chapter 5 high speed rail london to the west midlands and beyond a report to government by high...

8/8/2019 Chapter 5 High Speed Rail London to the West Midlands and Beyond A Report to Government by High Speed Two

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High Speed RailLondon to the West Midlands and Beyond

A Report to Government

by High Speed Two Limited

PART 10 of 11


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While High Speed Two (HS2) Limited has made every effort to ensure the information in this document is accurate, HS2 Ltd does

not guarantee the accuracy, completeness or usefulness of the information contained in this document and it cannot accept

liability for any loss or damages of any kind resulting from reliance on the information or guidance this document contains.

Copyright, High Speed Two (HS2) Limited, 2009.

Copyright in the typographical arrangements rests with HS2 Limited.

This publication, excluding logos, may be reproduced free of charge in any format or medium for non-commercial research,

private study or for internal circulation within an organisation. This is subject to it being reproduced accurately and not used in

a misleading context. The title must be acknowledged as copyright and the title of the publication specified.

For any other use of this material please contact HS2 Limited on 020 7944 4908, or by email at [email protected],

or by writing to HS2, 3rd Floor, 55 Victoria Street, London, SW1H 0EU.

Further copies of this report can be obtained from www.hs2.org.uk.

ISBN: 978-1-84864-072-6

Unless specified, all maps, tables, diagrams and graphs in this report are a product of HS2 and its consultants.

Chapter 1:

ICE 3 high speed train on the Frankfurt-Cologne high-speed rail line, Sebastian Terfloth;

Eurostar, Dave Bushell www.canbush.com/ppbfrontpage.htm;

Gmmenen viaduct over the river Sarine with TGV 9288, Berne, Switzerland, Chriusha;

Tunnelling, HS1 Ltd

AVE Tarragona-Madrid, Fototrenes

St. Pancras Station, HS1 Ltd

Chapter 5:

Matisa www.matisa.com/matisa_ang/matisa_produits.html


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Chapter 5 Implementaon


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High Speed Rail for Britain Report by High Speed 2 Ltd

194

5.1 Delivery and fundingIntroduction

5.1.1 This section summarises our assessment of the options for the delivery and funding of HS2.

We began our work by considering the accumulated UK experience of delivering major projects

such as HS1 and the now extensive experience of building and operating high speed rail projects

internationally. We then undertook a series of workshops, as well as qualitative and quantitative

analysis, to assess the different options.

5.1.2 In October 2009, we presented our emerging conclusions to our Delivery and Funding ChallengeGroup to provide an independent perspective and expertise. The group, chaired by Sir Adrian

Montague (formerly Chair, British Energy and Friends Provident plc), included the following

investors, lenders, contractors and regulators, and their feedback has been considered throughout

this section:

Michael Adams, President, Bechtel Civil, Bechtel Corporation

Philippe Camu, Managing Director (Head of Europe), Goldman Sachs Infrastructure Partners,

Goldman Sachs International

Ed Clark, Director, Infracapital, M&G Investments

Cheryl Fisher, Chef de Division, Financements Structurs et Oprations de Partenariat Public-

Priv, Banque Europenne dInvestissement

David Gray, formerly Managing Director, Networks, Ofgem

Cressida Hogg, Managing Partner, Infrastructure, 3i Group plc

Fred Maroudas, Director of Treasury, BAA plc

Renaud de Matharel, Chief Executive Ofcer, Natixis EIL

Stephen Paine, Managing Director & Global Head of Infrastructure Group, UBS Limited

Anthony Rabin, Deputy Chief Executive Ofcer, Balfour Beatty plc

Sir David Rowlands, Andy Friend and Mike Welton, as non-executive members of HS2s Board, were

also part of the group.


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Chapter 5: Implementation

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5.1.3 Further detail on our approach is contained in the three supporting documents to this section, whichhave been prepared by our nancial advisers, Ernst and Young:

International case studies on delivery and nancing report on international high speed rail

projects in, for example, France, Portugal, Spain and Taiwan, which are referenced throughout

this section.

Delivery considerations and Financial considerations reports on delivery and nancing, which

support the conclusions of this section.

5.1.4 Our aim has been to ensure an effective model for the long term operations of HS2 (and a possible

high speed rail network), recognising that short-term funding or nancing considerations should not

drive decisions on or constrain the exibility of long term operating structures.

The role of the project sponsor

5.1.5 Given the size, complexity and duration of HS2, successful delivery will depend upon stability of the

long term vision and political support. Given the signicant public sector funding requirement, this

stability must be provided by the public sector, as project sponsor. The project sponsors functions

include:

During planning and development:

Setting out the long term strategy for the delivery of HS2.

Specifying the requirements, budget and timetable for the HS2 project delivery body,

and controlling any changes to these.

During construction:

Monitoring the performance of the delivery body for HS2.

Balancing value for money, affordability, whole life costs, functional specication and the impact

on the classic rail network.

Acting as a single point of accountability for the delivery of the project.

Being the ultimate bearer of risk.

And, during operations:

Monitoring the performance of the HS2 operator and maintainer and/or managing the

relationship with the long term infrastructure owner.


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5.1.6 For both nancing and governance, a key question for Government at an early stage will be whetherit is proposing HS2 as a stand-alone project or as the rst phase in a high speed rail network, since

nancing the construction of HS2 on a stand-alone basis so as to increase the projects short-term

affordability could mean that evolution of the line into a network is more costly and complex than it

otherwise might be. If Government decides to pursue a longer term strategy for a high speed rail

network, the project sponsor would also have an important role in setting out that strategy and is

developing and specifying the next phases.

