Network Rail’s debt pile soars beyond £30bn

Marion Dakers
DEBTS at taxpayer-backed Network Rail (NR) have ballooned above £30bn in the last year, the owner of Britain’s rail infrastructure revealed yesterday.

Net debt at the group rose 11.2 per cent to £30.36bn, as it shelled out more than £5bn for around 2,000 ongoing upgrade and maintenance projects.

Operating costs also rose, by 8.8 per cent to £3.98bn, which NR said was caused by depreciation of assets and £58m spent dealing with weather-related damage.

NR’s total financing costs rose 3.4 per cent to £1.42bn over the last year, which included £1.2bn on repayment of borrowings.

Revenues, which come from state subsidies and fees paid by train operators as well as bond issues, rose 3.2 per cent to almost £6.2bn, while operating profits were down slightly at £2.2bn.

Network Rail also appears on track for a hefty fine from the regulator for failing to hit punctuality goals.

It said 90.9 per cent of trains ran on time in the year, down on last year’s 91.6 per cent and sinking further below the Office of Rail Regulation’s 92 per cent target.

“The challenge we have faced over the last year, and will continue to face in the years ahead, is one of success – more people wanting to use more trains, more of the time,” said finance director Patrick Butcher.

Network Rail said that passenger numbers are rising at double the rate forecast in 2009.

The results follow last week’s news that its bosses would receive less than a third of their potential bonuses this year, but will still collectively receive £350,000.

The group’s £37bn five-year spending plan will come under scrutiny next week when the ORR publishes its response to the figures. The plan will run from 2014 and outlines spending on flood defences, signal upgrades and more seats, particularly during rush hours.

NETWORK Rail’s £30bn debt pile would be enough to send most corporate bosses into a cold sweat.

But the owner of Britain’s railways was always designed to run in the red. NR was set up as an independent but state-backed group in 2003, in the wake of listed predecessor Railtrack’s collapse.

NR is expected to issue a stream of bonds in various currencies, in addition to its state subsidies, to fund operations.

These bonds are guaranteed by the state, a backstop for which Network Rail pays the exchequer around £200m a year.

Happily for a government that is trying to rein in its debts, Network Rail’s independent status means its liabilities do not appear on the state’s books.

With assets of £46.4bn, Network Rail has permission to raise billions more in this way. Its current bond scheme is set up to issue £44bn.

The Office of Rail Regulation is working on ways to keep NR’s funding sustainable, including a cap on debts at 75 per cent of its assets (its current ratio is 65 per cent).

However, there is no firm plan on the horizon to reduce the overall debt level.