TfL awards controversial £1bn ‘sale and leaseback’ Crossrail fleet deal to Natwest-backed group
Transport for London (TfL) has awarded a controversial £1bn "sale and leaseback" deal for a fleet of Crossrail trains to a rail company backed by Natwest and Japan's second largest bank.
345 Rail Leasing, which was set up in January this year and comprises Equitix Investment Management, Sumitomo Mitsui Banking Corporation and Natwest, will own the trains over a 20-year period which TfL will pay to use.
Read more: Aberdeen Standard backs controversial £1bn bid for Crossrail fleet
Last year City A.M. revealed that rival company Rock Rail had also bid for the contract, and was backed by asset management giant Aberdeen Standard.
The deal, which TfL branded "positive" for Londoners, will net the transport body £1bn that will be reinvested in the transport network, including the delivery of a new fleet of Piccadilly Line trains that are due to come into service in 2024.
However, Keith Prince, Tory transport spokesperson in the London Assembly, said the deal was "another example of how desperate the mayor is".
"This is a direct result of Sadiq Khan not putting fares up, which is costing TfL £140m a year," he said. "The mayor is desperately selling off the family silver just to keep TfL afloat."
Caroline Pidgeon, chair of the Assembly's transport committee, said: “TfL will of course trot out the argument that the sale and leasing of rolling stock is increasingly the standard practice in the rail industry.
“Yet however it is wrapped up the leasing arrangement is just a form of borrowing. Past claims about controlling budgets on Crossrail have not been met. Considering the huge overrun in budget for Crossrail it is not unreasonable to expect TfL to provide robust evidence to back up their claim that this is the best deal that could be secured.”
Over the past year, TfL has been battling a "perfect storm" on its finances, caused by the loss of the central government grant, Khan's fare freeze and the ongoing delay to the Elizabeth Line, which will cost TfL £600m over the next five years.
TfL, which yesterday announced that it had halved its near £1bn budget deficit through "relentless" cost savings, said the deal would allow it to carry out further savings as set out in its five-year business plan.
Simon Kilonback, TfL's chief financial officer, said: “As is standard practice across the rail industry, we have been looking to sell and lease back our Elizabeth Line rolling stock. This will help us purchase new trains on London Underground’s Piccadilly Line, where there is a clear need for a modern fleet.
“This is a positive deal for London, releasing almost a billion pounds of funding for TfL which can be immediately reinvested into delivering transport improvements, while still allowing us to operate these trains on our network. We look forward to working with the 345 Rail Leasing consortium as we progress towards delivering the Elizabeth Line, which once open will support the capital’s growing economy.”
TfL said the completion of the deal will have "no impact" on the operation or maintenance of the fleet, which will remain with TfL and MTR Crossrail, the company that operates TfL Rail services.
The £17.6bn Elizabeth Line, which will stretch from Heathrow in the west to Abbey Wood in the east through central London, was scheduled to open last December but has been delayed indefinitely because of problems with infrastructure and signalling testing.
Read more: Crossrail begins dynamic testing on the Elizabeth Line
TfL said today that Crossrail has now started testing Elizabeth Line trains in various underground tunnels throughout central London, using the new Class 345 trains. Test trains have also been running from Reading station as TfL hopes to operate services between Reading and Paddington by about December this year.
Dynamic testing was due to start in November 2017,but an explosion at Pudding Mill Lane pushed the programme back to February 2018, causing delays to the railway which is now unlikely to open before 2020.