Welcome to the second panel. Could I ask you both to introduce yourselves?

I am Malcolm Brown, chief executive officer of Angel Trains.

I am Christoph Pasternak, chief executive officer of EUROFIMA. Maybe in two or three sentences I can talk about EUROFIMA, because Angel Trains, Siemens and Alstom are well-known brands in the UK. It is not yet the case for EUROFIMA. We are a supranational financial institution based in Switzerland. Our only aim is to finance passenger vehicles or infrastructure vehicles on a non-profit basis in 25 European member states. We are not related to the EU because we also have member states such as Switzerland and Norway.

Thank you very much. Could each of you outline in simple terms how your organisations support operators to procure rolling stock for passenger operations?

Angel Trains creates the bridge between the financial markets and the operating railway. We invest in passenger rolling stock in the UK, but also in things like yellow plant which goes out and fixes the railway at night and such things. In the past 10 years we have invested about £1.9 billion in the UK rail industry, and we buy and procure trains such as Alstom’s Aventras. The last order involved 665 vehicles. We are waving our last five vehicles out of Derby. That was an order of about £1 billion. Most recently, we have placed orders for Hitachi bi-modes. We have ordered about 115 vehicles in the past six months. That has helped to support Newton Aycliffe with an order of about £400 million. We look at the asset from cradle to grave. We bring the expertise of procurement into acquiring the trains, introducing them into service, part-life maintenance and ultimately the sustainable disposal of those assets. We are a conduit and then an asset manager for the rail industry.

Christoph, you have a slightly different model.

It is a different model because we are not a leasing company; we are not a ROSCO. We are purely a provider of financial means, so we are similar to a financial institution or a bank. We do not cover aspects such as asset management, the whole of technical procurement and maintenance, which the ROSCOs do. We provide solely short-term financing. The Swiss railways sometimes get money for one, two or three months, but we also provide funding for 15 or 30 years in line with the asset lifetime. The most recent transaction we have done is with Ferrovie dello Stato, the Italian railways: £400 million for 15 years. That was used also for tri-mode, because that was a topic previously covered for tri-mode trains produced by Hitachi. They would be running with electricity on electrified routes, with diesel on non-electrified routes, and within city centres with battery. We do new procurements, but we also support refurbishments. That was also a topic which Alstom and Siemens previously covered. In addition, for Ferrovie dello Stato and also Serbian Railways we are currently in discussions about retrofitting coaches. In old times you had compartments on long-distance trains; nowadays, you have open space. We have done that, for instance, for Italian railways and Serbian Railways. We also support modernisation of that.

At what stage in the procurement process for new rolling stock do you get involved?

For new rolling stock as early as humanly possible. We own the asset for the life of the asset and, therefore, we are very interested in the product being specified early on—whether that is a common platform—and you heard previous witnesses give evidence on that basis. We are looking at it not just when it goes into service but what that asset will be like in 20 or 30 years. We have to take a long-term view of that. We will have that asset, as I say, from cradle to grave. We will then work with the train operator or local authority in the specification of the passenger environment of that asset—what is feasible and what is not—and with the manufacturer, and then we take it into service. How does it work with the training of staff? How do we introduce it, maintain it etc?

Christoph, is it similar for you?

For us, it is a little bit later in the process. Usually, once the rolling stock owner, whatever that entity is, starts the tendering process for manufacturing they usually revert to us to get at least some indicative financing offers, because we also finance the construction phase. It is important for Alstom, Siemens and all the other manufacturers to get pre-payments during the construction phase, because it is a capital-intensive business, as has been discussed previously. We support that. Therefore, at the early stage of the production process we have to have the funding in place. We do not go into the technical details—Angel Trains does that—but at a high level you need an understanding, and that aligns also with long-term infrastructure strategy, traction technology etc.

How much of your business is focused on second-hand rolling stock for operators, or not at all? Is it all new?

As I say, we have the rolling stock for life. I am not sure about “second-hand”. We procure a train; we will lease a train; we will re‑lease a train. We will refurbish a train and lease it again. Do we buy rolling stock from somewhere else that has already been manufactured and somebody owns? No. That is not really the model.

For us, as mentioned previously, we do new procurements and also modernisations, but the majority of our financing goes to new procurements.

