REG-FirstGroup PLC: Statement re TransPennine Express award <Origin Href="QuoteRef">FGP.L</Origin>

FirstgroupAnnouncement

09/12/2015 07:10

9 December 2015

FIRSTGROUP PLC WELCOMES
AWARD OF TRANSPENNINE EXPRESS RAIL FRANCHISE

  Franchise to connect the North and Scotland with new intercity trains, more  
                            seats and more services                            

FirstGroup welcomes today's announcement by the Department for Transport
('DfT') of its intention to award the new TransPennine Express rail franchise
to the Group. This new franchise, which will operate until at least 2023, will
play a key part in delivery of the Government's vision for a Northern
Powerhouse, with more seats, more services and new trains providing customers
with outstanding intercity connections across the region.

During the life of the franchise more than £500m will be invested to transform
rail services across the North of England and into Scotland. There will be a
large increase in the number of carriages compared with today, meaning an 80
per cent rise in capacity at the busiest times of the day. The new TransPennine
Express will increase connections between the largest cities in the North and
Scotland by 55 per cent by 2019, keeping their communities and businesses
prospering.

220 brand new vehicles will be introduced by 2019 providing an additional 13m
seats a year. These state of the art intercity trains will be faster and more
reliable with more seats and luggage space. Journey times will be reduced as we
realise the benefits of these new trains and the Government's investment in
electrification. The remaining vehicles will be refurbished to the same
standard.

The new TransPennine Express will also operate a timetable that gives a similar
level of service at weekends as on weekdays, reflecting the changing nature of
work and leisure travel needs. Pioneering fares will be introduced, including
half price travel for jobseekers and 16-18 year olds, as well as further
discounted travel for groups.

FirstGroup will have responsibility for 19 of the region's railway stations and
will invest more than £18m to further develop these transport hubs. Customer
information at stations and via websites and mobile apps will be improved and
all TransPennine Express trains and FirstGroup-operated stations will be fitted
with free
Wi-Fi by 2018.

A partnership agreement with Network Rail will be developed to deliver more
efficient planning of improvement works, keeping customers moving more often.
The new TransPennine Express will work closely with key stakeholders including
Rail North, Transport for the North and Transport Scotland, as well as local
councils and community groups across the network.

FirstGroup has operated the current franchise as majority partner with Keolis
since 2004, increasing passenger numbers from 13m to 28m in that time. As sole
operator of the new franchise FirstGroup will create a strong and confident new
TransPennine Express feel and brand.

Secretary of State for Transport Patrick McLoughlin said:

"We promised passengers a world class rail service that would make the Northern
Powerhouse a reality - and I'm delighted that we have found an operator that
will deliver exactly that. As a one nation government we are committed to
closing the economic gap between north and south. This deal, and the joint
management of the franchise, will bring the Northern Powerhouse to life.

"First Trans Pennine Express Ltd will deliver exciting, ambitious plans that
will make a real difference to customers, and - coupled with our commitment to
push ahead with electrifying the vital TransPennine route - will help the
region realise its full economic potential, ensuring it has a modern 21st
century transport system. This is fantastic news for the North."

FirstGroup's Chief Executive Tim O'Toole commented:

"Our new TransPennine Express franchise will deliver faster and more frequent
intercity train services between the North's major towns and cities and we are
excited to help the Government achieve its vision for a Northern Powerhouse.

"Our plans include investment in new and refurbished trains on every part of
the network, with millions more seats available, free Wi-Fi and simpler smart
and mobile ticketing, allowing us to build on the success we have had over the
past 11 years, in which we have more than doubled passenger journeys on the
network.

"We will work with local authorities, customers and community groups to give
them a real stake in the future of their intercity rail travel. The new
TransPennine Express will connect the North and keep people moving and
communities prospering across the region.

"I am delighted that our disciplined approach to rail franchise bidding has
given us this opportunity to continue to deliver ambitious improvements for
TransPennine Express passengers and appropriate returns for our shareholders,
at an acceptable level of risk."

Key franchise terms

The new franchise will start on 1 April 2016 and is planned to run until 31
March 2023, with the option for a two-year extension at the DfT's discretion.
Under the contract, FirstGroup will deliver £303m real NPV* in premium payments
to the Government over the core period, with 2017/18 marking the transition of
this franchise from being a subsidised railway to one which delivers a premium
to the taxpayer.

The franchise will benefit from investment of more than £500m, primarily during
the first four years of the franchise, leading to enhanced customer experience
and passenger capacity more than doubling across the network over the life of
the franchise. Franchise passenger revenues, which were £213m in 2014/15, are
expected to increase significantly from the additional capacity created. The
full revenue risk franchise includes a profit sharing arrangement whereby a
proportion of profit in excess of pre-specified thresholds will be payable to
the DfT. FirstGroup will provide up to £189m in subordinated contingent loan
facilities to the operating company, of which £84m is bonded, as well as a £15m
performance bond and a season ticket bond of up to £3m. The Group expects to
earn an appropriate return over the life of the contract, reflecting the
franchise risk profile.