5.1.7 Government could full the project sponsor role itself. However, we believe that these functions,

while being carried out within a wider policy and funding framework set by Government, would

be better undertaken by a body at arms length from central departments. Such a sponsor bodywould, in our view, be better placed to focus on project delivery and provide the necessary long term

stability similar to how the Olympic Delivery Authority and the Nuclear Decommissioning Authority

provide clear leadership for the delivery of their respective objectives. This issue of governance

would be particularly critical for Government if HS2 were to be the rst phase in the development of

a high speed rail network.

Delivering HS2

5.1.8 The main options for delivering the HS2 infrastructure are traditional public sector procurement or

some form of Public Private Partnership (PPP). The choice depends in particular on the scope for

value for money risk transfer, the effectiveness of risk management, and, ultimately, whether theapproach ensures an effective model for long term operations.

5.1.9 PPPs are attractive if they increase affordability and value for money by using private nance

to spread the projects costs to Government over time and to transfer risk to the private sector.

However, HS2 is simply too large to be nanced as a single PPP and it would be unrealistic for the

private sector to accept such a scale of project risks. As a comparison, the total value of all PPP

contracts let in the UK in 2008 was 6.5bn (which is approximately a third of the capital cost of HS2).

It is for this reason that, for example, the Portuguese high speed rail network was split into PPP

contracts of approximately 2bn to 4bn for individual lines of between 100km and 300km.

5.1.10 This suggests that a single PPP is unlikely to cover construction amounting to more than 20% of

the capital costs of HS2 and so ve or six (or more) contracts would be needed. We therefore

considered the scope for disaggregating the HS2 infrastructure into its project components on the

one hand, the core railway and, on the other, rolling stock and depots, and stations.

5.1.11 In practice the choice for delivering the core railway components is between multiple PPPs

(principally, Design, Build, Finance and Maintain (DBFM) or Design Build Transfer (DBT)) and

a more traditional public sector procurement approach. In contrast, the projects train and station

components might be delivered through commercial structures utilising private nance that should

not have an impact on the exibility of HS2s operations over the long term and may have the

potential to improve the affordability of the project.


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Multiple Public Private Partnerships5.1.12 The ve or six DBFM contracts that would be needed for HS2s railway components might be

bundled together in different ways for instance, by component type with several DBFMs for civil

engineering and structures (tunnels, viaducts, bridges, earthworks and drainage), one for the

railway systems (tracks, electrication, and heating, lighting and ventilation of tunnels), and one

for the control systems (signalling, control centre and communications). Alternatively, it might be

possible to have geographically-split DBFMs, although this would be less suitable for HS2 as it is a

single line. There are also other forms of design and build PPPs, such as Design, Build, Transfer.

5.1.13 However, whether component or geographically-based DBFMs or some other form of design and

build approach is adopted, in practice the delivery body would have difculty managing the interfaceand integration risk between the contracts, particularly as design control would be transferred and

the consistency of the design across the project would be reduced. The unattractiveness of this is

supported by the experience of the Dutch Hogesnelheidslijn Zuid (HSL-Z), where the complexity of

integrating the multiple PPPs used to nance the high speed rail line meant that train services did

not commence operations until two years later than planned.

5.1.14 The DBFMs would still require very substantial Government support because of both the length

of the construction period during which no revenues are being generated and the capacity of the

market to provide only a portion of the total nancing required. Also, the private sector is unlikely

to accept many of the construction risks such as the interface with the classic rail network andGovernment is ultimately exposed as funder of last resort. So, in practice, the opportunities for value

for money risk transfer under a DBFM for a high speed rail line may not be that much greater than

with public sector procurement. In the case of the TGV Bretagne Pays de la Loire PPP, for example,

the French Government needed to guarantee 80% of the debt.

5.1.15 Above all, multiple DBFMs for the core railway would create multiple owners and maintainers of

HS2 in operation. We believe that it is vital to reduce such interface risk to ensure performance and

growth in the use of the infrastructure. For that reason, in our view, there should be a single HS2

owner (or Infraco) to control the operation and maintenance of HS2 or a wider network. Therefore,

we do not recommend a DBFM approach.

Public sector procurement

5.1.16 More traditional procurement of the construction of the railway components by a public sector

delivery body while not providing the level of risk transfer that might, in theory at least, be

available with a PPP may be done in a way that allows construction risks to be suitably managed.

For example, while the project delivery body might retain some or all design control to decrease

integration risk and to balance consideration of whole-life costs, a partial design approach could

allow the private sector contractors to innovate and compete on detailed design consistent with

HS2s specication. Also, the construction contracts could have mechanisms to incentivise

construction performance such as xed or target prices, and contractor equity to strengthen risktransfer.


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5.1.17 Experience with Crossrail, HS1 and, for example, T5 at Heathrow, also suggests that a strongdelivery function will be critical to the procurement. The delivery body should be separate from the

project sponsor body by the point at which detailed design and planning begins. This will enable it to

focus on its role of delivering the sponsors requirements whilst being in some control of design.

