SBST's Downtown Line to shift to version 2 of rail financing framework

SBS Transit's Downtown Line (DTL) will transition to the new rail financing framework Version 2 - similar to that which the North East Line (NEL) and Sengkang Punggol (SPLRT) LRT Lines operate on, SBST said.

"The new framework will reduce commercial volatility for SBS Transit as it works at delivering a reliable and financially sustainable public rail service," the company said.

Under the framework, the earnings before interest and tax (EBIT) of rail operators have a cap of about five per cent. SBST will also share revenue risk with the Land Transport Authority (LTA) via a mechanism where the LTA will share - up to the payable annual licence charge - in fare revenue shortfalls and when the EBIT margin falls under 3.5 per cent.

The DTL currently operates under the first version of the framework where there is no revenue risk sharing.

In line with the latest agreement, the LTA will issue a consolidated rail licence to SBST's wholly-owned unit, SBST Rail, to operate the DTL, NEL and SPLRT for 11 years starting Jan 1, 2022 and ending on Dec 31, 2032.

Meanwhile, SBST will continue to hold the rights to lease out the advertising spaces of the DTL, NEL and SPLRT until end December 2023. Beyond that, LTA may allow SBST to continue to operate all, or part of, the rail advertising business from Jan 1, 2024 until end Dec 2032 at a concession fee.

At the same time, the agreement also allows for an extension of five existing bus contracts, presently operated by SBST, by an average of three years, SBST said. From Sept 1, 2022, the service fee for these contracts will be lower than the current service fee as they are benchmarked against recent bus tenders.

Shares in SBST closed at S$2.98 on Thursday, down one cent or 0.33 per cent.