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Transport for London completes ‘sale and leaseback’ of Elizabeth line trains to 345 Rail Leasing Consortium

05 Apr 2019

Transport for London (TfL) has completed a sale and leaseback deal for the new Class 345 ‘Elizabeth line’ trains to 345 Rail Leasing – a consortium comprising Equitix Investment Management Ltd, NatWest and SMBC Leasing.

The deal, which was approved by TfL’s Finance Committee in December, will release approximately £1bn to TfL. This will be reinvested in infrastructure across London’s transport network, including delivering a fleet of new Piccadilly line trains, the first of which will appear in London from 2023.

Rolling stock leasing is standard practice across the rail industry, with rolling stock leasing companies owning the vast majority of the UK rail fleet, which they lease to train operating and freight operating companies. Similar leasing deals have previously enabled TfL to introduce new trains onto London Overground since it began running services in November 2007. Due to their unique nature, leasing options are currently not suitable for the procurement of new rolling stock on the London Underground network. This is why TfL has pursued this with the Elizabeth line train fleet.

Following a rigorous finance competition, the consortium was selected as the lessor for the Elizabeth line fleet.

The 20-year deal will release approximately £1bn of capital for TfL, in line with its expectations. The final deal also secures TfL savings across its current five-year Business Plan, as the cost of the lease will be less than that assumed in that plan. In addition, the deal includes an option for TfL to purchase the fleet back at the end of the initial lease term if it wishes to do so. As with all leaseback contracts entered into by TfL, all other financial details are commercially sensitive.

The completion of the sale and leaseback deal will have no impact on the operation or maintenance of the Elizabeth line fleet, which will remain with TfL and MTR Crossrail, who currently operate TfL Rail services.

Simon Kilonback, Chief Financial Officer at Transport for London said: “As is standard across the rail industry, we have been looking to sell and lease back our Elizabeth line rolling stock. This will help us purchase new trains on London Underground’s Piccadilly line, where there is a clear need for a modern fleet.

“This is a positive deal for London, releasing almost a billion pounds of funding for TfL which can be immediately reinvested into delivering transport improvements, while still allowing us to operate these trains on our network. We look forward to working with 345 Rail Leasing Limited as we progress towards delivering the Elizabeth line, which once open will support the capital’s growing economy.”

Hugh Crossley, Chief Investment Officer for Equitix, said: “Equitix and its consortium partners are very pleased to be the new owners and lessors for the new fleet of Class 345 rolling stock due to run rail services on the Elizabeth line network. By leveraging our experience as long-term owners and managers of core infrastructure we are looking forward to establishing the Elizabeth line as a leading presence in the UK’s transport sector. We are especially mindful of its important role as a source of reliable transportation for London, and look forward to growing the business to meet the current and future needs of TfL’s long-standing customers and the communities it serves.”

Andrew Blincoe, Head of Structured Finance at NatWest said: “This is a great deal for London and one we are delighted to have been able to support. To be able to back an infrastructure project of this nature is very exciting and we are looking forward to seeing the benefits of the new service being delivered in the near future”
Since June 2017, the new trains, which have been built by Bombardier Transport in Derby, have been gradually introduced on TfL Rail services between Liverpool Street and Shenfield, as well as between Paddington and Hayes & Harlington since May 2018.

Crossrail Limited is now carrying out dynamic testing through the central tunnels of the Elizabeth line, to ensure the trains multiple signalling systems operate in a safe and reliable way. Test trains have also recently been running out to Reading station as part of TfL’s wider work to investigate, along with the DfT, the possibility of beginning to operate Reading to Paddington services ahead of the completion of the Elizabeth line.