Plan are a
part of the total necessary to deliver our vision and our
customer- and funder-reasonable requirements.Further
schemes for later years of the ten-year plan will be
developed as our understanding of the growth profile
emerges.
We are ready to invest the significant capital needed to
deliver the outputs,and to take on the associated market
risks.
We shall work with the Shadow Strategic Rail Authority
and the Rail Regulator to devise the frameworks necessary
to allow this all to happen.