5.1.18 The delivery body will need to build organisational capability and capacity in delivering major

infrastructure for example, skills in managing integration risk for multiple construction contracts,

and other risks that cannot be transferred. It might also engage a delivery partner to support its

project management and to draw on private sector expertise, experience and innovation that it may

not be able to retain itself. However, if there is to be a high speed rail network, then it might be

better value for money to build and sustain expertise and experience in the delivery body over thelonger term, which might sequentially deliver the next phases of the network.

Conclusions on delivery

5.1.19 So far as the core railway is concerned, in order to minimise interface risk in HS2 operations we

believe that there is a need for a single Infraco as part of the long term operating structure. We

also believe that it will be critical to the procurement for there to be a dedicated delivery body for

HS2. Public sector procurement can best provide for this by separating the different risks and

responsibilities in the projects construction and operational periods. This will subsequently allow

Government the exibility to decide on what structure should be put in place post-construction in a

way that multiple DBFMs would not. We therefore recommend a public sector procurement approach.

Rolling stock and depots

5.1.20 It should be possible to nance rolling stock and the train depots together, and separately from the

railway. Current practice is for these to be nanced under leases for example, the Thameslink

Rolling Stock Project is procuring approximately 1.5bn of rolling stock and approximately 0.5bn of

depots. Alternatively, the 5.9bn Intercity Express Programme is based on an availability payment-

based DBFM PPP. However, we recognise that factors such as the total costs and the markets

willingness to accept technical and residual value risk on the bespoke classic-compatible high

speed trains are likely to affect the nancing options available, and so, for the nancial modelling,

we have not assumed that the capital costs of these project components can be spread over time.


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Stations5.1.21 As described in Chapter 3, Euston station is the most complex component of the HS2 project from

a construction perspective involving the total rebuild of an existing station whilst classic train

services continue to operate from the station throughout the construction period. We believe that

a single body should have responsibility for procuring the rebuild in order to best manage the

risks involved. Government will need to decide whether that should be the HS2 delivery body or

the current owner of the station, Network Rail, as well as how that body is to balance the rebuild

with the continued operation of the classic rail network. It will be important to understand and, as

far possible, make contractual provision in franchises for dealing with the impacts on train service

operators on the classic rail network.

5.1.22 In contrast, some of HS2s new-build stations (for example, Birmingham Interchange and Fazeley

Street) could be delivered by DBFM contracts, as they are relatively separate from the other project

components in terms of both construction and operations. While signicant in themselves, they are

of a fairly modest scale and engineering complexity and consist of relatively simple civil engineering.

Such PPPs could be based on availability payments or user charges. These possibilities will need to

be considered further as the design of these stations develops and, again, we have not assumed in

the nancial model that the capital costs of the stations can be spread over time.

5.1.23 Whilst it has not been a deciding factor in choosing stations, there would be signicant opportunities

for redevelopment around HS2s stations in particular, the rebuilt Euston station, which mightcatalyse regeneration of the surrounding area, the Old Oak Common station (given the local

authoritys aspirations), and the Fazeley Street station in Birminghams Eastside regeneration

area. The project delivery body or sponsor might therefore need a wider social and/or commercial

redevelopment function, as such opportunities should be integrated into the project design at

an early stage (as was the experience at St. Pancras station for HS1). A separate station delivery

body might be needed to engage with land and property owners, the local authority and other

stakeholders over the long term in order to maximise the social and commercial value that could be

generated.


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Delivery structure for construction5.1.24 A diagram of the possible delivery structure for construction of our recommended approach, as

described above, is provided at Figure 5.1a.

Contracts transfer to government on completion Assets transfer to government on completion

Government

Arms-lengthsponsor body

Delivery body

Station and train components

Stations DBFMsand procurements

Depots and rollingstock DBFM

Civils andstructures

procurements

Railway systemsprocurement

Control systemsprocurement

Railway components

Figure 5.1a Proposed delivery structure for construction of HS2

Long term operations of HS2

5.1.25 Once construction is completed, we envisage that the infrastructure (and the contracts for any

disaggregated components) would transfer from the HS2 delivery body to the project sponsor/

Government. At this stage, possibly following a period of stable operation to generate a revenuehistory, Government has the exibility to determine the model for HS2s operations over the long

term. Government could continue to own the infrastructure or it could sell it to the private sector.

Build for sale

5.1.26 There are two build for sale options for realising the value of HS2 by selling it to the private sector:

Contract. Sell a long term contract for the operation and maintenance of HS2 to a concessionaire.

Regulation. Sell the infrastructure to be operated and maintained as, for example, a regulated

asset base (RAB).


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5.1.27 The value and timing of the sale will be determined by factors such as the amount of risk transferthat is achievable on a value for money basis, the amount of Government support that is required

and, in particular, how the user charges are set. On the one hand, guaranteeing a level of user

charges or availability payments would increase the sale value. On the other, setting of user charges

by the market offers exibility and avoids any ongoing Government subsidy, though the sale value

would be signicantly lower than the projects capital costs and Government would only recoup a

small proportion of its initial investment in HS2.

5.1.28 While private sector investors may prefer the certainty of a long term concession contract, they are

also more familiar with regulated assets rather than unique concessions. Features of a regulatory

regime, such as periodic reviews to ensure competitiveness of user charges by resetting themregularly to account for cost inefciencies and changes in circumstances, may also be desirable to

both Government and investors.

