Regulator prepares to strengthen Network Rail’s network licence

28 May 2004
ORR/15/04

The Rail Regulator, Tom Winsor, has set out today how he intends to strengthen Network Rail’s network licence. The changes are necessary:

  • to ensure that Network Rail’s proposed long-term debt issuance programme, which will involve the securitisation of a substantial part of Network Rail’s revenues, does not jeopardise the interests of customers and funders; and
  • to give effect to important agreements clarifying Network Rail’s accountability, which formed part of the Regulator’s reasons for his recent approval of Network Rail’s proposals concerning the mix and reprofiling of grant  and access charge income in its revenue allowed by the Regulator’s access charges review 2003.

Network Rail has consented to the proposed modifications and, subject to consideration of any representations made during the 28-day statutory consultation period, its network licence will be modified next month.

The proposed modifications to Network Rail’s network licence will ensure that:

  1. Network Rail’s borrowing through securitisation will be limited to 90% of its regulatory asset base (RAB) and a 100% limit on all borrowings;
  2. the financial ‘ring-fence’ which protects Network Rail’s regulated operating business will include the new financing company, Network Rail Infrastructure Finance (NRIF), which is to be the vehicle for its proposed securitisation;
  3. Network Rail’s regulatory accounts will include financial information on NRIF; and
  4. Network Rail’s management incentive plan will be aligned with the incentive policy referred to in the constitutional documents of Network Rail Limited, and Network Rail will have to adopt an incentive scheme for employees not covered by the management incentive plan.

Tom Winsor said: “These proposed modifications represent a further important step in ensuring that Network Rail’s network licence is fit for purpose and further clarifies Network Rail’s accountability to its customers, funders and its economic regulator.”

The notice of proposed network licence modifications is being distributed widely. The statutory consultation period closes on 25 June 2004.

Notes to editors

Further details of the background to and reasons for the modifications are set out in Chapter 2 of the Notice of proposed network licence modifications.  This document is also available from the ORR Librarian, Sue MacSwan, 1 Waterhouse Square, 138 – 142 Holborn, London EC1N 2TQ

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