FIRST GROUP SIGN NATIONAL RAIL CONTRACTS

5 FirstGroup has signed new National Rail Contracts with the Department for Transport (DfT) for its South Western Railway (SWR) and TransPennine Express (TPE) train operating companies which will begin this month. These National Rail Contracts (NRC) will replace the current Emergency Recovery Measures Agreements (ERMAs). The contracts will have a runtime of two years and include options to extend by a further two years at the DfT’s discretion. They will be comprised of a fixed management fee component as well as a variable performance fee component. Under these new contracts, unlike previous franchise agreements, FirstGroup will bear no revenue risk and only very limited cost risk under an annual budget agreed with the DfT. FirstGroup holds a 70 percent share of the First MTR joint venture for the SWR train operating company. Under the NRC, its fixed management fee will be £3.3 million per year. There is also scope to earn a further fee of up to £9.9 million GBP – the maximally attainable performance fee. This performance component will be calculated based on four categories: operational performance, customer satisfaction, finance, and business management. During the NRC, FirstGroup will introduce a new fleet of Alstom-made suburban trains and implement on-board 5G. FirstGroup’s fixed management fee for the TransPennine Express train operating company will be £2.3 million per year. The maximum performance fee it could earn on top of this is £5.2 million. There is room for an additional incentive fee to be earned by FirstGroup for taking part in significant ‘industry change’ projects such as the TransPennine Route Upgrade programme that is set to start in 2021 and conclude in 2028. As the largest UK operator with four passenger rail contracts expected to run to at least 2023, FirstGroup welcomed the transition to the new model for “generating more resilient and consistent returns for shareholders”. The West Coast Partnership ERMA is in place until the end of March 2022 and an NRC is planned with a duration up to 2032. The existing Emergency Measures Agreement for Great Western Railway has already been extended to this month and the underlying GWR direct award runs to April 2023 with an extension option of up to one year. FIRST GROUP SIGN NATIONAL RAIL CONTRACTS National Rail Contracts (NRC) will replace the current Emergency Recovery Measures Agreements (ERMAs) RMT helpline 0800 376 3706 :: june 2021 :: RMTnews NRCs: Two First Group First Great Western trains depart Paddington railway station passing under large signal gantry numbers