5.1.29 Overall, Government will want to understand what structure will best enable the successful delivery

of the long term operation of HS2 for example, through incentivising performance and growth of

the infrastructure and maximising the attractiveness of the asset to the market. The sale options

will also be inuenced by the prospective level of nancial contribution to the next phases of a high

speed rail network for example, by recycling the sale receipt or raising nance against a regulated

asset should that be a consideration for Government.

Long term ownership of HS2

5.1.30 There is also the question of who the long term owner of the HS2 infrastructure might be, in

particular if the line is sold as a regulated asset. The relatively limited number of HS2s interfaces

with the classic rail network (except for those at Euston station) and the different challenges for

the new high speed rail line (for example, the low future maintenance cost risk and the potential

for substantial future investment in a network) mean that it could have a separate infrastructure

owner, operator and maintainer from the classic rail network; or it could be owned and/or operated

by Network Rail. The HS2 Infraco could contract with other parties to undertake maintenance, but,

most importantly, it would be the single point of responsibility for the operations of the line.

HS2 train service operations

5.1.31 We have made no assumption of how train services would be operated (not least because we

cannot anticipate possible future changes to the railway over the next 15 to 20 years). However,

the experience with the original Channel Tunnel Rail Link and, for example, Taiwan High Speed

Rail has shown that there are signicant risks around the private sector accepting revenue risk

for infrastructure. Instead, we believe that a proportion of revenue risk should be transferred to

the train service operator through fares (as with current franchises). Whether the principal train

services are procured by the project sponsor/Government or the HS2 Infraco will depend on this

balance of revenue risk between the train service operator and the infrastructure owner.


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Regulation5.1.32 The experience with HS1 and Crossrail indicates that a regulatory regime could be tailored to the

delivery structure of HS2, with differences in some of the specic regulatory functions (depending

on, in particular, the sale approach and how user charges will be set). If there is a strategy to

develop a longer term high speed rail network, the regulatory regime will need to be exible so as to

allow the evolution of HS2 into a network.

5.1.33 We would expect the regulator of the classic rail network, the Ofce of Rail Regulation (ORR), to

continue to have a role in regulating the railway north of HS2s connection with the WCML, and

allocating released capacity on the WCML south of Birmingham. In developing the train service

specication, Government may need to test how to protect the future capacity on the WCML forHS2s high speed train services north of Birmingham and for improved train service levels south of

Birmingham. Government will also wish to consider the potential impact of competitive response

from open access operators, as well as the scope for competitive choices between operators on

HS2 and the WCML. In this context, there is a question as to whether or not the regulatory regimes

should be separate for the two railways. These are questions that do not need to be answered at

this stage, but they would require further consideration as the high speed rail lines or lines are

developed.

Funding HS2

5.1.34 Most new high speed rail projects require signicant amounts of Government funding to be

viable. That such a railway project is not self-funding should be unsurprising given the amount of

Government subsidy required to sustain the classic rail network and its train services (4.2bn in

2009-10). This is conrmed by the nancial modelling of the cash ows over 30 years for HS2, which

demonstrates that the net revenues generated are less than the total cost of the project, including

capital costs.

5.1.35 We have described earlier in this section why we do not think a PPP is an attractive proposition

for HS2. The more traditional public sector procurement, which we recommend, means that it is

inevitable that Government must cover the upfront capital cost of at least the railway components of

the project.


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m

Development Construction Operations

500

0

-500

-1000

-1500

-2000

-2500

-3000

-3500

-4000

-4500

Figure 5.1b Proposed prole of Government funding for HS2

5.1.36 Figure 5.1b shows the prole of Governments funding for HS2 from 2011 with upfront capital costs

during construction and a premium to Government during operations, net of the revenues that HS2

will abstract from the classic rail network.

5.1.37 Any HS2 premium could, in principle, contribute to the upfront capital cost of HS2. However, it would

be difcult to securitise this to nance construction without Government guarantees for the debt.

Instead, the premium might increase the value of a potential sale of HS2 or contribute to the next

phases of a network once HS2 is operational. It should be noted that the revenues are drawn from

our demand modelling and that there may be scope for increasing the revenues (and, consequently,

the operating premium) through, for example, the use of yield management techniques.

Scope for non-Government funding contributions

5.1.38 We have considered the scope for non-Government funding contributions to reduce the cost of HS2

to Government, particularly the upfront capital grant requirements.

5.1.39 Firstly, we have considered contributions from economic beneciaries of the infrastructure those

parties that will experience improved journey times, train service levels and connectivity based

on the principle that those who benet should contribute to infrastructure. This was the case for

Crossrail, which beneted distinct groups and areas; in contrast, the benets from HS2 will be

more widely and more thinly spread. Therefore, they may be difcult to monetise and secure. Such

contributions might be sourced from:

Non-user charges. For example, retailing and advertising at stations, utilities along the line of

route, and the sale of corporate sponsorship and naming rights of the line and/or stations.


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Train fares. A high speed rail levy on fares for all train journeys (high speed and classic rail)could be applied, as railway users will be the principal beneciaries; for example, a 1% levy might

raise 50m-75m per year.

Air passenger duty. An incremental levy would only make sense if HS2 was proposed to be the

rst phase in a high speed rail network and, probably, if a levy was commensurately applied to

train fares.

Supplementary business rates (SBRs). This would be difcult in the Greater London region as a

SBR is already allocated to Crossrail from 2010 for 30 years; application in the West Midlands is

theoretically possible, but, in practice, would be likely to require some comparable contribution

from London beneciaries. Council tax. Council tax valuation bands will likely mask any incremental increases in rates; a

at-rate high speed rail levy, similar to that for the London 2012 Olympics, could be applied

across the West Midlands county and Greater London region.

