The Strategic Business Plan: the challenges and the figures

Transcription

1 The Strategic Business Plan: the challenges and the figures Paul Plummer Director, Planning & Regulation

2 Opportunity to build on progress

3 Ten year growth in passenger miles Source: ATOC % increase Great Britain Ireland Belgium France Spain Germany Denmark Switzerland (SBB) Holand (NS) Finland Hungary Italy Austria Norway Czech Republic Poland Portugal Sweden Country

4 Ten-year growth in freight tonne miles % increase Source: ATOC Great Britain Switzerland (SBB) Austria Hungary Germany + Portugal Belgium Finland Spain Italy France Czech Republic Poland Ireland Country

5 Developing the SBP together

6 Objectives of the plan Strategy for Network Rail & the industry: which delivers the HLOS outputs set by DfT and Transport Scotland; meets the reasonable requirements of our customers and funders; is consistent with long-term strategies for the railways; and is supported by the industry as a whole.

7 Overview of HLOS outputs England and Wales: Safety outputs (also apply to Scotland) Performance improvement Demand to be accommodated by strategic route and peak passengers into major urban centres Specified enhancement schemes Scotland: Tier 1 maintain today s railway with improved performance Tier 2 deliver specified enhancements Tier 3 develop further enhancements

8 Safety Rail is recognised as the safest form of transport HLOS metric 3% reduction in risk to passengers and workforce Engagement with industry: RSSB Railway Strategic Safety Plan covers Consultation with operators on their plans Key issues for improvement include: Reduced train accident risk Reduction in slips, trips and falls Improved workforce safety Plans expected to exceed HLOS target

9 Punctuality and reliability HLOS reliability outputs HLOS targets further step change in passenger reliability We also plan to improve freight reliability by 25% Sector Long distance London & SE Current PPM 2013/14 PPM Severe delay reduction 85.1% 92 % 36 % 89.3 % 93 % 21 % Regional 88.1 % 92 % 27 % Scotland 89.4 % 92 % -

10 Punctuality and reliability Industry engagement: National Task Force Individual passenger operators Freight operators Performance trajectory based on: Detailed network-wide analysis Initial analysis of local issues Long list of potential improvement initiatives Further work is required to: Refine these plans particularly at a local level Build a longer-term JPIP process We will provide update in April

11 Punctuality and reliability CP4 train reliability (%) LSE Regional Long distance E&W Scotland Current PPM Projected 2008/09 PPM Network Rail baseline improvements TOC franchise improvements Timetable developments Impact of traffic growth (0.4) (0.3) (0.2) (0.4) (0.2) Impact of major works (0.6) (0.2) (0.3) (0.4) - Projected 2013/14 PPM (without further investment) HLOS forecasts Current gap (requiring further investment) (0.1)

12 Capacity Specified HLOS schemes are included in our plan E&W HLOS effectively specifies peak capacity at end of CP4 Our plans were developed in consultation with operators: Route Utilisation Strategies Specific dialogue on SBP We identify interventions which increase peak capacity Incremental vehicle requirements Infrastructure requirements More could often be provided with just more vehicles Our plan should help inform government rolling stock plans We also identify further potential opportunities

13 Stations A vision for significant improvements in stations Delivered in partnership with operators at a local level to: Prioritise and integrate our plans Identify the best means of delivery Leverage additional sources of funding Long-term stewardship requires significant funding There are significant opportunities for improvements National Stations Improvement Programme Access for All Programme Development of major stations Third party funded improvements Our plans will be much more transparent

14 Freight We fully support the freight industry in expanding rail use We have one network which serves multiple users: Performance, capacity and access initiatives benefit freight directly Freight operators are directly affected by efficiency improvements Also substantial freight-specific investment Southampton to West Coast scheme Cross-London gauge and capacity improvements Peterborough to Nuneaton gauge enhancement Funding for the Strategic Freight Network provides an opportunity to build on this We will work with the rest of industry to develop plans by April 2008

15 Seven day railway Previously encouraged to lengthen possessions to cut cost Consensus now that running more services is better Committed to greater discipline in running working timetable Strategy based on half capacity railway when demand is low Complemented by a range of operational and engineering initiatives to reduce our access requirements Additional costs from reduced access on West Coast in plan We identify potential further initiatives and assume 300 million will be spent in CP4 The immediate benefit will flow to operators and users

