In the September 2012 issue, FTA welcomed news of a planned land sale transfer from DB Schenker to Network Rail. We felt the changes would, in Network Rail’s words, ‘Right one of the great market imperfections since rail privatisation where rail freight terminal sites were effectively vested in the privatised incumbent freight train operating companies.’
Following consultation, Network Rail has decided not to proceed with the deal, losing out on what we feel was an excellent opportunity for the industry as a whole.
DB Schenker and Freightliner currently hold on lease most rail freight terminal sites across the network. Given that the Office of Rail Regulation (ORR) has concerns over the potential negative competition effects of this, the news of a land sale transfer between DB Schenker as the biggest holder of these sites and Network Rail was very welcome. Network Rail’s proposed plans for management of the sites were designed to increase the ability of other operators to use them, thus helping network utilisation, freight train pathing, customer choice and on-rail competition.
The plan was for about 260 sites that are currently held by DB Schenker on 125-year leases to transfer to Network Rail, which would buy out the unexpired portion of the leases. The deal would have been self-financing to Network Rail as the rent roll would effectively pay for the cost of purchase. The sites concerned fitted into seven broad categories, and the plans for some of them were very interesting indeed in terms of freight network utilisation and enhanced competition.
Network Rail received a number of responses to its consultation on the proposal. There was strong support from many consultees for the general principle of the acquisition, and it is clear that there is a desire to improve transparency on matters such as access to sites.
Aspects of the proposal which attracted positive responses included:
• the potential operational benefits (particularly those associated with the creation of additional network nodal yards)
• the opportunity to create an ownership structure which could improve clarity and availability of access opportunities for freight sites
• opportunities for investing rental income to enhance and develop freight schemes which could encourage freight growth.
Aspects of the consultation which consultees sought clarification on, or wished to consider or understand further, included:
• whether separation of site ownership could affect rent and haulage rates
• more detail as to the extent of and nature of the sites being respectively acquired and retained by Network Rail and DB Schenker
• more certainty around both the terms on which sites would be retained and/or made available to other operators (in particular in relation to ‘use it or lose it’ clauses)
• the basis on which sites would be protected for freight or other railway use in the future.
Network Rail’s Consultation Conclusion Statement said: ‘Having carefully considered and taken account of the responses, we have decided not to proceed with the proposal.
‘Nevertheless, we remain keen to continue to explore ways in which it may be possible to achieve the overarching objectives identified in our consultation document. We recognise the desirability of wider industry support should there be major structural changes required to achieve this. In the meantime, Network Rail will continue to support the development by the industry of code(s) of practice relating to freight site access/ leases, as identified in the Industry Action Plan consulted on by ORR following the findings of its Freight Sites market study.’
Contention had particularly surrounded the first group of sites, comprising end user sites where predominantly aggregates companies sub-lease. With Network Rail taking these over it would have freed up the potential for other sub-tenants and for different rail freight hauliers to service the customers, as train operation and site ownership would be divorced. However, concern by existing aggregate tenants over the effect on haulage rates by this separation seems to have played higher than the effects of greater haulage choice.
The second group of sites also attracted contention in its plans, despite looking perhaps the most interesting. These were the network nodal yards at key locations around the network. The plan was for part of these to become effectively common use, with the double-ended reception sidings open to any train freight operating company. As this would allow for recessing trains, loco run-round moves, crew changes, fuelling etc, it would all have helped make more efficient use of the network and allowed for more efficient train pathing.
A particular bugbear of newer entrant operators is that as they did not traditionally have access to these yards, pathing A to B train movements was harder. If they have access to a yard en route, pathing could actually be made easier in certain cases. So, this would have stimulated competition which is good for the end shipper. Contention about this group surrounded not the principle but the detail of the individual yard plans and what was reserved to Foc’s, what was open access, what was reserved for headroom growth etc. It seems that the principle got lost in the detail here.
Overall, this looks like an excellent opportunity lost!