HS1 to be sold?

[infoman]

https://www.ft.com/content/5ed4e89e-bd36-11e6-8b45-b8b81dd5d080

 

[SPADTrap]

Some substance would be a good start, the link doesn't work for me.

 

[infoman]

Try this one.

https://www.theguardian.com/business/2016/dec/08/hs1-sale-borealis-ontario-teachers

 

[SPADTrap]

Try this one.

https://www.theguardian.com/business/2016/dec/08/hs1-sale-borealis-ontario-teachers

Very kind, thank you

 

[DasLunatic]

The article itself, for those who can't access the Guardian:

The pension funds that own the company running Britain’s only high-speed railway, HS1, are considering a sale after receiving a number of offers.

The Canadian investors, Borealis and Ontario Teachers, have announced a strategic review of their ownership of HS1 Ltd, which operates and manages the line on a 30-year concession until 2040.

Any sale is not expected to affect the day-to-day operation of services on HS1, which has been performing in line with investors’ expectations.


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HS1 is the 67-mile stretch of railway linking London to the Channel tunnel, on which both Eurostar and high-speed Southeastern services operate. Network Rail is subcontracted to manage the rail infrastructure, while HS1 owns and manages four of the stations on the route, with significant commercial income including retail at the flagship St Pancras International in London.

A source said neither Borealis or Teachers had been looking to sell but had been approached by a number of potential investors “kicking the tyres” of HS1. The review could end with no sale, or the sale of a stake, but the Canadian owners, while traditionally long-term investors, are assessing the scale of other potential interest.

Borealis and Teachers paid £2.1bn to the government for the concession in 2010. They also now own stakes in London City airport, as part of the consortium that bid in the £2bn takeover this year. Teachers has a HS1 share in Bristol and Birmingham airports, while Borealis is an investor in Associated British Ports.

HS1 is the UK’s only high-speed railway to date. Parliament is expected to fully ratify plans for the London-Birmingham first phase of HS2 early in 2017, and the government may yet look at a similar concession model for the rail infrastructure.

Significant interest in bidding for a rail line could boost the prospects of the planned line between Oxford and Cambridge, announced by the transport secretary, Chris Grayling, this week to be funded with private investment and operated separately from the rest of the network.

 

[The Ham]

In summary, HS1 is still owned by UK government, it is however leased to another party who is considering selling part or all of the value of the lease to a third party.

The only thing that it means is that when the lease comes up for renewal that there could be more interested parties which could push the price the government gets for it up.

I am now just waiting for someone to say how this is why we shouldn't build HS2.

 

[Chester1]

In summary, HS1 is still owned by UK government, it is however leased to another party who is considering selling part or all of the value of the lease to a third party.

The only thing that it means is that when the lease comes up for renewal that there could be more interested parties which could push the price the government gets for it up.

I am now just waiting for someone to say how this is why we shouldn't build HS2.

Fully agree. There is a very big difference between leasing a railway and selling it. In just over 20 years there will be a bidding process for a new lease which will more than likely mean that HS1 delivers the taxpayer a good profit. Alternatively it will come under government control in good condition and having mostly paid for itself. I am not sure the model is right for HS2 but its a good choice for an international route that is basically self contained.

 

[coppercapped]

The Financial Times of 9 December (page 18) points out that

Sales at the holding company that controls HS1 slipped to just below £300m in the full year to March. Earnings before interest, tax, depreciation and amortisation fell from £181.6m to £180.4m.

Presumably because of a softening in cross-channel travel.

 

[daikilo]

Fully agree. There is a very big difference between leasing a railway and selling it. In just over 20 years there will be a bidding process for a new lease which will more than likely mean that HS1 delivers the taxpayer a good profit. Alternatively it will come under government control in good condition and having mostly paid for itself. I am not sure the model is right for HS2 but its a good choice for an international route that is basically self contained.

But if the concession is sold on, presumably HMG gets nothing and it's higher perceived value is anyway only until the end of the concession, not a reference for the next concession, or thqt anyone will then be interested.

