FirstGroup eyes long-term First Great Western deal

[Woody]

British transport operator FirstGroup (FGP.L) said it would not take up the option to extend its First Great Western franchise for three years beyond 2013 so it can bid for a longer-term deal.
http://uk.reuters.com/article/2011/...dType=RSS&feedName=companyResultsNews&rpc=401

 

[Masbroughlad]

vs Virgin, Stagecoach, Abelio, Arriva, DB, SNCF, Go-Ahead........?????

Should be a good fight for this one. Given First don't want an extension, when does the franchise go out to initial bidders?

 

[185]

If they are eyeing it, can I be the first to poke them in the eye with a pencil?

 

[LNW-GW Joint]

when does the franchise go out to initial bidders?

It's running 12 months behind ICWC so they should start the process for GW by the end of this year. Might clash with ICEC unless they defer it.

Clever really. They would lose heavily on the 3 year GW extension, and backing out forces new franchise terms which First (or whoever) will ensure they benefit from.
So the taxpayer loses.

There is quite a lot of performance detail on First's franchises in their press statement (particularly the presentation):
http://www.firstgroup.com/assets/pdfs/investors/presentations/FINAL_PRELIMS_2011_presentation.pdf

The ICWC spec/ITT should have been published by now.
I wonder what is holding it up?

 

[tbtc]

vs Virgin, Stagecoach, Abelio, Arriva, DB, SNCF, Go-Ahead........?????

Should be a good fight for this one

I'd be interested in seeing how Stagecoach/ DB etc are going to run the franchise without the HSTs owned by FGW...

 

[Masbroughlad]

I'd be interested in seeing how Stagecoach/ DB etc are going to run the franchise without the HSTs owned by FGW...

If First don't get it, guess there is no point keeping them and they would sell them to the new franchisee.

 

[imagination]

If First don't get it, guess there is no point keeping them and they would sell them to the new franchisee.

Unless First got ICEC?

 

[ainsworth74]

If First don't get it, guess there is no point keeping them and they would sell them to the new franchisee.

I wouldn't expect them to sell them to be honest too useful to just give up. I would expect them to lease them to the new franchise acting basically as a mini ROCSO. Either that or deploying them with another First franchise but I don't think there is anywhere logical really.

 

[TomJ93]

They're a bartering chip.

 

[WatcherZero]

I wonder if theyve calculated how much of a reputation premium Dft will put on losing all that revenue from the 3 years under previous franchise. First is within their rights to do it but doesnt mean Dft will like it. Look at what happened after the East Coast fold, they were frozen out of West Coast bidding.

 

[TEW]

This isn't an early termination, or First walking away from the franchise. It is simply not taking up an entirely optional extension. They were never under an obligation to run the franchise for the extra three years, and the DfT knew that when the franchise agreement was signed.

 

[Zoe]

Don't forget that if First waited until 2016 and the IEP they wouldn't have their HST tump card to play. By having the franchise relet in 2013 the fact that First own the HSTs will put them in pole position to retain the franchise. I doubt the dft would want to risk First not letting another company use the HSTs.

 

[tbtc]

I wouldn't expect them to sell them to be honest too useful to just give up. I would expect them to lease them to the new franchise acting basically as a mini ROCSO. Either that or deploying them with another First franchise but I don't think there is anywhere logical really.

London - Hull? Send the 180s to TPE? Scotrail?

Edinburgh - Aberdeen? The existing Scotrail service has fewer stops than the East Coast one (avoids Inverkeithing, Kirkcaldy), so would be well suited to HSTs

 

[Zoe]

Edinburgh - Aberdeen? The existing Scotrail service has fewer stops than the East Coast one (avoids Inverkeithing, Kirkcaldy), so would be well suited to HSTs

An extra HST from Edinburgh to Inverness would be useful or possibly even an HST operated Glasgow to Aberdneen or Inverness service although these would be a bit difficult to as they would have to run from Glasgow Central.

 

[Darandio]

I'd be interested in seeing how Stagecoach/ DB etc are going to run the franchise without the HSTs owned by FGW...

Do you really think there isn't some sort of legislation in place to cover this eventuality, despite FGW owning them?

It just couldn't happen, giving the contract to someone else but sadly informing them that the majority of their required stock is not available for use.

It must be covered, whether in an agreement with First Group that they must pass them over for lease in return for some sort of compensatory payment. Or, First Group are obligated to sell them to one of the main ROSCO's should they lose the franchise.

 

[DarloRich]

If First don't get it, guess there is no point keeping them and they would sell them to the new franchisee.

not unless they sell them back to one of the RosCos who the lease them to say EC!

Hang on that might get some 50's back......................................

 

[Masbroughlad]

Do you really think there isn't some sort of legislation in place to cover this eventuality, despite FGW owning them?

It just couldn't happen, giving the contract to someone else but sadly informing them that the majority of their required stock is not available for use.

It must be covered, whether in an agreement with First Group that they must pass them over for lease in return for some sort of compensatory payment. Or, First Group are obligated to sell them to one of the main ROSCO's should they lose the franchise.

If they own them, I would imagine that's that. They can do what they like with them! I actually think they will sell them on.

Or maybe other companies will bid and put provision in for new/alternative stock? How many HSTs do FG actually own themselves?

 

[Zoe]

Do you really think there isn't some sort of legislation in place to cover this eventuality, despite FGW owning them?

It just couldn't happen, giving the contract to someone else but sadly informing them that the majority of their required stock is not available for use.

It must be covered, whether in an agreement with First Group that they must pass them over for lease in return for some sort of compensatory payment. Or, First Group are obligated to sell them to one of the main ROSCO's should they lose the franchise.

