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The country’s most ambitious and long-delayed train procurement programme has suffered such heavy cuts that less than a quarter of the carriages envisaged in the original project are expected to be built in the first tranche.
A consortium led by Japan’s Hitachi is hoping to secure the financing for the first 330 carriages in the InterCity Express (IEP) programme by the end of next month, after more than three years of delays.
The number is a far cry from the 1,400 carriages originally planned by the government as part of a £7.5bn deal when it awarded Agility Trains preferred bidder status in February 2009.
Since then the programme has suffered a number of setbacks and in mid-2010 came close to cancellation after a damning review of the programme.
Last year the government decided to cut the size of the project to between 500 and 600 carriages. It has suffered further delays because of the banking crisis, which has made lenders ultra-cautious about providing financing to build the trains and three depots.
The complicated deal, which was meant to have been financed by the end of last year, will see government effectively lease the trains from Agility over a 27-year period.
“It is a shadow of what it started life as,” said a former senior rail industry executive familiar with the project.
Train operators have long been sceptical of the programme, which was first conceived in 2005 to replace the 1970s-era Intercity 125 trains.
Most of the trains were intended to run under electric wires and then switch to a diesel engine when on non-electrified routes.
While this controversial “bi-mode” design – no other country has tried to design anything similar – has been retained, a larger proportion of the order is now expected for carriages that run on electrified routes after the government stepped up plans to put wires over more of the country’s rail network.
Alistair Dormer, chief executive of Agility Trains, said he expected final offers in from banks by the end of June, having secured a deal with a core group of lenders, including HSBC, Lloyds TSB, Mizuho and Bank of Tokyo Mitsubishi.
“We are now close to financial close,” he told the Financial Times. He said that once the first tranche of 330 carriages, destined for the Great Western line between London and Wales, was financed, it would take another year to finance a second tranche of up to 270 carriages, for the east coast mainline
The order is a key part of the government’s industrial strategy for the north-east of England as it includes a commitment from Hitachi to build a £70m trainmaking factory in Newton Aycliffe, County Durham.
Mr Dormer denied claims the plant required an order of at least 600 IEP trains to make it viable. “It is part of Hitachi’s strategy to set up a [rail] manufacturing presence in Europe,” he said.
Maria Eagle, shadow transport sectretary, called the government’s train procurement a “shambles” pointing to delays in other rolling stock orders such as the order for Thameslink.
A government spokesman said: “We will commit to around 600 vehicles initially, and will retain options to purchase additional vehicles, subject to a detailed value-for-money evaluation.”