16 Sustainability Developed approach to sustainability with the rest of the industry This plan targets 20% reduction in carbon emissions from nontraction energy We are developing traction targets with operators We will provide further details in our Corporate Social Responsibility report

17 CP4 Enhancement spend Type of project CP4 m Description DfT Baseline 1,221 King s Cross ( 153m), Access for All ( 197m), Stafford / Colwich remodelling ( 483m), Bletchley / Milton Keynes ( 116m), Power Supply Upgrade ( 272m) DfT Specified 4,036 Thameslink ( 2589m), Birmingham ( 134m), Reading ( 455m), IEP ( 260m), Stations ( 156m), NRDF ( 234m), Strategic Freight Network ( 208m) DfT HLOS 1,978 Capacity schemes inc platform lengthening, upgrading power supply, junction capacity, route enhancements, station capacity ( 1324m), performance schemes ( 368m), risk adjustment ( 287m) Other potential 447 Projects not required to deliver HLOS outputs but offer value for money opportunities during CP4 plus CP5 scheme development funds for CP4 Performance projects 400 Projects to deliver 92.6% PPM Seven day railway 270 Projects to support move towards seven day railway Total DfT funded 8,353 Tier 2 schemes 318 Airdrie-Bathgate ( 145m), GARL ( 170m) and Borders ( 3m) Tier 3 schemes 13 Development of Tier 3 schemes Small projects fund 20 Seven day railway 30 Projects to support move towards seven day railway Total TS funded 380 TIF projects 117 Round 1 TIF projects such as Peterborough-Nuneaton Third party projects 779 Total 9,630

18 Investment across Britain

19 Producing the plan Policies Expenditure Efficiencies Infrastructure cost model Route Strategies Outputs

20 Efficiency improvement Targets need to be challenging but realistic: Our projections are based on detailed bottom-up analysis They also take account of top-down studies 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% We assume: 0% 2003/ / / / / / / / / / /14 30% by end CP3 Further 18% in CP4 in most areas Offset by 1% pa real input price increase

21 Efficiency issues Understanding the business Incentivising success Improving on many fronts Progress in CP3 Post-Hatfield cost increases Internal benchmarking Benchmarking against other railways Comparison with other regulated businesses Input price trends

22 Expenditure in E&W and Scotland TOTAL EXPENDITURE AND SINGLE TILL INCOME CP3 ISBP SBP (E&W) SBP Scotland SBP Total Controllable opex 4,240 3,854 3, ,771 Non-controllable opex 1,632 2,115 1, ,842 Maintenance 5,868 4,765 4, ,819 Renewals 14,232 10,846 9,966 1,396 11,362 Discretionary investment Renewals deferred from CP Enhancements 3,306 8,250 8, ,733 Single till income (2,536) (2,505) (2,156) (177) (2,333) Total 26,967 27,424 26,674 2,645 29,319

23 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Long term expenditure CP3 CP4 CP5 2004/ / / / / / / / / / / / / / /19 CP6 Av CP7 Av m (2006/07 prices) Renewals Maintenance Controllable OPEX Non-controllable OPEX Enhancements

24 Structure of charges Extensive further analysis and consultations Details provided in supporting document Industry workshop on 29 November Access charges Usage charge Coal spillage charge Freight-only line charge Capacity charge Electric traction charges Station charges Schedule 8 Schedule 4 Fixed charges

25 Financial issues Building blocks: Regulatory Asset Base (RAB) Amortisation / depreciation Rate of return / risk buffer / ring-fenced fund Taxation The treatment of risk is a key issue: Allocation of risk Contingencies We assume profits are reinvested in the railway We plan to raise finance without government guarantee

26 Challenges The challenges are clear: Improving efficiency on top of 31% in CP3 Improving reliability after reaching 90.4% in CP3 Delivering 2 billion p.a. enhancements plus renewals Moving towards a seven day railway This depends fundamentally on: Our people s ability to achieve change Effective partnership with the rest of the industry A regulatory regime which enables us to deliver

27 Next steps This is an (important) input to the review: Detailed challenge and review by ORR Continued dialogue with the rest of the industry Update in some areas in April Draft conclusions in June Final conclusions in October Control Period 4 Business Plan in March 2009 Beyond the review we need to build on progress: To deliver the plan in an effective partnership Retain a focus on longer-term planning