Transport for London says it will be able to invest £1bn in frontline services, including introducing new trains on the Piccadilly line, after completing the sale and leaseback of its Elizabeth line trains.
A fleet of 70 new Class 345 trains were ordered by TfL from Bombardier, some of which are already running on TfL Rail routes ahead of their incorporation into the now-delayed Elizabeth line.
Last January the agency, which has a £500m funding deficit due to a combination of government funding cuts and the impact of mayor Sadiq Khan’s fares freeze, confirmed it was considering selling the trains in order to free up cash and help deliver its business plan for the coming years.
A final decision to go ahead with the sale and leaseback was approved by the TfL board’s Finance Committee last December and the agency says it’s now completed a deal with 345 Rail Leasing, a consortium comprising Equitix Investment Management Ltd, NatWest and SMBC Leasing.
TfL says the deal “will release approximately £1bn” for reinvestment in the wider network, adding that it delivers higher than expected savings across the current business plan, “as the cost of the lease will be less than that assumed in that plan”.
While the agency has declined to provide any specific financial details about the 20-year deal citing commercial sensitivity, a paper presented to the Finance Committee suggested that the selected buyer of the trains would have to reimburse TfL for payments already made to Bombardier and assume liability for all future payments.
It also said that TfL would then sub-lease the trains to MTR Crossrail, operator of the TfL Rail and Elizabeth line operator services.
Under the terms of the deal TfL will be able to buy the fleet back at the end of the initial lease if it wishes to do so.
Simon Kilonback, Chief Financial Officer at Transport for London said: “As is standard practice across the rail industry, we have been looking to sell and lease back our Elizabeth line rolling stock.
“This will help us purchase new trains on London Underground’s Piccadilly line, where there is a clear need for a modern fleet.
“This is a positive deal for London, releasing almost a billion pounds of funding for TfL which can be immediately reinvested into delivering transport improvements, while still allowing us to operate these trains on our network.
“We look forward to working with the 345 Rail Leasing consortium as we progress towards delivering the Elizabeth line, which once open will support the capital’s growing economy.”
Hugh Crossley, Chief Investment Officer for Equitix, said: “Equitix and its consortium partners are very pleased to be the new owners and lessors for the new fleet of Class 345 trains due to run rail services on the Elizabeth line.
“We have a strong history of being long-term owners and managers of core infrastructure and look forward to working with TfL as they establish the Elizabeth line as a leading presence within the UK’s transport network.
“We are especially mindful of its important role as a source of reliable transportation for London, and will support TfL as it delivers this new rail line for both its long-standing customers and the communities it serves.”