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Upside Downside
04 February 2012
Britain’s next slate of rail projects will require billions of pounds of investment. Government now needs to settle on a viable funding and financing mechanism. By Antony Collins.
Recent increases in UK rail fares have sparked anger among the country’s travelling public, but government wants to point to the £70 billion ($110.9 billion) price tag attached to delivering the pathfinder rail projects it has promised for the current decade.
The main items on the agenda include Borders Railway, Intercity Express Programme (IEP), Thameslink rolling stock, Crosslink and High Speed 2 (HS2). These projects have attracted the attention of the project finance market because PFI-derived financing structures have been an increasingly prevalent way to pay for that £70 billion ($110 billion) shopping list. But a series of failed concessions has created a legacy of cynicism in the market.
“The main issue with any UK rail PFI is the need to ring-fence the project and define the interface risk clearly, such as providing the land and right of way,” says Manish Gupta, head of Ernst & Young’s transport infrastructure practice....
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