Or they could just avoid the issue by giving First a new 15 year franchise. This may be what First are gambling on by having the franchise relet realy and if it pays off they will have a lucrative 15 year franchise.

 

[Darandio]

If they own them, I would imagine that's that. They can do what they like with them! I actually think they will sell them on.

Or maybe other companies will bid and put provision in for new/alternative stock? How many HSTs do FG actually own themselves?

But that stock is already forthcoming, to replace the HST's. If it wasn't, then any such procurement would have had to be already underway given the lead time to design/create and build. There is not much chance of any alternative stock from elsewhere, we have other TOC's beggind for whatever is available anyway!

I don't think it is quite as clear cut as FGW own them and "thats that". There is no doubt that they do own them, but its the terms and conditions of what they own which I am more interested in. Presumably DAFT would have had some input on the sale anyway, given franchise commitments etc and most likely put conditions in place to make sure any issues are avoided.

Like I said, the franchise is not going to be given to someone else only for them to be told they cannot fulfil their new franchise commitments because First have refused use of the stock.

Or they could just avoid the issue by giving First a new 15 year franchise. This may be what First are gambling on by having the franchise relet realy and if it pays off they will have a lucrative 15 year franchise.

Well yes, and First will be banking on that but I really don't think there is an issue anyway, it must be already covered contractually somewhere. The most likely scenario is that First will lease the stock to the operator for a handsome yearly sum.

 

[Zoe]

Like I said, the franchise is not going to be given to someone else only for them to be told they cannot fulfil their new franchise commitments because First have refused use of the stock.

That's why I very much doubt the franchise is going to anyone else.

 

[Darandio]

That's why I very much doubt the franchise is going to anyone else.

I am not so sure, their record hasn't been fantastic but at the same time, could any other operator have done it better in the circumstances?

I don't see it as cut and dried because of the stock ownership issue though. As I have said, there must be some sort of provision already in place for this.

Also, because of that situation, expect legal challenges from the rival bidders if FGW are given the new franchise, surely they will be wanting to know if it was cut and dried in the first place.

 

[Masbroughlad]

That's why I very much doubt the franchise is going to anyone else.

Crafty/careful planning on their behalf if that is the case. I am sure that other bidders will have something to say about it!

 

[Zoe]

Crafty/careful planning on their behalf if that is the case. I am sure that other bidders will have something to say about it!

Exactly, if they wait until 2016 they won't have the trump card to play. By playing their trump card now they can win themselves a very lucrative 15 year franchise.

 

[Darandio]

Crafty/careful planning on their behalf if that is the case. I am sure that other bidders will have something to say about it!

And is it that easy that other TOC's could potentially purchase "their" stock from the relevant ROSCO's to protect their future franchise interests?

In reality, it won't happen due to the DAFT involvement in stock procurement but how did FGW manage to buy their stock anyway? Surely DAFT allowed it and therefore put plans in place for protection of future franchises?

 

[Zoe]

In reality, it won't happen due to the DAFT involvement in stock procurement but how did FGW manage to buy their stock anyway? Surely DAFT allowed it and therefore put plans in place for protection of future franchises?

As I remember it, the dft were caught off guard with that one and were not at all impressed. As for protection of future franchies, I don't think there is much the dft can do.

 

[Helvellyn]

It probably suits both First Group and the Government that First aren't taking up the three year extension. Why? because it is the stated policy of the Government that it wants to see longer term franchise deals, up to 15-20 years. That will give the franchise holders more incentive to make major investment because they have a long time period in which to realise the benefits of that investment. (Look at the Evergreen schemes under Chiltern, and the proposed resiting of Clapham Junction as a new fully accessible, 12-car capable station by Stagecoach under the aborted 20-year franchise).

The outcome of the 2015 election is obviously unknown, but the Government will want as many franchises let as possible under the new terms. First will benefit from bidding on a longer franchise, and save money by not taking up the franchise extendion in 2013 under the existing terms. However, they will not be a shoe-in for the longer franchise - I expect to see some interesting (and even radical) bids on all of these given that the price for a long franchise will include major investment commitments.

 

[TEW]

It wasn't FGW who bought the HSTs. The parent company, First Group, bought lots of the off-lease HST stock. At the time nobody was using it.

 

[Zoe]

I am not so sure, their record hasn't been fantastic but at the same time, could any other operator have done it better in the circumstances?

Actually other than the first year or so, FGW have a very good record, they were able to completely turn things round. There were some unpopular cuts at the start of the franchise but these were actually specified by the SRA back in 2004/2005.

 

[YorkshireBear]

I thought FGW had been one of most improved operators recently?

 

[cj_1985]

It wasn't FGW who bought the HSTs. The parent company, First Group, bought lots of the off-lease HST stock. At the time nobody was using it.

exactly... if it had been FGW that had purchased the HST sets then they would be required to transfer ownership at the end of their operation of the franchise, to the new operator...

the HSTs were sold when they were not in demand, and there was no future plan for them with an existing operator...

AIUI any stock owned by the ROSCOs that were built/ordered under BR, is covered by an agreement (MOLA iirc) that basically says that the government/DfT (or SRA as it was) can control where it goes while it still has use... (obviously stock built after BR is required to be offered to DfT first before sale or lease to open access operators) however since the HSTs were sold when there was no requirement or future plan for them any sale means that the new operator can do whatever they like with them... they can burn them, scrap them, ship them off overseas or use them in the UK.

frankly there is sweet F*ck all that the DfT can do... and untill suck time as IEP or whatever else comes into physical existence... First hold a trump card for any other franchise they bid for ie. MML or ECML or GWML... there simply are not enough HSTs to cover the DfT specified timetable/service paterns, nor are their enough available class 180s to displace the HSTs and still have the same passenger cappacity on services