New WCML contract 2023-2032 for Avanti (West Coast Partnership)

[Snow1964]

Just appeared on a stock market news page
3 years, extendable upto 9 years to 2032

FIRSTGROUP PLC

NATIONAL RAIL CONTRACT FOR WEST COAST PARTNERSHIP
FirstGroup plc (‘FirstGroup’ or ‘the Group’) is pleased to announce that a new National Rail Contract (‘NRC’) has been agreed with the Department for Transport (‘DfT’) for the West Coast Partnership (‘WCP’), which is a partnership between FirstGroup (70%) and Trenitalia UK Ltd (30%).

The WCP NRC comprises Avanti West Coast (‘Avanti’) and the West Coast Partnership Development (‘WCPD’), the shadow operator for the HS2 programme. Key terms of the new contract are as follows:

• The new NRC will commence on 15 October 2023, when WCP’s current contractual agreement ends.
• The contract is for nine years and has a minimum core three-year term to 18 October 2026, following which a further six years until 17 October 2032, subject to ongoing DfT approval.
• The NRC is a management contract under which the DfT retains all revenue risk and substantially all cost risk.
• WCP will earn a fixed management fee of £5.1m per annum to deliver the contract with the opportunity to earn a variable fee of up to £15.8m per annum based on a number of criteria. Punctuality and other targets required to achieve the maximum variable fee are designed to incentivise the highest level of performance. Fees are also linked to milestones in WCPD’s programme.

FirstGroup Plc - National Rail Contract for West Coast Partnership

FIRSTGROUP PLC NATIONAL RAIL CONTRACT FOR WEST COAST PARTNERSHIP FirstGroup plc is pleased to announce that a new National Rail Contract has been agreed with the Department for Transport for the...

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Additional background on financial terms of the WCP National Rail Contract

• The DfT retains all revenue risk, and substantially all cost risk up to the agreed annual business plan budgetary levels, with contractual change mechanisms that allow the annual budget to be increased for items outside of the operating company’s control, like inflation, or changes requested by the DfT.
• The Variable Fee is scored against five performance categories (Operational Performance, Customer Satisfaction, Financial Performance, HS2 Shadow Operator Delivery and HS2 Shadow Operator Financial Management). There is a mix of quantitative metrics and qualitative assessments with three levels (‘below acceptable’, ‘acceptable’, ‘good’) – an ‘acceptable’ rating results in approximately 65% of the Variable Fee element being payable.
• The fixed fee and variable fee potential remains flat for the contractual term and is only subject to escalation only after the core term and only if CPI inflation is outside agreed bands.
• The NRC makes provision for additional incentive fees to be earned for participation in significant industry change projects outside normal operation to be agreed between WCP and the DfT.
• Combined with operating Avanti West Coast, WCP also acts as the shadow operator for the HS2 programme. The shadow operator role involves the development, mobilisation and the eventual operation of high-speed services.
• The Group is obliged to retain its share of the £45m parent company support and £10m Performance Bond for the previous WCP agreement until final settlement of any net assets or liabilities between WCP and the DfT relating to it. Thereafter, the Group’s contingent capital reduces to its share of the £14m in total, half of which is bonded.
• WCP will continue to be fully consolidated in the Group financial statements, with the net cost of operations and capex to be funded in advance by the DfT.
• The Group financial statements for FY 2024 will include Right of Use assets of c.£0.3bn recognised under IFRS 16 rules. Other impacts under IFRS 16 compared to an IAS 17 basis include EBITDA +c.£160m, EBIT +c.£10m and interest cost +c.£10m.

EDIT : DfT version now available

Avanti West Coast awarded long-term contract after significant improvements for passengers

New long-term rail contracts awarded to Avanti West Coast and Cross Country.

www.gov.uk

 

[Dan G]

Just to be clear it's a twofer statement from DfT, West Country and CrossCountry

Starting on 15 October 2023, Avanti West Coast’s new National Rail Contract will have a core term of 3 years and a maximum possible term of 9 years. After 3 years, the Transport Secretary can terminate the contract at any point with 3 months’ notice.

...

Meanwhile, the department has also today awarded Cross Country a new National Rail Contract, with a core term of 4 years and a maximum possible term of 8 years.

The contract will also begin on 15 October

I wonder why one is 3-9 years and the other 4-8 years.

 

[Danfilm007]

I wonder why one is 3-9 years and the other 4-8 years.

HS2 provisions included in the AWC one maybe?

 

[LNW-GW Joint]

HS2 provisions included in the AWC one maybe?

