Add us to your taskbar by dragging this icon RGI logo to the bottom of your screen.

Close

Govia wins Thameslink, Southern & Great Northern rail franchise

23 May 2014

UK: The Department of Transport announced on May 23 that it had selected Govia to operate the future Thameslink, Southern & Great Northern passenger franchise.

Covering regional and commuter services into London in an area bounded by King's Lynn, Cambridge, Peterborough, Bedford, Southampton, Brighton and Ashford, TSGN will be the UK's largest franchise in terms of passenger numbers, trains, revenue and staff, with the current operations carrying 273m passengers/year, having 6 500 staff and generating passenger revenue of £1·3bn.

The TSGN franchise will include:

  • 150 new metro-style EMU cars to replace the existing 1970s stock on commuter services into London's Moorgate station;
  • A new fleet of 108 coaches 'designed for airline travellers' to be introduced on Gatwick Express airport services by 2016;
  • Introduction into service in 2016-18 of the 1 140 Class 700 EMU cars which Siemens is currently building for Thameslink services;
  • Additional direct services to Gatwick airport, including a through Cambridge - Brighton service;
  • £50m to be spent improving 239 stations;
  • The 100 busiest stations staffed from first to last train;
  • Free wi-fi at 104 stations.

The Thameslink brand is to be re-introduced, and Southern and Gatwick Express brands retained.

Franchise timeline

  • May 23 2014 DfT names Govia as preferred bidder, with the contract to be awarded following the 10-day regulatory standstill period;
  • September 14 2014 Current Thameslink & Great Northern franchise expires. Govia to replace FirstGroup's First Capital Connect as operator;
  • December 21 2014 A small number of services to transfer to TSGN from Govia's current Southeastern franchise;
  • July 26 2015 Current South Central franchise operated by Govia under the Southern brand ends and is incorporated into TSGN;
  • September 2021 TSGN franchise ends.

Financial details

The franchise is being let as a management contract, with ticket revenue to be passed directly to the government rather than retained by the operator. This reflects the complexity and scale of the Thameslink Programme route upgrade.

Passenger revenue is estimated at £12·4bn over the life of the franchise. Franchise payments from the DfT to Govia amount to an estimated £8·9bn to reflect operating costs and a small margin allowance. The net present value of the franchise payments is estimated to be around £6·8bn. Govia's target operating profit margins average 3% over the life of the franchise including an estimated annual non-cash margin impact of 1% for pension costs.

The incentive regime will be based on service quality targets including punctuality, customer experience and revenue protection. In addition, Govia can achieve up to £25m for delivery of key performance milestones in the Thameslink Programme.

Govia will procure around £430m of investment and £40m of capital expenditure will be made by Govia directly, mostly in the first two years.

Shortlist

The shortlisted bidders for the contract were Abellio, First Group, Govia, MTR and Stagecoach.

FirstGroup CEO Tim O'Toole said he was disappointed that FirstGroup's bid was not successful, but this 'does not alter our stated medium-term targets. Going forward the Group is currently shortlisted for a number of other rail franchises and will participate in a range of competitions with the objective of achieving earnings on a par with the last round of franchising, with an acceptable level of risk.'

  • For in-depth coverage of the UK rail market, subscribe to Rail Business Intelligence, the incisive and analytical newsletter for all train operating companies, investors, contractors, consultants, lawyers, local authorities, equipment manufacturers and service providers.