Fantasy funding

Telegrammed by the General Manager
NR piles on £1.1m of debt each day across CP4

As the bosses of Network Rail passed round the celebratory steaming mugs of Horlicks (avoided) on Monday when WCML got off to a reasonably good start their collective attention doubtless turned to fighting the CP 4 settlement and thinking who is going to lend them money over the next few years.

ORR's figures show that NR's position over the next few years is dire and getting worse.

Expenditure exceeds income in all but 2013/14 and interest payments just get bigger each year, in fact they almost exactly match the total TOC premium - assuming this can be sustained.

ORR Assumptions of Network Rail’s net debt in Control Period 4
(£M 2006/7 prices)	2009/10	2010/11	2011/12	2012/13	2013/14	Total
Opening debt	21,267	23,841	26,638	28,585	30,230	21,267
Total income	-5,921	-6,138	-6,345	-6,491	-6,647	-31,542
Total expenditure	7,304	7,556	6,780	6,502	6,235	34,337
Net interest costs	1,188	1,379	1,512	1,619	1,711	7,410
Tax	2	0	0	14	10	26
Total movement in debt	2,574	2,797	1,947	1,645	1,309	10,271
Closing debt	23,841	26,638	28,585	30,230	31,538	31,538
Source: ORR Doc 329167.02 dated 4 November2008

Bold statements by NR that commercial lenders are gagging to pile cash onto this debt mountain without a government guarantee seems self-delusional.

There is no way, other than doubling fares, or even more improbably NR becoming a really efficient world-class business, that any inroads can be made into this ever-growing debt mountain.

Also the oft repeated statement that commercial lenders will be a lever for achieving better governance seems a little cart before the horse.

Any commercial lender will insist that NR changes its governance well before it antes up the cash and it may well be that the NR board won't like the messages they get told.

Meanwhile its back to bashing ORR in the hope they will hand out more dosh and postpone the need to take difficult decisions.