DfT don't want multiple contracts expiring at the same time, and there is the HS2 connection as you say.
I should think both contracts will be revised when (if) "GBR" becomes the contracting body.
If both contracts run their full terms, renegotiation would be more than 2 election terms away, which limits Labour ambitions.
The DfT announcement is illustrated by a picture of a soon-to-be-discarded Avanti Voyager at New St...

 

[Kingham West]

Unless the fleet is expanded , it’s more of the same , which is in many cases , not good enough..
More overcrowding in the leisure sector , is not the way to grow the rail industry.

 

[Snow1964]

Unless the fleet is expanded , it’s more of the same , which is in many cases , not good enough..
More overcrowding in the leisure sector , is not the way to grow the rail industry.

The Ministers speech says

The contract will also begin on 15 October and includes additions to help improve services, such as the replacement of the now-retired High Speed Trains with more modern equivalents,....

Avanti West Coast awarded long-term contract after significant improvements for passengers

New long-term rail contracts awarded to Avanti West Coast and Cross Country.

www.gov.uk

So if taken literally all the retired HSTs will get a direct replacement. But time will tell in this is waffle or fact

 

[yorkie]

This thread is for non-speculative discussion regarding the announcement of the new Avanti contract

Please use an alternative thread to discuss anything that is speculative and/or related to XC and/or any other topic, thanks

The following threads may also be of interest:

Avanti speculation:

New Avanti Contract: speculation, predictions and possibilities

I'm sure this has been talked about before, but do we suppose that HS2 will be operated along the lines of "Avanti High Speed" to compliment "Avanti West Coast"? Less clear now because of the whole GBR debacle, I suppose.

www.railforums.co.uk

XC contract news/updates:

New XC contract - news & updates (not speculation)

From Arriva’s Press Release on CrossCountry: Under the new contract, CrossCountry is also planning enhancements to its timetable, including a new daily direct service between Cardiff and Edinburgh. The company will also explore the reintroduction of services between Cambridge and Stansted...

www.railforums.co.uk

XC speculation:

XC desperately needs more rolling stock

The DfT should be applauded for making a wise decision to dispense with expensive-to-run relics from the past. It does make sense to remove the XC HSTs, however they should be replaced by other trains, rather than a cut in capacity on an operator that is already short on that. Fortunately...

www.railforums.co.uk

 

[Bluejays]

Hasn't had a positive impression on the first group share price. Maybe the extension was expected and had already been factored in.


Bit of a turnaround for them, looking like losing it to a potential 9 year extension. Andy Burnham must be spitting feathers.

 

[LNW-GW Joint]

Hasn't had a positive impression on the first group share price. Maybe the extension was expected and had already been factored in.
Bit of a turnaround for them, looking like losing it to a potential 9 year extension. Andy Burnham must be spitting feathers.

I don't think it was ever likely that WCP would be "nationalised", as it doesn't fit the HS2 agenda with Trenitalia in there.
The unions seem unimpressed and are flinging insults around, but I'd say Avanti has turned the corner.
Now we just want the missing services restored (Chester/North Wales and Preston-Glasgow mainly).

 

[Bluejays]

I don't think it was ever likely that WCP would be "nationalised", as it doesn't fit the HS2 agenda with Trenitalia in there.
The unions seem unimpressed and are flinging insults around, but I'd say Avanti has turned the corner.
Now we just want the missing services restored (Chester/North Wales and Preston-Glasgow mainly).

Does annoy me a bit when the unions start chirping about 'shareholders'. Everyone who works for first group has had the chance to become a shareholder at very advantageous terms. So this distinction between staff and shareholders just isn't there in many cases, they are 1 and the same.

 

[RPI]

Does annoy me a bit when the unions start chirping about 'shareholders'. Everyone who works for first group has had the chance to become a shareholder at very advantageous terms. So this distinction between staff and shareholders just isn't there in many cases, they are 1 and the same.

Exactly, I've always done Buy as you earn and save as you earn (which has just returned) and made plenty of money along with legitimate tax savings!

 

[185]

So this distinction between staff and shareholders just isn't there in many cases, they are 1 and the same.

As a former FG shareholder, I disagree. Staff put money into the scheme in the mid 2000s, only to find that the shortsighted, corner cutter bean counters running the firm pushed the business into near collapse - share price fell from £8 to 99p. Even with the advantageous rate, staff still got burnt. Most sold out to cut their losses.

If I recall, FG staff make up less than 0.2% of shareholders. Negligible enough to consider it irrelevent.


For me the biggest scandal is why this new state government awarded contract was not advertised as a public, open tender, as legally required in every other public body. Do FG also make PPE? Ahem.