How has the procurement model changed since 2020 from a financier’s perspective?

If I may go back to previous evidence, there has been very little by way of new rolling stock procurement since 2020. We had the small matter of a pandemic. I would describe it as changing the shape of passenger journeys. We have moved away from dependency on morning peak and are seeing passenger journeys move more into weekends on that basis. The procurement process has slowed; there are no two ways about it. If you objectively measure the start to finish of South Eastern, Northern or TransPennine, those processes have slowed down for various reasons, some good because we are reassessing the market and passenger demand, but at other times there is definitely an element of what feels like bureaucracy.

I can shed some light on the continental European perspective, because we are not yet active in the UK. Looking at countries of a similar size to the UK, there are not such large gaps of two, three or four years with no major procurements. In all the other countries there is a constant flow of procurements. Upcoming, there were certain delays during covid due to supply chain issues. There were factory closures and also some supply chain issues; otherwise there was a constant flow.

In September or October we did a procurement for Hitachi bi-modes for open access FirstGroup. We completed that in 11 weeks, start to finish, from the initial phone call to having the Prime Minister at Newton Aycliffe. That was 12 weeks, but we had done the deal in 11 weeks. So you can do it fast.

Do you work differently with a privately owned operator than you would with an operator that has been taken over by the Department for Transport Operator?

No. We have always worked with a combination of private and public. From the get-go, we lease trains to Mersey Transport, which is a public entity, which then leases those trains on to Merseyrail. We have always had rolling stock—maybe there is something in this—where the public owner has had to step in: LNER, Northern etc. We have always been able to deal with that; the framework and contracts are there and we are able to make it work.

Did you find the DFT to be a good client for you?

I found all my clients to be excellent.

Okay.

Mr Pasternak, thank you very much for coming to the Committee. It is very interesting to hear a European perspective on this because some would argue that we can be a little inward-looking here. You mentioned that there has been a fairly continuous level of demand for rolling stock, but do the companies for which you provide finance tend to buy rolling stock using that finance, lease or a combination?

It is a combination. We see various models across Europe. Historically, continental European markets were dominated by the state-incumbent railways—national railways. In some areas, we also see regionally owned public railways. As of now, I see a wider range of rolling stock owners. The national railways are still dominating, and they usually tend to own the rolling stock by themselves. In addition to that, we also see private train operating companies owning the rolling stock. We see private ROSCOs active. UK ROSCOs are also active in continental Europe. We see public ROSCOs as well in certain European countries such as Germany, France, Norway and Sweden. We also see devolved public transport authorities similar to Transport for London owning the rolling stock. It is a wide range. We are agnostic to that. Historically, we were concentrating on financing national railways. We would be happy to do the same here. But we are agnostic, so we can also support Angel Trains in the UK and all the other UK ROSCOs.

That is very interesting, thank you. Clearly, a key challenge for the railways across Europe is decarbonisation. In the UK, as you will probably be aware, we have a very high percentage of unelectrified lines. How are you finding that the market is changing in Europe in what you are looking to finance? Is it becoming more complicated in terms of mix between conventionally electric trains, batteries, bimodal etc? How is that affecting your ability to finance things or the complexity of doing so?

It has not majorly changed our financing. We still continue financing diesel trains, especially towards eastern Europe. A diesel train is usually cheaper than a battery solution or a hydrogen solution. For many countries, it is easier still to stick to diesel, and we still continue financing diesel, because I am of the opinion that if you have one four-car unit diesel train it is still more effective than 100 private cars or 200 private cars. We still support that. However, it comes with a small price tag; we increase our interest rates largely to give an advantage to those who move towards electric vehicles, battery vehicles or hydrogen vehicles. We see basically a pendulum swinging a little bit more when it comes to alternative drives to battery solutions. We are in discussions with Czech Railways to finance battery trains. Hydrogen has been hyped for many years, but what I see in the pipeline is more either battery or bi-modal/tri-modal as in the most recent transaction with Ferrovie dello Stato in Italy, which was a tri-mode solution.

That is very interesting, thank you.

What would you hope to see in the new strategy document beyond certainty from an investment or financial risk perspective? Are there particular characteristics or attributes that you would hope to see?

