Rock Rail, a UK-based rolling stock investor, developer and asset manager, has secured £400 million in financing to buy 33 new Hitachi trains that will be leased by train operator Abellio UK for its new East Midlands Railway.
The transaction was led by Rock Rail and Japan Infrastructure Initiative, a company that invests in infrastructure projects and asset holding vehicles overseas in which Japanese manufacturers and engineering companies are involved, according to its website.
The transaction will be financed through Rock Rail East Midlands, a separate business Rock Rail will establish and invest equity in to own the fleet. The transaction is being financed in its entirety with senior debt provided by Aberdeen Standard Investments, Aviva Investors, Scottish Widows and Canadian insurer Sun Life Investments – institutional investors that have provided debt for Rock Rail’s three previous rolling stock deals.
The new fleet will start operating in 2022, serving the main cities and towns on the Midland Main Line to and from London’s St Pancras, Rock Rail said in a statement. The fleet will be leased to Abellio for the life of the franchise, which runs until mid-2027. “But there’s potential for an extension until August 2029,” Rock Rail chief executive Mark Swindell told Infrastructure Investor.
Asked whether nationalisation of the rail industry – which the Labour Party has said it will carry out if elected – could affect rolling stock investments, Swindell replied: “The Labour Party’s position at the moment is that they’d like for franchise agreements, once they come to an end, to remain in the public sector and not be re-franchised. So, in 2029, if that was the case, then Abellio would lose its franchise and the government would step in.
“Our view is that at that stage they would want to use our trains and would still want to lease them,” Swindell continued. “We provide the trains significantly cheaper than alternative trains would cost. In addition, the investors in these trains are UK pension funds, so if the government wanted to buy the trains, they’d be buying them from the UK pension fund market. So, I would think that they would give true value for those trains on that basis,” he said.
Rock Rail leases rolling stock to three other UK rail franchises: Great Northern routes, Greater Anglia and South Western Railway. Since 2016, it has secured financing for £2.5 billion of new rolling stock fleets from Siemens, Stadler, Bombardier and Hitachi.