Rail financing model is just euphemism for "Govt subsidy" or "Govt bail-out". Govt is using tax payers' money to bail out these PTOs...
The fact that PTC has removed the focus on ROTA would probably show that groundwork has already been laid to shift to the new financing framework.
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REMOVING ROTA AS A REALITY CHECK
The Committee has reviewed the use of ROTA as a reality check. It has
deemed that, for the long-term viability of the public transport industry, it is better to allow the fare adjustment to be determined by the fare adjustment formula, consistent with the economic rationale of the price cap model.
Going forward, the Committee has also noted that in line with the Land Transport Masterplan 2008, the PTOs will become more asset-light as they will not be required to own operating assets, making the use of ROTA far less meaningful.
Taking into consideration the changes to the industry, and the recommended changes to the fare review mechanism that will require the PTOs to share gains by contributing to the Public Transport Fund (with the more profitable PTO contributing more), the Committee recommends to remove ROTA as a reality check on the PTOs, and to focus on the issue of fare affordability instead.
(02-05-2014, 09:10 PM)CityFarmer Wrote: [ -> ]The "much more sustainable business outlook” means a lot to investor...
SMRT says proposal for rail financing model submitted
SINGAPORE — Transport operator SMRT said it has submitted its proposal for a rail financing model to the government a month ago.
Speaking at the company’s fourth quarter results briefing today (May 2), SMRT’s CEO Desmond Kuek said it hopes the government will respond “as soon as possible”.
Mr Kuek adds that should the changes to the rail financing and bus operating models be approved, SMRT should “see a much more sustainable business outlook”.
SMRT has reported a net profit of S$16.9 million in the fourth quarter, compared to a loss of S$11.9 million in the same period a year ago.
For the full year ending March 31, 2014 SMRT booked a profit of S$61.9 million, down 25.7 per cent from a year ago. CHANNEL NEWSASIA
http://www.todayonline.com/singapore/smr...-submitted
So can I also say that government purposely suppress fare adjustment to rob shareholders of PTO?
SMRT bullish on non-fare income growth
CEO also counting on change to financing framework
Published on May 3, 2014 1:30 AM
SMRT's non-fare income includes advertising revenue and rentals. It has more than the 36,000 sq m of commercial retail space at its train stations. This includes the Esplanade Xchange. -- ST FILE PHOTO
By Christopher Tan Senior Transport Correspondent
TRANSPORT operator SMRT Corp's growth in the medium term could well be propelled by its non-fare businesses, and a change in the way public transport is financed and operated in Singapore.
Chief executive Desmond Kuek said the company's non-fare businesses, such as advertising and rental, are growing steadily.
For the year ended March 31, 2014, operating income from its non-fare businesses amounted to $109.2 million - more than total income, which was dragged down by a $25 million loss in the fare businesses.
The breakdown was starkly different 10 years ago. For the year ended March 31, 2004, non-fare income amounted to $33.9 million - or just one-third of total income.
The Sports Hub will also boost SMRT's non-fare income. The company has tied up with NTUC FairPrice to operate 41,000 sq m of commercial retail space - more than the 36,000 sq m it has in its train stations - at the sports venue, due to open next month.
In the same vein, Mr Kuek said SMRT is continuing to explore international opportunities and boosting its engineering capabilities.
Speaking at a post-results conference yesterday morning, he said "we're very optimistic" that the non-fare side will "generate sustainable growth for the company".
He said this in response to a question on whether SMRT would ever return to the 40 per cent margins it enjoyed in its heyday. For the year just ended, its operating margin stood at 22 per cent.
Mr Kuek also said a shift to a new rail financing framework will bode well for the company's long-term sustainability.
The change will see the Government assuming ownership of rail operating assets and being responsible for their timely replacement.
It will free the operator of holding hefty assets in its books, depreciation charges and lumpy capital expenditures.
"We've put in our proposal, and are awaiting response from the authorities," Mr Kuek said.
The chief executive added that a contestable bus industry - which the Government has been studying for about six years now - will also be positive for SMRT.
The Temasek Holdings-owned company has long been incurring losses on its bus business, which it inherited when it acquired Tibs Holdings in 2001.
Analysts blame SMRT's small route parcel for this. A contestable bus regime - where companies bid for routes - could give the company an opportunity to expand its bus network.
Mr Kuek was less optimistic about another loss leader: the Bukit Panjang LRT. He said the line has incurred losses from Day One, and is likely to continue to do so.
christan@sph.com.sg
Personally, I don't think the rail/bus financing will cause a major uptick in SMRT profitability without a corresponding fare increase. It is likely the cumbersome depreciation, loan interest and maintenance charges will be replaced with leasing charges to LTA. However, since, as a pureplay operator, it no longer needs to spend on capex, the quality of its earnings (ie FCF) will be significantly improved. Just my speculation.
In my view, it is a bit unfair to the govt for this rail financing framework. This is because LTA is required to absorb the lesser profitable rail equipment while SMRT holds on to the advertising as well as retail components. Hopefully LTA notices this and imposes T&C such as getting a percentage of advert/rental revenue. This is because the traffic volume, for these retail and advert, are created by commuter traffic-derived by the soon to be owned LTA carriages.
Anyone has detail of SMRT proposal? Supposedly GOVT needs to do a public consultation for it? After all part of it comes from tax-payers.
I have not read up much on why the their bus operation is loss-making. Is it only SMRT's or all bus operators? Can someone point me to any articles explaining the issues?
Thanks in advance.
Privatise profits, socialise costs.
(03-05-2014, 03:06 PM)GPD Wrote: [ -> ]Anyone has detail of SMRT proposal? Supposedly GOVT needs to do a public consultation for it? After all part of it comes from tax-payers.
I have not read up much on why the their bus operation is loss-making. Is it only SMRT's or all bus operators? Can someone point me to any articles explaining the issues?
Thanks in advance.
You may want to read-up SMRT and SBST ARs, as a starting point. PTO issues are "hot" topic nowaday, you should be able to catch useful news article(s).
(03-05-2014, 01:20 PM)CY09 Wrote: [ -> ]In my view, it is a bit unfair to the govt for this rail financing framework. This is because LTA is required to absorb the lesser profitable rail equipment while SMRT holds on to the advertising as well as retail components. Hopefully LTA notices this and imposes T&C such as getting a percentage of advert/rental revenue. This is because the traffic volume, for these retail and advert, are created by commuter traffic-derived by the soon to be owned LTA carriages.
The rail financing framework isn't a new concept. The Downtown Line is operating under the framework.
In that framework, which shouldn't be too far from likely framework on SMRT, contains fixed and variable parts. The variable part has the risk-sharing (profit-sharing) component.
(not vested)
Did they give any timeline for the new framework?