Redevelopment. Land and property owners, the local authority and other stakeholders could

contribute directly by pooling or leasing land and property at HS2 stations or contributing

to stations or ancillary investment to improve accessibility to stations, or indirectly via the

Community Infrastructure Levy but any additional value will be generated over the long term.

Other public sector funding. From, for example, local authorities or Regional Development

Agencies for components such as stations and ancillary investment to improve accessibility,although this could be contingent on conditions imposed by the parties contributing (as has been

the case in France the use of local Government funding for the TGV Sud Europe Atlantique had

conditions relating to local road investment).

5.1.40 Secondly, we have considered access to European funding sources. Recent European high speed

rail projects have been nearly 20% funded by EU grants for instance, the Porto-Lisbon and

Lisbon-Madrid lines but the majority of this is from the Cohesion Fund, for which the UK is not

eligible. The European Regional Development Fund could possibly apply to ancillary investment,

but its objectives and priorities are very unlikely to be aimed at the UK or projects such as HS2

in the future. Approximately 350m will be distributed from Trans-European Transport (TEN-T)programme grants to high speed rail projects, which is a signicant proportion of the available

funding, but only a tiny proportion of HS2s costs. To access TEN-T programme grants, Government

would need to include HS2 and/or a high speed rail network as a priority axis on any successor

to the TEN-T programme by demonstrating the projects added value through reducing trafc

bottlenecks and optimising capacity on other priority axes such as the WCML, and contributing to

the continuity of the TEN-T and European high speed rail networks.


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5.1.41 It is impossible to reach detailed conclusions at such an early stage of the development of theproject and given the uncertainties as to how non-Government funding contributions might be

secured for example, the political support required for a train fare levy. We are, however, clear that

they will amount to only a small contribution towards the overall cost of HS2, up to a maximum of

about 1bn. And it may be very much less.

Summary and key recommendations

5.1.42 In this section of the report, we have assessed the options for the delivery and funding of HS2. We

concluded that:

Consideration of the long term operations of HS2 (and a possible high speed rail network) shoulddetermine delivery structures, including nancing and governance.

Long term stability for project delivery must be provided, in particular through the functions of an

arms-length body as project sponsor.

Government must make an early decision on whether HS2 is intended to be a stand-alone high

speed rail line project or the rst phase of a future high speed rail network and, if the latter, the

project sponsor body should have a role in this.

A single Infraco is needed to control the operation and maintenance of HS2 or a wider network.

A dedicated delivery function is critical to the procurement.

A traditional public sector procurement approach to delivering HS2 can best deliver the

separation of responsibility for delivery and operations that is needed to minimise risk.

A single body should be in control of Euston station for the construction period.

Wider social and/or commercial redevelopment opportunities around stations should be

integrated into the project design at an early stage.

Government must cover the upfront capital cost of at least the railway components of the project.

Government then has the exibility to decide how HS2s operations are to be delivered over the

long term, including exercising one of two principal build for sale options, which may also offer

the prospect of a nancial contribution to the next phases of a high speed rail.

5.1.43 We also believe Government should give early consideration to:

What model might be best for the long term operations of HS2 and who the long term owner of

the HS2 infrastructure might be.

What regulatory regime there should be for HS2 (and a high speed rail network) and the WCML,

considering in particular how user charges will be set.

What amount of non-Government funding contributions might be secured, in particular from

revenues, redevelopment and European sources.


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5.2 Implementation and timescalesIntroduction

5.2.1 This chapter sets out possible timescales for HS2 from now until opening and sets out any key

implications of how the project might be taken forward.

5.2.2 The main components of the timeline are:

The need for effective public consultation and management of blight.

The need to secure approval for building HS2 and to satisfy other legal requirements, either

through a hybrid bill or application to the Infrastructure Planning Commission, requiring further

design and Environmental Impact Assessment.

Production of detailed engineering designs and construction drawings.

The time needed to put in place the structures for the functions of the project sponsor and the

project delivery body and build their capability.

Mobilisation preparations for construction, including procurement, initial utilities diversions,

detailed planning permissions and land assembly and preparation of temporary works.

The main construction period.

Testing and commissioning the new infrastructure, rolling stock and operations.

Opening the line and starting to operate passenger services.

5.2.3 Up to the start of construction, we have assumed the need for three investment approvals;

provisional approval at the time of the decision on the preferred route; conditional approval after

securing the necessary powers and at nalisation of the contracting strategy; and nal approval

before starting construction. The rest of this chapter provides more details about the key areas and

ends with our considerations about what this means for the overall timetable and of the main risks

and opportunities.

Consultation

5.2.4 Consultation with the public and interested stakeholders is a fundamental part in the development

and delivery of any major infrastructure project. The HS2 Consultation Strategysets out our

high-level recommendations on how Government should take forward a public consultation. We

recommend a two stage approach to this. The rst public consultation would be on the strategy

proposed to be followed by the Government. A key focus of this would be on the analysis and

assessment of the preferred London to West Midlands route and the options considered. A second

consultation would follow once a more detailed design of the preferred route had been completed

and would be associated with securing powers.


