Deadlock over SMRT's shift to new rail financing framework

MRT train approaching Ang Mo Kio Station. Negotiations for SMRT to shift to the new rail financing model have hit a deadlock, with the rail operator and the Land Transport Authority (LTA) nowhere close to an agreement. -- PHOTO: ST FILE
MRT train approaching Ang Mo Kio Station. Negotiations for SMRT to shift to the new rail financing model have hit a deadlock, with the rail operator and the Land Transport Authority (LTA) nowhere close to an agreement. -- PHOTO: ST FILE

SINGAPORE - Negotiations for SMRT to shift to the new rail financing model have hit a deadlock, with the rail operator and the Land Transport Authority (LTA) nowhere close to an agreement.

In a written response to a question by non-constituency MP Gerald Giam on Monday, Transport Minister Lui Tuck Yew said "there remains a wide gap between SMRT's expectations and LTA's position".

On Friday, an LTA spokesman told The Straits Times it took into account not only the value of the existing assets SMRT owns, but also its financial obligations under its existing rail licences. The spokesman estimated that SMRT's total obligations are about $2 billion between 2014 and 2019.

She added that discussions between SMRT and LTA on the transition to the new financing framework are confidential, and details of SMRT's proposal cannot be disclosed. As such, it is unclear how SMRT's $2 billion in obligations impacts its proposal.

The LTA spokesman noted that under the existing financing framework, rail operators own the operating assets of the system and are responsible for buying additional trains to meet ridership growth.

As such, SMRT is obliged to invest in more trains for capacity enhancements over the next few years, including on the North-South East-West Line (NSEWL), the Circle Line (CCL) and the Bukit Panjang LRT (BPLRT), she said.

SMRT also has to pay for the re-signalling project for the NSEWL, although it may apply for a Replacement Grant to offset part of this replacement cost, she said.

These major investments add up to about S$900 million, she noted.

In addition, SMRT would have to buy over the first set of CCL trains in 2019 at an estimated net book value of $1.1 billion under the current licence, she said. SMRT would also have to buy over the first set of LRT trains next year for about $40 million.

In his written reply on Monday, Mr Lui also said: " Discussions between SMRT and LTA on the proposal are ongoing and they have not reached any agreement nor are they close, and unless and until they do reach agreement, we will continue to work on the basis of the current financing framework."