The successful bidder in a sale of the concession to run Britain’s first high speed railway, High Speed 1, was announced today (5 November 2010) by Transport Secretary, Philip Hammond, as a consortium comprising Borealis Infrastructure and Ontario Teachers’ Pension Plan. The consortium will pay the government a total concession value of £2.1 billion to operate the line for the next 30 years in a sale which will help reduce the UK’s record debt and provide opportunities for new services on the line.
The consortium will take on the management of the 68 mile line which links London to the Channel Tunnel following completion later this month. The consortium will be responsible for running the line as well as stations such as St Pancras International, and the international stations at Stratford, Ashford and Ebbsfleet.
Philip Hammond said:
This is great news for taxpayers and rail passengers alike. It is a big vote of confidence in UK plc and a big vote of market confidence in the future of high speed rail. It also shows that the decisive action this government has taken to reduce the deficit is already paying dividends and that investors believe once again that Britain is open for business.
The £2.1 billion receipt exceeds the highest expectations for the sale and will make a welcome contribution to reducing the deficit.
I look forward to working with the new concessionaire and to the benefits passengers will see as High Speed 1 seeks to attract new services to the line, allowing British passengers to travel by high speed train to even more destinations across Europe.
This is an exciting time for rail travel and an important step in our plans to develop a truly national and international high speed network for British travellers.
The successful sale was managed for the government by London and Continental Railways (LRC) Ltd. Commenting on today’s announcement, LCR Chief Executive, Mark Bayley, said:
High Speed 1 is a unique, high quality infrastructure asset which speeds tens of thousands of people between London, Kent and continental Europe every day. I am very proud to have been associated with the business and its excellent management, and believe that we have achieved an extremely good price for HS1 through a very competitive process.
High Speed 1 is currently used by international Eurostar services between London and European destinations as well as domestic high speed services between London and Kent. The performance of the new operator of the line will be independently policed by the Office of Rail Regulation to ensure that rail passengers’ interests are effectively safeguarded. The government began a competition for rights to run the line in June 2010.
UBS acted as financial adviser to LCR on the sale of HS1. Citi advised DfT in relation to the sale.
Notes to editors
The winning bidder becomes the owner of HS1 Limited which has a 30 year concession to run the High Speed 1 line and stations. HS1 is currently a wholly-owned subsidiary of London and Continental Railways which is, in turn, owned by the Secretary of State for Transport. As part of the general financial restructuring undertaken in summer 2009 the then Secretary of State for Transport entered into a long-term Concession with HS1 to manage and operate the High Speed 1 railway between London and the Channel Tunnel.
HS1 receives revenues from track access charges paid by train companies using the line including Eurostar, which operates services between London and Paris, Brussels and other European cities, and Southeastern Trains, which operates domestic high speed services. Deutsche Bahn has also recently announced its intention to commence running high speed trains from London to Frankfurt via Brussels and Cologne as well as to Amsterdam in 2013.
The Secretary of State for Transport will continue to own the infrastructure of the railway and the freehold to the associated land. HS1 will have the rights under the Concession to sell access to track and stations on a commercial basis. It will have to preserve the nature and capacity of High Speed 1 as a high-speed railway and to maintain and renew it to modern standards.
The performance of HS1 under the concession will be independently policed by the Office of Rail Regulation. After 30 years, the current concession will cease and the government will once again enjoy unencumbered ownership of the assets, with the potential to re-let a further concession.
About Borealis Infrastructure
Borealis Infrastructure is the infrastructure investment arm of the OMERS Worldwide group of companies. It is one of Canada’s largest pension plans with approximately C$48 billion in net assets invested on behalf of approximately 400,000 active and retired municipal employees, and more than 900 local government employers in Ontario.
Borealis manages a diversified portfolio of infrastructure assets for OMERS including investments in energy, transportation, government-related services and institutional facilities. Borealis has over C$7 billion (£4 billion) invested in over 20 businesses. Its portfolio includes investments in Associated British Ports and Scotia Gas Networks in the UK and a significant majority interest in The Detroit River Rail Tunnel, a 2.6km freight railway tunnel which spans the business trade corridor between the US and Canada and connects Windsor, Ontario and Detroit, Michigan in North America.
About Ontario Teachers’ Pension Plan
With C$96.4 billion in assets as of December 31, 2009, the Ontario Teachers’ Pension Plan is the largest single-profession pension plan in Canada. An independent organisation, it invests the pension fund’s assets and administers the pensions of 289,000 active and retired teachers in Ontario.
Teachers’ direct investments in the UK include Camelot Group, Acorn Care and Education, Bristol International Airport, Birmingham Airport, Scotia Gas Networks, InterGen and Thomas More Square Estate, as well as substantial shareholdings in a variety of publicly listed companies. It has offices in Toronto, London and New York.