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5.2.5 Generally, Government consultations last for a minimum 12 week period. Given the scale of thisproject and the scope of proposed communication activity 6 months would be a more appropriate

timeframe for the rst strategic consultation. This consultation would inform the decision on the

preferred route. The decision on the preferred route would also be the point at which the project

delivery body should be separated from the project sponsor so it can focus on the role of delivering

the sponsors requirements.

5.2.6 A second consultation would be required in due course on the detailed design of the preferred route

in advance of seeking the necessary powers. This consultation would include much greater detail

on engineering, planning, environmental assessment and mitigation planning. It would also allow

more robust costings to be produced, which would be essential for giving the necessary degree ofcommitment to public funding before powers were sought.

5.2.7 We also recognise the specic requirements in the Planning Act for public consultation which would

need to be complied with if approval for HS2s development was sought through the Infrastructure

Planning Commission.

5.2.8 Once further design work had been done on the route, it would be possible to determine which

existing properties for instance residential, commercial or industrial ones would need to be

purchased in order to build and operate the new rail line. At the same time, it would be possible to

identify those properties in the vicinity which would not need to be purchased but which could still

be affected by the construction and operation of the line (for example by noise or vibration), as well

as what mitigation measures (such as sound barriers) could be put in place to reduce these negative

effects.

Blight

5.2.9 The experience of other major transport schemes such as HS1 is that they can have the effect

of blighting property in the immediate vicinity, either making the property unsellable or reducing its

value. In the case of HS2 this blight would be likely to take two forms:

Statutory blight relating to those properties that would need to be taken in order to build

or operate the line.

Until any decision is taken on the exact route of the line, the main risk is of generalised blight.

In other words if a property owner tried to sell during this period, uncertainty as to whether

that property might be affected by HS2 might have the effect of deterring buyers or reducing

signicantly the price they were prepared to pay. Generalised blight can also apply to properties

that do not need to be purchased to build or operate the line but which would be severely affected

by it (eg through noise). Generalised blight could be triggered as soon as route proposals are

published.


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5.2.10 If the Government decides that it wishes to take forward the proposals in this report for a new highspeed line, and to consult on a preferred route for the line, there would inevitably be a risk that

some properties on or in the vicinity of the route would be affected by generalised blight. We note

that the Government announced on 14 December 2009 that it proposed to consult on an exceptional

hardship scheme which would allow those property owners whose properties are severely affected

by generalised blight, and who have a pressing need to sell, to apply for the promoters of HS2 to buy

their property.

5.2.11 We also recommend that, after a public consultation on the form of the exceptional hardship scheme

and a nal decision is taken on the detailed arrangements, the scheme should operate until such

time as the Government makes a nal decision post strategic consultation - on whether to goahead with the new line and on exactly what route it should take.

5.2.12 If, following consultation, the Government decides to proceed with HS2, a follow up statutory

blight scheme would need to be put in place setting out the arrangements for the promoters of

HS2 to purchase those properties which were needed either to allow the line to be constructed

or for operating the line once it was opened, or which were near enough to the line to be made

uninhabitable. Our current assumption is that this scheme would need to apply from about the time

that the nal route for the line was published.

5.2.13 In due course it would also be necessary to safeguard the route of HS2. Safeguarding is a legal

process which would allow the Secretary of State to require planning authorities (such as London

Boroughs) to notify certain other bodies (such as the HS2 promoter) before granting planning

permission for any development proposals which might affect the proposed HS2 route, for example

where developers are proposing to build over part of the route. This would allow those bodies to

recommend to a planning authority that it should either refuse permission for the development or

only grant it with conditions attached. We would expect the main safeguarding exercise to take place

once the Government has decided on the nal route for the line, though the Government may wish to

consider whether certain parts of its preferred route should be safeguarded earlier.

Powers

5.2.14 Once a detailed route had been identied, it would still be necessary to seek legal powers to

allow construction to proceed. Amongst other things, these powers would be needed to enable

the promoter to purchase compulsorily the land required to build and operate the line, pay

compensation to people affected by the works, and amend existing legislation, where this was

necessary to construct the line.

5.2.15 There are two possible approaches to obtaining the necessary powers, rstly a hybrid bill in

Parliament, and secondly, an application to the Infrastructure Planning Commission. We note that

the Government announced on 14 December 2009 that if it decided to proceed with plans for HS2 a

hybrid bill would be prepared.


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Hybrid bill5.2.16 A hybrid bill is a set of proposals for changing existing laws, which needs to be debated and

approved by Parliament. Such bills follow a slightly different procedure from normal public bills,

in that they give organisations or individuals the chance either to oppose the bill in Parliament or to

look to amend it when it goes before a Select Committee in either the House of Commons or Lords.

In the past, the hybrid bill has been the usual way of obtaining powers to build major transport

infrastructure projects of national importance, where these would also affect the private interests

of a signicant number of individuals.

5.2.17 There are several characteristics of hybrid bills which are relevant in deciding whether they are the

right route for obtaining powers for HS2:

Although Parliament has only passed around a dozen hybrid bills over the last 25 years, they

have been used for several major transport projects, including the Channel Tunnel Rail Link

(HS1), Crossrail and the Dartford River Crossing. As such, the procedure is a familiar one, with a

relatively straightforward process, which would allow people and bodies who might be affected

by the proposals a proper opportunity to put their views across and have these taken into account

before Parliament decides whether to approve the bill.