The franchise award is subject to the customary 'standstill' period of ten
days, after which formal contracts will be signed by the DfT. As with other UK
rail franchise awards, the Competition and Markets Authority is also required
by law to carry out a 'phase 1 review'.

* Net present value of forecast premium payments over the core franchise period
to 31 March 2023, expressed in 2015/16 prices and discounted using the DfT's
'real' discount rate of 3.5%

Key benefits of the new TransPennine Express franchise:

New and improved trains

  * 44 new state of the art intercity trains, 220 new carriages introduced by
    2019
  * Fleet size increases by two-thirds, with over 70% of it new
  * Existing trains all fully refurbished.

More capacity

  * 20,000 extra peak seats per day giving an 80% increase into seven largest
    cities on the network; with 13 million more seats across our timetable each
    year by 2019
  * More than double existing capacity on Sundays.

New and better connections

  * 55% increase in TransPennine Express connections between seven largest
    cities on the network by 2019
  * New 125mph rolling stock supporting reductions in journey time across the
    region
  * Direct trains from Newcastle to/from Manchester Airport reinstated in
    December 2016 with two trains per hour service to Newcastle in December
    2017
  * New direct services from Liverpool to Glasgow from December 2018
  * Extension of TransPennine Express services beyond Newcastle to Edinburgh
    from December 2019
  * 16 additional services per day from Glasgow and Edinburgh to Manchester by
    2019
  * Six trains an hour between Manchester and Leeds every hour - over 100
    services a day
  * Weekend services at similar frequency to weekdays
  * More early and late trains supporting the economic development of the
    region
  * An integrated network with better connections with local rail, bus and
    light rail
  * 13 new destinations served including St Helens and Morpeth added to the
    TransPennine Express network from 2017 and 2019, respectively. Both gaining
    new hourly direct links to Edinburgh, Leeds, Liverpool, Manchester,
    Newcastle and York.

More reliable services

  * Target to reduce delays and cancellations by 27%, underpinned by new
    partnership agreement with Network Rail.

Modern, flexible and value for money ticketing

  * Paperless tickets via mobile, available on all routes and for bus/rail
    journeys
  * Enabling Smart in the North - integrated ticketing with local smart card
    schemes
  * More through ticketing with bus, Manchester Metrolink and other tram or
    light rail systems
  * Discounted fares available for 16-18 year olds and for job-seekers
  * Online direct debit season ticket purchase and further group travel
    discounts
  * Bookings available up to 26 weeks in advance for Anglo-Scottish services
  * Delay Repay when things go wrong; automatic compensation for registered
    customers.

Better connected, better informed, better customer experience

  * Free Wi-Fi on Anglo-Scottish services and at all stations by summer 2017
  * Free Wi-Fi on all trains by July 2018 with free TV programmes and films on
    demand
  * Improved on-board catering, and plugs and USB ports accessible at every
    seat
  * Real-time passenger information screens on all trains by April 2019
  * New mobile app with journey planner; real-time seat availability on the app
    and website
  * 24/7 social media team; hearing loops on every train; cycle storage on
    board.

Station improvements

  * Total of £18m invested in stations across the franchise (19 stations in
    all)
  * £2.8m investment in customer information systems at stations
  * £1.4m Hull station retail development
  * New or improved ticket offices at Manchester Airport, Huddersfield and Hull
  * Extra car parking spaces and additional cycle parking
  * Improved customer facilities at stations including Click & Collect.

Community and sustainability benefits

  * 30% reduction in train carbon emissions
  * 31% reduction in non-traction energy use
  * 90% of waste to be recycled or prepared for re-use (from 2018)
  * A Living Wage employer, covering all of our employees and contracted staff
  * Dedicated fund to help small businesses grow through innovative use of our
    stations
  * £29m of funding to support customer and community identified improvements
    in the franchise.

  A conference call for analysts and investors will be held at 11:00am today.  
  Please call +44 20 7725 3354 in advance of the call to register and receive  
                               joining details.                                

Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Media
Tel: +44 20 7725 3354

Contacts at Brunswick PR:
Michael Harrison / Andrew Porter, Tel: +44 20 7404 5959

Notes:

FirstGroup plc (LSE: FGP.L) is the leading transport operator in the UK and
North America and our services help to create strong, vibrant and sustainable
local economies. During the last year around 2.4 billion people relied on us to
get to work, to education, to visit family and friends and much more and, each
day, every one of our 110,000 employees works hard to deliver vitally important
services for our passengers.

Our vision is to provide solutions for an increasingly congested world… keeping
people moving and communities prospering.

First Rail

FirstGroup is one of the most experienced rail operators in the UK and the only
one to run every sort of railway - long distance, regional, commuter and
sleeper operations. We carried more than 280 million passengers in 2014/15. We
operate two passenger franchises - Great Western Railway (GWR) and First
TransPennine Express - and one open access operator, First Hull Trains. We
operate the Tramlink network on behalf of Transport for London carrying more
than 32 million passengers a year and the Heathrow Connect service in
partnership with Heathrow Airport.



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