International Business & Economy LTA to pay SMRT $1 billion to take over rail assets under...

LTA to pay SMRT $1 billion to take over rail assets under new framework

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The Land Transport Authority (LTA) will pay about $1 billion to SMRT for its rail assets like the trains and the signalling system. LTA today (July 15) announced the new deal under the New Rail Financing Framework.

LTA in a press release said that it will also shorten operating licences from 30 to 40 years under the previous model, to 15 years. The transport regulator hopes that this will result in operators becoming more asset-light, allowing the operation of rail lines to be re-tendered more frequently, and so make it more competitive.

The new licences will begin in October for all affected lines — North-South, East-West Lines, the Circle Line and the Bukit Panjang LRT Line — and will expire Sept 30, 2031.

SMRT had halted the trading of its stock earlier today in anticipation of this announcement.

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Under the new framework, SMRT trains will have to pay a licence charge, comprising fixed and variable components, annually to the LTA. This charge will be accumulated in the Railway Sinking Fund, which will help to pay for the maintenance of rail operating assets.

LTA will also impose and enforce a new Maintenance Performance Standards (MPS) on SMRT. The MPS is aimed at improving maintenance performance and rail reliability. Under this performance standards, SMRT will have to increase its maintenance staff by 20 percent over the next three years.

The new rail framework was first implemented in 2011 for the Downtown Line operated by SBS Transit.

LTA hopes that the move will relieve the train operators of ownership responsibility of rail operating assets, allowing them to better focus on the operations and maintenance of its network.

Fares will continue to be regulated by the Public Transport Council and so remain unchanged.
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