The process is a exible one. The contents of a hybrid bill could be tailored to include all of the

various powers which would be needed to construct HS2, including obtaining overall planning

permission and amending existing legislation, such as that relating to rivers, trees and utility(e.g. telecommunications) companies apparatus; and, any powers needed to put in place delivery

and regulatory structures or funding mechanisms.

Whilst this route rightly allows objectors to any HS2 proposals the opportunity to put their case

across, once the Bill had become law there would be no risk of further legal challenge preventing

the scheme going ahead unless it could be proved that aspects of the proposals breached

European law.

Hybrid bills are subject to more intensive scrutiny in Parliament than normal public bills, and so

consume more parliamentary time. As such, they would affect the time available in Parliament

for other legislation which the Government might also see as a priority.

Infrastructure Planning Commission

5.2.18 The Planning Act 2008 introduced a new route for obtaining powers for major infrastructure projects

of national importance - which could include for example, airports, power stations or reservoirs -

the Infrastructure Planning Commission (IPC).

5.2.19 The IPC, which started its work in October 2009, is a non-departmental public body. Where a

sponsor, such as a private developer or a Government department, wished to build new major

infrastructure they would be able to submit an application to the IPC to be given the necessary

powers. The sponsor would already need to have carried out widespread public consultation on the

scheme before submitting it to the IPC. Any body or person with an interest would also be able to

submit their views on individual proposals to the IPC.


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5.2.20 In order to set a framework within which the IPC could work, the Government intends issuing aseries of National Policy Statements (NPSs) setting out national policy relating to particular types

of national infrastructure such as nuclear power and the strategic road and rail network. In

considering applications for powers to construct new infrastructure the IPC would have to take into

account their compatibility with the relevant NPS.

5.2.21 Where the IPC decided to approve an application, the scheme promoter would be granted a

development consent order, which would give it a range of powers needed to build HS2, including

planning permission and compulsory purchase powers.

5.2.22 The features of the IPC route which may be relevant to whether it is the best route for obtaining

powers for HS2 include:

As the Planning Act set up the IPC specically to consider major infrastructure projects, at rst

sight it would seem appropriate for it to rule on any application to build a new high speed rail line.

Leaving a decision on whether powers should be granted to build HS2 to the independent IPC

would mean that the case for the HS2 proposals could be considered on its own merits, rather

than it becoming subject to political pressures.

Whilst the IPC would be able to grant HS2 overall development consent to go ahead, it would not

necessarily be able to make changes to any existing legislation which would be required to build

HS2. In particular, it would be inevitable that changes would be needed to general legislationcovering railways, for instance to the role of Network Rail and Ofce of Rail Regulation in relation

to a new high speed link. It seems unlikely that these changes could be made through the IPC

route, so a supplementary bill in Parliament would still be needed.

Environmental assessment

5.2.23 Whichever route is pursued, there would be advantage in having a NPS which sets out the policy for

high speed rail. For the IPC route this would be a requirement in any event. For the hybrid bill route,

such an NPS would provide the required consideration of the strategic alternatives. In both cases

the NPS would be subject to an Appraisal of Sustainability, which may also need to incorporate the

requirements of the Strategic Environmental Assessment Directive and its regulations.

5.2.24 Both the hybrid bill and IPC routes require an Environment Impact Assessment and Environmental

Statement. This would be a project level assessment for a precisely dened preferred route,

covering in less detail the main alternatives considered.


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Timetable5.2.25 Based on the experience of recent bills and subject to outside inuences, such as the timing of

elections - the hybrid bill process could be expected to take approximately two to two-and-a-half

years from introduction of the bill into Parliament to it receiving Royal Assent. The IPC has only

recently been set up and has yet to rule on any applications. Given this, it is difcult to be certain

how long it would need to consider and decide upon what would be a very detailed and complicated

application. The indicative timetable which the Commission has published suggests that once the

IPC has accepted that the application has been submitted validly it would take around one year

for them to complete the assessment process and for the application to be approved or turned

down. That said, the IPC can extend this timescale, for instance where applications are particularly

complex, as inevitably they would be for HS2.

5.2.26 However, before an application can be submitted to the IPC, the promoter needs to have carried out

various pre-application tasks, including a widespread consultation with local communities affected

by the proposals and a series of other bodies. So, on balance, the timescales for both the hybrid bill

and IPC route could turn out to be broadly similar.

Mobilisation

5.2.27 By the time of preparation for powers, a dened delivery body and sponsor should be in place

(in shadow form if their establishment requires legislation). After obtaining powers to build the

new line, whether via a hybrid Bill or the IPC, around two years would be needed before the main

construction work could begin, for instance to allow for detailed planning approvals, land assembly,

commencement of initial utilities diversions and temporary works, nalising the funding, letting

contracts and other steps to mobilise the project. Advanced planning for the major construction

works would need to start as soon as possible in order not to delay the overall timetable. This

mobilisation period could take longer depending on the complexity of the delivery arrangements, the

contracting strategy and nalising funding. During this stage the nal investment approval would be

required before the main construction starts.

5.2.28 The procurement of the classic-compatible eet would commence during the mobilisation stage,

allowing time for the eet to be designed, approved, built, delivered and tested. The procurement ofthe off the shelf eet would start later, as the design and approval stages would need little time.

Rolling stock procurement would be linked to the depot construction programme. All infrastructure

and rolling stock testing would need to be completed by early 2025, allowing for a period of

operational training and shadow running before opening.


