LTA says SMRT has $2b in obligations until 2019

RAIL operator SMRT's financial obligations for the next five years are estimated to be about $2 billion, a sum that includes buying over operating assets and paying for re-signalling works. The Land Transport Authority (LTA) revealed this yesterday, after Transport Minister Lui Tuck Yew was asked in Parliament this week for the details of the Rail Financing Model proposal submitted by SMRT in April.

In his reply, he had said that he was unable to disclose details because discussions between SMRT and LTA on the transition to the new rail financing framework were confidential. "However, I understand that there remains a wide gap between SMRT's expectations and LTA's position," he said.

"One of LTA's considerations is that the valuation of SMRT's business must take into account not only the value of the existing assets it owns, but also its current and future capital expenditure obligations, as required under the existing licences."

The LTA said that the value of the existing assets SMRT owns, as well as its financial obligations under its existing licences, have to be taken into account when considering SMRT's proposal.

An LTA spokesman explained that, for example, under the current financing framework, rail operators own the operating assets of the system and are responsible for procuring additional operating assets to meet ridership growth. "As part of this responsibility, SMRT is obliged to invest in more trains for capacity enhancements over the next few years."

The spokesman added that these include additional trains on the North-South and East-West Line (NSEWL), the Circle Line (CCL) and the Bukit Panjang LRT (BPLRT).

"In addition, it 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. These are all major investments to which SMRT has either committed or is already in the midst of implementing, and add up to about $900 million," the spokesman noted.

The LTA added that beyond this, SMRT may need to buy even more trains to meet ongoing ridership growth and enhance service levels for commuters.

Under the current CCL licence, SMRT also has to buy over from LTA the first set of operating assets in 2019 at an estimated net book value of $1.1 billion. And under the BPLRT licence, SMRT would have to buy over the first set of operating assets in 2015, at an estimated net book value of $40 million.

All these run up a bill of about $2 billion between 2014 and 2019.

One analyst speculated that SMRT's proposal was too high, which was why the LTA decided to respond in detail. "It seems that SMRT is asking for way over what the LTA feels it is entitled to," he said. "This is the 'wide gap' that the minister is referring to."