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Consortium Acquires 30% stake in Intercity Express Programme West

01 Nov 2018

A consortium comprising Dalmore Capital (“Dalmore”), Equitix Investment Management (“Equitix”), Japan Infrastructure Initiative (“JII”) and Rock Rail has signed agreements to acquire a 30% stake in Agility Trains West (ATW) from Hitachi Rail Europe Limited.

ATW was established in 2012 to finance, own and maintain 57 Hitachi class 800 trains that form the first phase of the Intercity Express Programme (IEP).

IEP is a £5.7bn Government-led rolling stock programme to build and maintain 122 new intercity trains for the East Coast and Great Western main lines.

The delivery of IEP has created 730 permanent jobs at Hitachi’s factory at Newton Aycliffe, County Durham. By sourcing 70% of parts from within a 40-mile radius of the plant, the programme supports jobs in the supply chain across the North East of England.

The Great Western fleet began a phased entry into service in October 2017 and is performing to a high standard and proving more reliable than the trains they are replacing.

The entire Great Western IEP fleet is bi-mode, meaning the trains are able to operate under both diesel and electric power. This has allowed the introduction of the new trains whilst electrification works on the Great Western route continue.
Unusually for a rolling-stock project, the revenue is based on a 27.5 year availability-based inflation-linked contract with the DfT, with full ownership of the trains being retained at the end of this initial period.

£160 million has been invested in new and refurbished depots along the Great Western route, including new sites at Bristol and Swansea, and the modernisation of a depot in West London. Hitachi will continue to maintain the Great Western fleet for the duration of the 27.5 year contract, as part of its long-term investment commitment to building and maintaining trains in the UK.

Dalmore and Equitix previously acquired a 15% interest in IEP through the acquisition of John Laing Infrastructure Fund in October 2018.

Michael Ryan, Chief Executive Officer of Dalmore Capital said “We are delighted to make this further investment in IEP. Assets like IEP with long-term availability-based and inflation-linked returns are very attractive to our investors”

Geoff Jackson, Chief Executive Officer of Equitix, says “We are very pleased to have secured a further interest in the IEP West project which builds on the existing stake that Equitix acquired as part of the acquisition of JLIF. As a long term holder of high-quality core infrastructure assets this project represents an excellent fit for our investors. We look forward to working together with the other stakeholders in the project to ensure its long term success.”

Naoki Nishida, President & CEO of JII, said “We are very pleased to make this investment, which marks a significant milestone in JII’s company history. We look forward to working closely with our co-investors and other stakeholders including Hitachi, to ensure long-term success of IEP West project.”

Mark Swindell, CEO of Rock Rail, stated: “Rock Rail is delighted to build on its long-term relationship with Hitachi Rail Europe and is looking forward to working with its equity partners, Hitachi and other stakeholders to ensure that passengers of Great Western Railway enjoy the full benefit of the Intercity Express trains over the entire life of the fleet.

“Previous involvement with the Intercity Express Programme means Rock Rail and its partners have a deep understanding of the commercial and economic aspects of the project, including the diverse roles and responsibilities of its many stakeholders and is well placed to contribute to the future success of the IEP.” 

DC Advisory acted as lead financial advisor and Ashurst acted as legal advisors to the consortium.

Cantor Fitzgerald Europe, Crédit Agricole Corporate and Investment Bank
and Goldman Sachs International acted as financial advisors and Allen &
Overy acted as legal advisors to Hitachi Rail Europe.

About Dalmore Capital

Dalmore Capital is an independent fund manager with a sole focus on investment in lower volatility infrastructure assets, particularly those in the UK. 

Dalmore raises and manages private funds from institutional investors who seek long-term investments in high quality yielding assets with index-linked returns. We manage in excess of £5bn and investments have been made to date in over 130 assets.

The team has 35 staff based out of offices in London and Edinburgh.

About Equitix

Founded in 2007 and headquartered in London, Equitix is a leading infrastructure investment firm that manages over £3 billion through five core infrastructure flagship funds, co-investment funds dedicated to larger infrastructure projects and segregated managed accounts providing customized solutions to Equitix’s investor base. The Manager’s investment strategy focuses on small to mid-cap infrastructure projects, predominantly located in the UK, covering a wide range of sectors with a particular focus on social infrastructure and renewable energy. Across all of its core funds, Equitix seeks to hold assets for the life of their funds.

With over 170 core infrastructure projects acquired since the firm’s inception, Equitix has institutionalised its distinctive approach to infrastructure investing and has been exhibiting a predictable rate of deployment throughout its history. As a result, Equitix has established a strong reputation as a leading developer, trusted partner, operator and fiduciary fund manager.

About Japan Infrastructure Initiative (JII)

JII is an infrastructure investment company established in January 2017 as a joint venture between Hitachi Capital Corporation, Mitsubishi UFJ Lease & Finance Co., Ltd. and MUFG Bank, Ltd. JII’s corporate mandate is to support Japanese manufacturers’ infrastructure business worldwide. In September 2017, as its first investment, JII invested £75 million in the UK rail infrastructure, HS1, through an Equitix managed fund dedicated to the project. In April 2018, as its second investment, JII made a $20 million investment in the Japan-Guam-Australia Submarine Cable project. JII aims to accumulate total invested assets up to $1 billion in the next few years through supporting Japanese manufacturers’ and engineering companies’ infrastructure business globally.

About Rock Rail

Rock Rail was established in 2014 by sister company Rock Infrastructure to focus on the development of large scale, strategically important rail infrastructure in partnership with public sector bodies and private sector investors. Rock Rail is an active investor developer and asset manager,esponsible for leading the development of financing solutions for core rail infrastructure as well as providing asset management services for the same.

Rock Rail invests on behalf of its institutional investors in trains which represent a core passenger fleet for the rail franchise. Rock Rail works closely with the franchise train operators and train manufacturers to ensure a collaborative approach to design, manufacture and acceptance of the new, state of the art trains on time and to budget. In its role as asset manager, it provides a complete range of asset management services specialising in the rail sector, to manage the long-term residual value and releasing risks and protect the long-term interests of institutional financial investors.

Since 2016 Rock Rail has secured £2 billion of new rolling stock fleets which will come into service on the UK rail network over the next 2 years. As well as continuing to work on other core fleet opportunities in the UK, Rock Rail has extended its focus to other UK rail infrastructure sectors including digital signaling, depots and electrification and other rolling stock geographies including mainland European markets.