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Construction5.2.29 We estimate that construction would last for around six and a half years. The largest element of the

programme in terms of value and overall duration would be Euston Station and its approaches. The

construction of this element would probably take the whole of the construction period and would

form the critical path for the whole programme. The other major site-specic work packages would

be (in no particular order, with indicative durations):

Birmingham Fazeley Street station (4 years).

Old Oak Common station (4.5 years).

Rolling stock maintenance depot (3 years). Infrastructure maintenance depot (2 years).

Birmingham delta junction (2 years).

London tunnels (Old Oak to Euston) (4.5 years).

HS2 to HS1 tunnel works (3 years) (if the rail link were to be taken forward).

Chalfont and Amersham tunnels (5.5 years).

Little Missenden tunnel (4 years).

Ufton Wood tunnel (4 years).

The construction and tting out of an operational control centre (2.5 years).

5.2.30 The site-specic contracts would be phased to enable adjacent contracts to take place with a

minimum amount of disruption. They would be complemented by linear contracts to cover the

construction of sections of Line of Route linking the key sites. These linear contracts would cover:

Civil works (earthworks, bridges, local road diversions etc).

Trackwork.

Electrication (power supply and overhead line equipment).

Train Control Systems (signalling and telecommunications).

5.2.31 These linear contracts would be phased to link with key milestones in the site-specic contracts to

simplify construction and lower cost and programme risk.

5.2.32 It is anticipated that each of the major site-specic work packages would require major temporary

worksites to cover the actual construction period, plus periods before for mobilisation and site

preparation, and for fault rectication and general testing. In addition to the key worksites a large

number of much smaller ones of a more temporary nature would be required adjacent to the line of

route for plant and materials storage and for staff welfare facilities.


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Testing and commissioning5.2.33 During and then after construction there would be a period of testing and commissioning before

passenger services start. This period would be used to test all of the new infrastructure, rolling

stock and operations and conrm that the line is ready for passenger services. Safety testing and

recruitment and training of staff would be part of this process.

5.2.34 When sufcient testing has been carried out there could be some shadow running of services where

high speed services can start to operate in addition to the existing timetables for example, as seen

with the HS1 domestic services during 2009.

The timetable

5.2.35 Figure 5.2a shows a possible project plan for building our preferred scheme. The earliest possible

time that HS2 would open under this scenario is December 2025.

Activity 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Submit Report

Ministers Decision

Strategic Public Consultation

Preferred Route (Provisional

Investment Approval)

Development of Specification

Commence Approval Process

Approval Process Complete(Conditional Investment Approval)

Detailed Design

Mobilisation etc

Final Investment Approval

Construction

Testing & Commissioning

Opening

Figure 5.2a Proposed project timeline for HS2 to opening

5.2.36 Figure 5.2b sets out the spread of costs across the project until opening, calculated using the

programme of works and capital costs described in Chapter 4, including construction risks and

purchase of rolling stock. The relevant infrastructure costs, split by components, have been spread

over the duration of the activity. For example, the earthworks have been spread over the ve years

in which they will occur. In general, the rate of spend on infrastructure costs builds gradually during

preparatory works and then increases during the main phase of construction activity before reducing

again.


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5.2.37 The overall cost prole of HS2 would also increase slowly during the design and approvals stage,before increasing rapidly as construction starts and then reducing as construction is completed and

the testing and commissioning phase commences. The additional risk prole allowance has been

allocated pro rata to project spend. However, there are other ways of spreading the costs throughout

the duration of the project, for example, with a higher proportion applied during construction than

during preparation.

m

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

Financial year

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Figure 5.2b Proposed overall cost prole for HS2 from 2010 to opening

Risks and opportunities

5.2.38 This timetable carries considerable risk. If the public consultation identies new route sections

that have not been previously assessed in detail, further design work and re-consultation would be

needed, which are likely to add to the timetable. Both the hybrid bill and IPC routes for obtaining

powers depend on obtaining Parliamentary time, which will depend on other legislative pressures.

Any changes to the scope of the project, at any stage but especially later in the process, would

require redesign and reassessment. Securing early and broad support and establishing structures

which insulate the project as far as possible from future changes would help to reduce these risks.

5.2.39 Funding is likely to be a signicant source of risk with a project of this scale. Timely decisions on the

delivery and funding issues we have identied would be needed, including a decision on the most

appropriate delivery body, the long term owner of the infrastructure, the regulatory regime and most

importantly, the funding itself. Nevertheless, changes in economic circumstances and Government

policies and priorities inevitably raise considerable risks for the timing and certainty of public

funding, as well as any elements of private funding.


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5.2.40 Our assumed construction timetable is around seven and a half years from start of works to opening,compared with 9 years for HS1. Our timetable is achievable but could clearly be longer depending for

example on ground and weather conditions and given the challenges especially at Euston.

Summary and key recommendations

5.2.41 The various processes through to opening are likely to take a period of at least 16 years, of which

broadly half is for planning, and preparation, and half for construction and commissioning. The

earliest we consider the new line could open would be December 2025.

5.2.42 If the Government decides to proceed, we recommend that the next key stage is a strategic

consultation on the Governments proposals. Generalised blight could be created as soon asroute proposals are published. We recommend that a hardship scheme is established, following a

consultation on its contents, and note that the Government has announced its intention to do this.

chapter 5 high speed rail london to the west midlands and beyond a report to government by high...

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