North-East Line, Sengkang and Punggol LRTs to move to new financing framework

North-East Line, Sengkang and Punggol LRTs to move to new financing framework

SINGAPORE: The North-East Line (NEL), Sengkang LRT and Punggol LRT will transit to the New Rail Financing Framework on Apr 1, completing the transfer of ownership of all rail assets to the Government.

The Land Transport Authority (LTA) said on Wednesday (Feb 14) that this will benefit commuters as there will be "more coordinated and timely expansion, and renewal of the rail system". 

SBS Transit will be granted a 15-year licence to operate the lines until Mar 31, 2033.

LTA will pay SBS Transit S$28.8 million, the estimated value of the assets.

As part of the transition, LTA will inspect the condition of the operating assets. They will be paid for in tranches over the next two years. During this period, SBS Transit will provide warranties on the conditions of the assets and LTA is entitled to withhold payments for assets that need to be replaced or rectified. 

In order to operate the rail lines, SBS Transit will have to pay LTA a licence charge that will be used for the renewal of operating assets, similar to the structure that SMRT trains operate under. 

As part of the licensing agreement, SBS Transit will have to agree to the Maintenance Performance Standards set by LTA. The standards will regulate maintenance processes upstream to ensure that issues which may affect train reliability are pre-emptively identified.

Under the previous framework, rail operators own assets like the trains and the signalling systems, and are responsible for replacing and upgrading these assets. As the operators bear the full financial risk, LTA said they may be "too cautious" in undertaking expansion, replacement or upgrading works, and thus be "less responsive to growing ridership and commuter expectations".

The transition aims to benefit commuters by enabling the government to keep up with the growing ridership demand by ensuring timely procurement of additional trains and operating assets. LTA said this will ensure that rail capacity is improved in a timely manner and commuters can receive "higher-quality rides".

The new framework will also ensure that the rail operators can "focus on their core role of operating and maintaining the rail network", and be relieved of expenditure and revenue risks, said LTA.

The framework will also make the industry "more contestable", LTA said, by shortening the licence period to 15 years with a possible five-year extension, down from 30 to 40 years previously.

The new financing framework was first implemented in 2011 for the Downtown Line that is also operated by SBS Transit. The framework was then subsequently extended to include the North-South and East-West lines, Circle Line and the Bukit Panjang LRT.

Source: CNA/aa