Also, 2.1+bn for HS1 is still a very low reference for a concession on HS2!

 

[Mikey C]

In summary, HS1 is still owned by UK government, it is however leased to another party who is considering selling part or all of the value of the lease to a third party.

The only thing that it means is that when the lease comes up for renewal that there could be more interested parties which could push the price the government gets for it up.

I am now just waiting for someone to say how this is why we shouldn't build HS2.

Surely what this article suggests is that the Ontario Teachers pension scheme etc who currently own the 30 year concession have received an offer to sell their ownership of the concession now

This will make no difference to the UK government and probably have no bearing on how attractive HS1 will be in 2040 when the concession ends!

As long as it doesn't affect the free toilets at St Pancras I'm not bothered

 

[fgwrich]

Could now be an opportunity for Groupe Eurotunnel - Who were one of the interested parties in the initial first round.

 

[Lurpi]

Fully agree. There is a very big difference between leasing a railway and selling it. In just over 20 years there will be a bidding process for a new lease which will more than likely mean that HS1 delivers the taxpayer a good profit.

Really? The HS1 concession went for £2.1bn as noted. That's about £3bn less than it cost to build. Supposing it goes for less than £2.1bn in equivalent money next time?

The interesting thing about this talk (well for me anyway) is that the current concession owners, being pension funds, are in it for the long term; they are not like private equity funds who look to sell in five years. So they must have been made a particularly generous offer.

Significant interest in bidding for a rail line could boost the prospects of the planned line between Oxford and Cambridge, announced by the transport secretary, Chris Grayling, this week to be funded with private investment and operated separately from the rest of the network.

A piece of sheer pig ignorance from The Guardian. There's no comparison between investor appetite for an infrastructure asset that's already been built compared to one that hasn't. It's like comparing buying a house with building your own, and the pool of potential investors is very different.

 

[The Ham]

Surely what this article suggests is that the Ontario Teachers pension scheme etc who currently own the 30 year concession have received an offer to sell their ownership of the concession now

This will make no difference to the UK government and probably have no bearing on how attractive HS1 will be in 2040 when the concession ends!

As long as it doesn't affect the free toilets at St Pancras I'm not bothered

Yes the government won't get anything out of any sub sale, so what. The point about any future sake is that if there is enough interest note to try and get the current owner to sell it or sell part of it there are likely to be two things that would likely make the next sale the government result in a better value.

The first is that there is likely to be more parties interested meaning that those that win will probably have to pay a bit more to retain it.

The second is, those looking to buy part/all of it now will have to pay a sufficient figure to the current owners to make it worth the effort of the current owners to sell it. As such that would imply that something has changed that makes the value with significantly more (at least to those making the offer). That is likely to continue be the case going forward, which is likely to result in a higher figure going forward.

However, even if it doesn't it is unlikely to result in a negative impact.
--- old post above --- --- new post below ---

Really? The HS1 concession went for £2.1bn as noted. That's about £3bn less than it cost to build. Supposing it goes for less than £2.1bn in equivalent money next time?

The interesting thing about this talk (well for me anyway) is that the current concession owners, being pension funds, are in it for the long term; they are not like private equity funds who look to sell in five years. So they must have been made a particularly generous offer.

Governments generally only see any form of return from infrastructure from extra tax revenue, so the fact that they have had a lump sum of £2.1bn as well would mean that are probably very happy.

Any future return will be an added bonus, especially as they won't be liable for the day to day maintenance of the line and could (via Network Rail) use it as a revenue stream to subside other rail investment. As I hope NR are making a profit on their contact with the owners to keep the line maintained. As such any extra money from that can then be used to reduce the amount of money the government has to give NR.

I agree the offer must have been very generous, as any change in income would have just resulted in them being able to have seen a better return (so no need to sell) which means that whoever has made the offer can see something of "other" value to them to have been so generous in their offer.