Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Supplementary memorandum by Virgin Trains (PRF 45A)


  Railtrack approached Virgin Rail Group (VRG) shareholders in July to discuss ways of resolving the difficulties they faced in delivering the contract for the full West Coast upgrade. A series of meetings took place in September with the agreement of the DTLR.

  The outcome was a non-legally binding document known as the Hartwell Agreement and this was signed by the Chairman of Railtrack and VRG on 1 October. Railtrack was placed under Administration soon afterwards, but the Agreement was still presented to the DTLR in the week following the Administration Order as originally intended.

  The Agreement identified options for Government to consider which would de-risk a project which has been subject to very substantial Railtrack cost escalation (see Appendix).

  The Hartwell Agreement was extensively leaked to the media before any further discussions could take place, and VRG has had to remind all parties that its first duty to shareholders position must be to hold Railtrack to delivering the original West Coast PUG 2 contract in full regardless of the cost.

  VRG will continue to consider other proposals and further discussions have since taken place with the Administrators, the Strategic Rail Authority and DTLR. All discussion will, however, have to recognise that VRG has obligations in its West Coast Franchise Agreement to deliver the upgrade on the West Coast, to introduce the new Pendolino trains and to make franchise payments to the SRA.

  The outcome of any discussion will need to leave VRG's financial position neutral if it is to continue to meet the premium payments to the SRA. Thus, any income lost from delayed or abandoned journey speed improvements will need to be balanced through reduced track access charges: any additional train sets needed to cover the longer journey times/turnrounds will need to be compensated.

  A summary of the principle issues in the Hartwell Agreement are given in the Appendix attached. VRG remains open to constructive proposals by which the West Coast service enhancements can be delivered at a more affordable price to all parties, including Government.

Chris Green

Chief Executive

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