A clear message from the Hansford Review is that the rail sector must provide strong assurances to private capital to drive fresh investment into the rail network.
Investors need greater confidence in the outcomes, as well as reassurance that the problems which plagued some past public-private partnerships initiatives can be avoided.
Network Rail chief executive Mark Carne’s comments to the Rail Industry Association this month suggest the operator is meeting this challenge head on.
The commitment to producing a pipeline of PPP projects by the end of the year is promising. A forward view of opportunities that the private sector can target and plan for is essential – not only to drive greater investor interest, but also to support the wider industry in developing capability and capacity.
Great and small
Likewise, it is good to see reference to projects of a range of sizes; small and medium-sized schemes are important for regional and local growth and could attract a different type of investor as well as a variety of supply chain partners.
This spectrum of projects should also logically lead to consideration of different funding solutions – from design-and-build through to the transfer or operational management of an asset.
“Mr Carne wants potential investment partners to become the driving force behind standardised service-level agreements – this, too, is encouraging”
The challenge is to balance the risk transfer between network operator and investor, and this is just one area where the early development fund recommended by the Hansford Review has an important role to play.
Mr Carne is clear that he wants potential investment partners to become the driving force behind standardised service-level agreements – this, too, is encouraging.
As we move forward, we also need to see strong programme planning and greater whole-life consideration of rail projects.
Dealing with ‘scope creep’
To overcome a history of ‘scope creep’ that has frustrated private sector investors in the rail sector, there needs to be a more collaborative approach from the outset as to what falls within or beyond the scope of a contract.
Honesty, clarity and flexibility are important and it benefits everyone to build trust from the beginning in a long-term partnership. The set-up stage is crucial in creating the right conditions to drive strong performance and – ultimately – productivity throughout construction.
Private investors in rail are likely to be looking for returns over decades, and taking a whole-life view of an asset should help improve certainty and predictability of returns – this represents a golden thread running through Hansford’s 12 recommendations. One period that arguably needs more attention is the transition from the construction to operational phase.
It’s positive to see industry leaders pulling in the same direction to drive private sector investment in the UK rail network. It’s a good start in building greater confidence among potential new partners.
Now, we need to work together to keep up this momentum.
Sacira Coric is director of infrastructure and project finance advisory at Turner & Townsend