Long-term forecasting key to rail success

05 October 2015

Long-term life cycle costs key deciding factor for choice of supplier for $8.9bn UK rail scheme

  • Comprehensive evaluation of long-term costs critical to Agility Train’s win of UK rail project
  • The $8.9bn contract calls for the manufacture, supply, installation and maintenance of 122 train sets
  • The first of the 122 Hitachi express trains arrived in the UK in March 2015

A comprehensive evaluation of long-term costs was critical to Japanese/UK firm Agility Train’s success in winning the contract for the UK’s $8.9bn intercity express programme (IEP).

“A full consideration of the total life cycle costs of the project – from acquisition to servicing and operations and maintenance costs, which include the long-term cost of fuel and emissions – was the most important consideration that allowed us to win over [the] competition,” Alastair Dormer, global CEO for rail at Hitachi Rail Europe, told a breakfast briefing at MEED’s Mena Rail and Metro Summit in Dubai on 5 October.

The IEP was initially conceived in 2005 due to the need to replace the UK’s ageing trains with new units that would last for the next 30 years.

A feasibility study was initiated in 2005, with tenders released in early 2007. Agility Trains, a 70:30 joint venture between Japan’s Hitachi and the UK’s John Laing, was awarded the deal in 2009.

Financial close for the project was achieved three years later. Lenders included Japan Bank for International Cooperation (Jbic) providing £1bn ($1.5bn), European Investment Bank £235m, and Japan’s Nippon Export and Insurance (Nexi) £150m. Another £850 was provided as an uncovered facility by several banks including the UK’s HSBC and Japan’s Mizuho, among others.

The $8.9bn contract calls for the manufacture, supply, installation and maintenance of 122 train sets totalling 866 vehicles. Hitachi is to supply the initial train sets from Japan, with 112 to be produced at its £82m factory, which was recently inaugurated at the Newton Wycliffe in County Durham. The first of the 122 Hitachi express trains arrived in the UK in March 2015.

The sustained low oil prices have opened up discussions on public-private partnerships (PPPs) across the Middle East. Kuwait has recently updated its PPP framework and the passage of a similar law in Dubai provides strong evidence the private sector will likely play a bigger role in future infrastructure projects.

Stay informed with the latest in the Middle East
Download the MEED app today, available on Apple and Android devices

 

 

 

 

 

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications