See Also: https://bathtrams.uk/did-the-nottingham-tram-massively-put-up-taxes-and-the-work-place-parking-levy-drive-businesses-away/?

For those who aren’t aware, I was formerly the PD for the Consortium Tramlink Nottingham Ltd (and its Holding and Finance Companies) which won the D-B-F-O-M contract for Phase Two which included two new lines and TUPE transfer of Bombardier maintenance staff to Alstom and of O&M staff to the new Wellglade (20%)-Keolis (80%) operating subsidiary. I then became Chairman of the three Concessionaire Companies (TNL, TNHL and TNFL). The concept was that the private sector paid for the construction (ie to provide an incentive to complete on time) and once built, part of the funding was paid to consortium at the end of construction and the rest over the remaining years of the concession on a monthly basis to the operator concessionaire against a range of Key Performance Indicators. Generally performance and reliability has been in the upper 90%s, often reaching 97/99%. The shareholders at the beginning were 6: the concept being that the shareholdings of the four “industrial” shareholders (Keolis SA, Vinci plc, Alstom and Wellglade invested 12.5% each) was balanced 50-50% with the two private equity investors Meridiam (30%) and OFI Infravia (20%). Over time Meridiam became the major shareholder and provided management to TNL in return for payment.  I retired in 2015 and there have been changes of the funding banks since that time and shareholdings may have changed.

TNL had two subsidiaries – one to build (an unincorporated 50-50%JV between Alstom and Vinci Construction) and one to operate and maintain both the rolling stock and the infrastructure as an integrated tramway (a JV between Keolis 80% and Wellglade 20%) known as Nottingham Trams Ltd. NTL subcontracted the rolling stock maintenance to Alstom. The total public project cost about £570m of which £430m budgeted for construction (with additional major cost overruns funded by the private sector)..The rest of the construction was funded through loan finance. The actual cost of construction was higher than budgeted, so the construction JV lost money, but the public sector didn’t because all the construction risk lay with the private consortium. The operation and maintenance has been profitable based on ticket prices similar to bus ticket prices. The revenues more than covered the O&M costs. The shareholders invested a lot of their own money (c £100m) and were repaid once the construction completed. The remainder was funded by debt financing,provided by the European Investment Bank and other major banks (European and Japanese plus RBS). Inevitably when the pandemic hit the country, revenues collapsed and the financing model became difficult without government support. More recently, revenues and passenger numbers seem to be recovering towards pre-pandemic levels. The 23 year contract was signed in 2010. The two new lines were built on time (3 years) but the commissioning of the system was delayed by 8 months, costs overran. Cost overruns were due to delays (liquidated damages), higher than expected utilities diversion costs, many snagging issues, legal/financing and initial concept design costs and additional built in costs for risks. Therein lie the advantages of DBFOM projects (revenue and construction risk with the private sector, generally built more quickly) but they will be more expensive and large amount of debt funding makes these kind of projects less attractive when faced with economic shocks like the pandemic. If more of the cost had been raised through the WPPL perhaps the project model would have been more sustainable in the event of a major economic shock. I doubt whether any private contractors would undertake a project of this type today without the risk being more equitably shared with the public sector, although there are alternative examples of PPP funded projects throughout the world, including one in Reims (France). European Investment Bank relatively cheap loans are no longer available since Brexit.The cheapest sources of loan finance are available from HMG’s Public Sector Loans Board and these are available to all public authorities and local councils but supply is limited. Nevertheless, the lesson from France is that the more the funding comes from the Local Authority and the Region the more likely the project will proceed. PPP can work and payments are spread over many years, but there must be a big change in the allocation of risks between the public and private sectors for them to be viable and attractive to investors.

70% payments to the consortium come from the Government in the form of monthly payments for meeting the monthly KPIs over the period of the concession, paid via the contract holder – Nottingham Cit Council. The remainder comes from the Local Authority Nottingham City Council – mainly from the WPPL. The WPPL was the first of its kind in the UK and works well. It closely resembles the Virement Transport means of financing LRT in France. The WPPL did not drive away potential investors away – quite the opposite. My own feeling is that this type of funding could be used to fund a greater proportion of cost, as in France, where very little financing is provided by central government – 97% from the Region/LA involved. The removal of 20 million passengers from the roads of Nottingham reduced congestion and levels of pollution and Nottingham City Council has invested in many other forms of green transport – cycling, electric buses etc. The buses are modern and run by Nottingham City Transport (inner routes) and Trent Barton Ltd (redial routes).Ticketing is modern and similar to Oyster in London. The price of tickets still remains relatively low and comparable with bus ticket prices. When I retired, average ticket prices were little more than an average £1.30/ticket.

Hope that helps.

Roger Harrison

Nottingham. Could someone with knowledge of the tram give me their comments please? Did taxes go up massively? Did it cause massive disruption? How many times has it been extended?

Dave Andrews

David Gibson	18 Nov 2021, 20:58
to me

Nottingham used the WPPL for finance, it was said it would lead to masses of businesses leaving Nottingham, which didn’t happen, instead, it has been an attraction for new businesses.

There has been one extension, Phase 2, but this of course is two lines, doubling the passenger numbers to 18m+ (before the pandemic – from my experience, most have returned). There was disruption during building, particularly in Beeston, but after, the benefits have been massive, and Beeston seems to be thriving, with much new development. There is likely to be at least one further extension, from Clifton to a new development of 3,000 houses and businesses. Other extensions are likely, one to the east into Gedling probably next on the list. The cancellation of HS2b though reduces the likelihood of extension from Toton Lane, though getting into Long Eaton is a possibility, as is going on to Derby, only about 8 miles further. I will continue to campaign for the latter, about 40,000 people commute daily between the two cities. This though is bedevilled by local politics, the counties and intermediate boroughs don’t cooperate, and fear a takeover by the cities. Derby and Nottingham cities though do. We need a change in the organisation of local government in the EM.

 

I can’t understand the comments about “ugly vehicles”, the trams are sleek and attractive, and fit into the cityscape much better than any road vehicle, and of course don’t emit masses of pollution, and run on renewable energy.

 

Regards,

Dave G.