 

[LNW-GW Joint]

For me the biggest scandal is why this new state government awarded contract was not advertised as a public, open tender, as legally required in every other public body. Do FG also make PPE? Ahem.

Before GBR, or whatever organisation emerges, DfT are not in a position to run a long-winded competition for any TOCs.
They are using a loophole in current legislation to do direct awards multiple times or for periods longer than 2 years.
On top of which they can't offer financial terms which are of interest to the private sector, when they don't know themselves what the context will be in 1-2-5 years from now.

The OLR TOCs, and Scotrail and TfW, have all essentially got indefinite direct awards without competition.
TOC management contracts, at the moment, are much the same whether you are public or private sector.

 

[Clarence Yard]

185, you are obviously referring to Dean Finch, the power behind the throne at FG at the time, who thought the American adventure was a good punt and all but sunk FG in the process. It is a major miracle that it survived.

The Government has gone through the whole EMA/ERMA/NRC contract process because it wanted to start retendering when everything settled down. So, in the interim, it is keeping the private sector interested in rail ops by extending their (now management only) contracts. It is virtually free money for the existing owning groups, but much less than they would have earned through the old franchise system.

The civil servants at the DfT have been rather cunning in the way these NRC’s have been constructed so, if they want to do so, Labour can roll them all up into OLR vehicles/GBR in the next parliament, at no cost. Just look for the Core Term Expiry Dates - that is the earliest they can terminate each one and then any date after that, usually at three (28 day) periods notice.

 

[greyman42]

As a former FG shareholder, I disagree. Staff put money into the scheme in the mid 2000s, only to find that the shortsighted, corner cutter bean counters running the firm pushed the business into near collapse - share price fell from £8 to 99p. Even with the advantageous rate, staff still got burnt. Most sold out to cut their losses.

That will have applied equally to staff shareholders or non staff shareholders, so the point stands. The value of shares can go up and down and you may not get back what you have invested.

If I recall, FG staff make up less than 0.2% of shareholders. Negligible enough to consider it irrelevent.

That figure is true of most companies that have share schemes.

 

[frodshamfella]

Does this mean, we will have the long promoted 30 min service London to Liverpool ?

 

[Bletchleyite]

Does this mean, we will have the long promoted 30 min service London to Liverpool ?

That's waiting on the 807s and always was.

 

[dk1]

Does this mean, we will have the long promoted 30 min service London to Liverpool ?

It was stated in the extension that the additional Liverpool services will only start when the time is right. No definate commitment from what I understand.

 

[LNW-GW Joint]

And power supply upgrades, and ORR sign off of the rights.

Where is there a power supply shortfall on London-Liverpool?
I thought the ATF upgrade fixed all that, at least as far as Shap.
Train frequency won't be any higher than applied in the peaks before Covid.

 

[Master29]

What do they mean about retired High speed trains here exactly? HST's? AWC never used them.

 

[LNW-GW Joint]

What do they mean about retired High speed trains here exactly? HST's? AWC never used them.

BR/Virgin did though, on Euston-Holyhead services for about a decade before Voyagers arrived.
They also made it to Blackpool, and when Blackpool was dropped they were used briefly on Euston-Manchester services.
The trains came out of the GW pool at Old Oak, working from there to and from Euston every day for the WCML services.

 

[dk1]

Virgin did though, on Euston-Holyhead services for about a decade before Voyagers arrived.
They also made it to Blackpool, and when Blackpool was dropped they were used briefly on Euston-Manchester services.
The trains came out of the GW pool at Old Oak, working from there to and from Euston every day for the WCML services.

Remember the power car being named Blackpool Rocks.

 

[43096]

What do they mean about retired High speed trains here exactly? HST's? AWC never used them.

It's referring to the Cross Country contract award - below is the extract from the DfT release:

Meanwhile, the department has also today awarded Cross Country a new National Rail Contract, with a core term of 4 years and a maximum possible term of 8 years.

The contract will also begin on 15 October and includes additions to help improve services, such as the replacement of the now-retired High Speed Trains with more modern equivalents, refurbishment of existing Cross Country train fleets, and the introduction of direct daily services between Cardiff and Yorkshire, the North East and Edinburgh from December 2024.

 

[yorkie]

For WCML power supply discussion please see/use the following thread:

WCML Power Supply & Auto Transformer Upgrade

Bringing this thread up again, I'm wondering what the current process of the WCML Power Supply Upgrade is, having noticed ATF supports up on sections of the route (sans wires) for a number of years now. I know Whitmore - Weaver Jct is waiting on Crewe ATFS being installed/commissioned, and I...

www.railforums.co.uk