Network Rail courting markets for funding

Network Rail is seeking private sector investment in its electrical power assets to help find the funding it needs for future upgrades. The government owned rail operator has announced it is inviting interest from global investors and electricity network operators to inject more private capital as part of financial reforms promised in response to the scoping document of the Shaw Report.

HS1 chief executive Nicola Shaw's report advising reform of Network Rail's structure and financing is expected to be published on the day of the next government budget, 16 March. In her scoping report, Shaw said she would consider future funding for Network Rail through three key perspectives of the customer, devolution and growth. Alternative funding mechanisms are being considered to remove Network Rail’s reliance on direct public sector funding.

Network Rail's latest move to attract private investment is in addition to plans already underway to raise £1.8bn through property sales to help plug a £2.5bn gap in its now £40.5bn five year CP5 investment period. Cost and delivery overruns in NR's £11.8bn major projects improvements programme, particularly in connection with key electrification projects, led to commissioning of the Shaw report, plus appoinment of Sir Peter Hendy as NR chairman and his review of what had gone wrong. Subsequently, government has injected a further £700m to help meet the rest of the shortfall, with a number of electrification projects reprogrammed to complete during the next financial control period.

Financial reform was set out in NR's response to the Shaw Report scoping document, with further devolution of route businesses and accelerated use of technology to deliver more delivery capacity needed.

NR chief executive Mark Carne, said: “Continuing the historically high levels of investment in our railway that we’ve seen over the last decade is absolutely vital if we’re to provide the railway Britain needs in the years ahead. Our approach is all about financial discipline, with a renewed focus on our core activities while being open and innovative about new sources of finance to fund our growing railway. If there are investors or others with expertise in key areas who can help us do that, then we should look to embrace those opportunities.”