BRITAIN'S RAIL FREIGHT PRIVATIZATION--
AN INVESTOR'S VIEW

RAIL FREIGHT CONFERENCE
London, UK - June 1995


Henry Posner III is a founding principal of RDC
Henry Posner III
Chairman
 

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What I would like to talk about today is our view of the British Railway Privatization. First I will compare the UK privatization on a structural basis with the rest of the world as we see it; second, I will compare the fundamentals of the UK privatization with the rest of the world; third, talk about how to value railway freight franchises; fourth, how to structure for competitive advantage, not only in making successful bids but also in making sustainable bids; fifth talk about possible roles for US investors in the UK; and then close with some conclusions.
 
  Global Perspective on UK Privatization - Structure  
  Taking the major types of privatization and the major countries where it's evolved, please focus your attention on the franchise type and note that in the USA, Argentina and New Zealand the franchises are all exclusive and these have all been considered successful.  In Chile, they have a kind of open access and there was only one bidder.  In the UK, a grand experiment is about to begin and it will be very interesting to see how many bidders come forth, but I think more importantly how successful these privatizations will be. I'm confident there will be numerous bidders but the question is, "Are these sustainable bids or not?" I think a lot of that is driven by the type of franchise, which I will clarify later on.  
 


Rail Privatization Models (freight only)

  
 
  USA Argentina Sweden New
Zealand		 UK Chile
Franchise Scope Region Region Branches Country Country Region
Number of Franchises 1 6 Unlimited 1 6 Initially 1 Initially
Franchise Type Exclusive Exclusive Open
Access		 Exclusive Open
Access		 Open
Access
Transaction Year 1987 1991-
Present		 1988-
Present		 1993 1996? and
beyond		 1995
Infrastructure Transaction Purchase Lease Utilization Fee Purchase Utilization Fee Utilization Fee-Core Lines; 
Lease-Branch Lines
Initial Rolling Stock Transaction Purchase Lease Purchase Purchase Lease Purchase
Ongoing Subsidy None None As needed None As needed None
Example Conrail BAP Osterlentag NZRL Load Haul FEPASA
 
 


Primary Government Objectives

 
 
  USA Argentina Sweden New
Zealand		 UK Chile
Reduce / Eliminate Losses X X X   X X
Improve Service/
Lower Transp. Costs		   X     X X
Raise Cash X X   X   X
 
     
 

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