A 'mixed' performance from Network Rail...

Telegrammed by Bulldog Drummond
It started with a lacklustre performance by Iain Coucher on the Today programme at 07:20.

The Network Rail chief exec seemed to allege that ORR were using the 'wrong kind of efficiency measures'.

Then there was the ORR press conference, well described by Nigel Harris on his blog, called to discuss the Regulator's robust and pointed letter on Network Rail's performance last year.

Another self-serving piece of work was Network Rail's Preliminary Financial Results for the year ending 31 Mar 2010.

Although not easy to read the story is depressing.

There is some improvement but it is being bought at too high a price and taking too long and, anyway, ORR is clearly not convinced that many of Network Rail's claims add up.

It is instructive that Coucher only mentions six new projects in the Preliminary Financial Results:

• Airdrie to Bathgate – a new line being built in Scotland, scheduled to open in December 2010
• The programme of work for the London 2012 Olympics continues; this includes new lines, new stations, better facilities and new rolling stock on the North London Line and East London Line in addition to works to support and enable the transport links being developed in the Stratford area
• Construction is well advanced on the Thameslink programme
• Also as part of the transport strategy for London, the Reading project has advanced, as well as key development work now underway for Crossrail
• The Birmingham Gateway project to redevelop New Street has attracted a significant amount of third party investment

Yet half of these are being driven by others.

Rolling stock procurement is nothing to do with Network Rail.

Property investment should not be the main focus of our national infrastructure company.

Highlighting Newport station as a major initiative seems to indicate so little is being achieved that a £22m project, which is partially funded by the Welsh Assembly, gets top billing.

Meanwhile signalling problems on the North London Line and ORR's intervention into Airdrie Bathgate appear to have been glossed over.

The fantasy that Network Rail is a sound and effective business is best left to the words of the hapless Group Finance Director, Patrick Butcher:

"Network Rail is maturing into a company that is strong and sustainable."

Does anyone in their right mind really think this is the case?

He tops this Pooterish statement with the complete nonsense that:

"Our financial performance means we generated operational cash flows 80% greater than required to pay our net financing costs. Our gearing ratio [debt to regulatory asset base] of 64% shows that our debt is at a sustainable level and gives the business a significant buffer to absorb unplanned costs."

This is the world of Micky Mouse accounting.

Interest on debt can only be paid out of net income, not total cashflow.

The RAB is a completely meaningless basis for borrowing, particularly if sufficient income cannot be generated to pay interest and start to reduce the principal outstanding.

The reality is that Network Rail is slipping into a morass of debt and that too little is being bought for the huge sums being borrowed.

The Prudential affair has shown that corporate activism is now much in vogue.

Eye is certain that the Members of Network Rail will make it their primary business to stop this corporate muddle at their AGM next month and direct the Board as to how the business is to be run in future.