Tuesday 19 November 2002 6.45pm
Extracts from TfL Business Plan 2003-2009 - being discussed by the TfL Board in City Hall
today! Read these as you will:
Cross River Tram
- a tram scheme, opening in 2012- linking two regeneration areas in south London (Peckham and Brixton), with central London and Kings Cross/Camden.
The recommended 2003/04 Business Plan includes several large-scale infrastructure projects that would require significant increases in grant if built as traditional capital projects. The Business Plan assumes TfL would use an alternative means of financing—a Special Purpose Vehicle structure such as a PFI/PPP, Company Limited by Guarantee, or other structures that combine various design, build, finance, operate and transfer options.
Employing these structures does not reduce the net infrastructure financing requirement. Indeed, there is an additional financing cost for funds raised from the private sector. The use of these structures changes the profile of the financing by extending and smoothening out the funding requirement. Additional benefits may be available through the use of SPVs if there is a transfer in the risk burden between the public and private sectors.
These proposed SPVs include West London Tram and Cross River Tram, two Thames River Crossing schemes, and DLR extensions to London City Airport, Woolwich and Barking.
These projects could be financed through a concessionaire/PFI structure, in which the concessionaire would construct the project, and then collect the operating profits (or a TfL subsidy if the project does not cover its financing costs). This model has been used for Croydon Tramlink and the DLR extensions to Lewisham and London City Airport. The projects that best lend themselves to this PFI structure are ones that involve new construction, i.e., the tram schemes, the river crossings, and the DLR
Woolwich and Barking extensions. We have reflected these costs in the business plan as PFI ventures. However, at this stage in the project's life, we have not completed a full assessment of opportunities for risk transfer and, therefore, of the implications of current Local Authority Capital Finance regulations.
These financing schemes provide TfL with an opportunity to invest in infrastructure that will not only provide near-term benefits to transport users, but also continue to provide benefit to Londoners in future generations. The SPV financing method, which spreads the costs out over a number of years, enables future users of the infrastructure to pay for their share of the infrastructure. However, proceeding with these projects through an SPV will require a long-term commitment from TfL and its funding partners prior to committing to implementation.