I would say right at the start that the search for perfection is getting in the way of the good. It depends how you define strategy. You can quite quickly determine a forecast of, to use the terminology, the pipeline. We know how many trains we have, we know what age the trains are and we know how long a train lasts, so you can start forecasting that on a national basis. For the manufacturers, the Siemens and the Alstoms of this world, that will not necessarily give certainty, but it will give them a clear line of sight as to when they are likely manufacturing, within a couple of years. Remember, these are heavy capital items. We are not down to minutes; we are into within a couple of years. It should be able to give a clear pipeline. For ourselves as investors, that allows us to set money aside and say, “I’m going to compete for this.” Christoph and I can work together. I can compete against Christoph, but what you do is create a market where you are creating the best value for money. However, that money is global, and if we cannot have a line of sight on what we can spend it on in the UK, that money will go to other infrastructure projects in Europe or in the rest of the world. That is why it is key. The strategy piece that then blossoms out and starts getting more complex is what we are going to do about traction. Traction is about infrastructure. It is about where you are going to put wires up, whether you are going to do discontinuous electrification and so on. As Christoph says, you are not going to buy a train that has a diesel engine on it. I would not buy a train that has a diesel engine on it. But I would not buy a train if I am going to find out in two years or five years that there will be wires up and a diesel engine will be redundant. You have to have those hand in hand for the traction aspect of it.

For me, there are three pillars. Looking from a pure EUROFIMA perspective, since we cannot lend for the time being as long as the UK has not signed our state treaty, my major goal would be to convince you, the DFT and all the policymakers that EUROFIMA would be a good choice for the UK railway market because I believe that we can support the UK rail market with substantial financing amounts at much cheaper costs. My gut feeling is that savings could amount to approximately two percentage points, which means if you are thinking about £500 million in financing on an annual basis it will be £10 million, and in 15 years it is £150 million. Please correct me if I am wrong, Malcolm, but £150 million should be about 20 four-car units. If you multiply that, and it is not £500 million but, for instance, us providing £2 billion into the UK system, it is 80 additional train sets, increasing frequency in your constituencies and having more modern rolling stock helping with decarbonisation. I believe in that story very strongly, but of course I am a representative of EUROFIMA. That would be one pillar that I strongly believe in. The second pillar is the same one that Malcolm mentioned—the pipeline. There is no perfect railway market in continental Europe. When it comes to infrastructure planning and deriving from the infrastructure planning, knowing that a specific line will be electrified in 10 years, does it make sense to buy a diesel train, yes or no, if I know that in 10 years it will be electrified? Is it then better to use a ROSCO structure or maybe a different funding structure? The Swiss model and the Austrian model are very good because they have long-term views about target nets. What should the Swiss rail system look like in 2035? What should it look like in 2050? Derived from that, they have continuous planning. The Austrians have a six-year rolling period. Basically, once a year has passed, they add another year on. Out of that, you can derive a precise strategy for the rolling stock. The third pillar is not just what is derived from the rail infrastructure but, purely from the existing rolling stock, what are the ending of concessions or the ending of the lease periods? Will the same rolling stock be used, or will new be procured? What kind of traction technology will be used? It would be great to have that on a UK level and a general overview. Whoever does that is not important for me, but we need to have a long-term view. As mentioned, we are providing construction phase finance: three, four or five. Currently we are discussing one project where we have providers of indicative offers. It is the commuter trains in the capital city of Berlin. Here, because of the size of the project, the construction phase will be more than 10 years. So it is good to know when the procurement strategy is and when the construction phase will start, because then I can also start discussing the financing, whoever is the new owner of the rolling stock.

I am enjoying the language. I like the fact that you measure ROI in terms of the number of four-carriage trains. We have heard platform, not meaning the platform that you stand on.

No, no. Standardisation is also an important topic.

Yes. It is interesting getting my head around the language. You are basically saying you want to know what is going on beyond just repair and replacement of existing rolling stock. That is the plan. That is the ideal strategy that would help you do that. What, roughly, is the time horizon? I know you will say as long as possible, but, for example, in automotive leasing, three years tends to be the cycle. The aftermarket takes care of vehicles that come out of that type of arrangement. What is the minimum necessary time period in rail?

I would say that five or six years, as Christoph and Sambit mentioned, is the minimum. We can then easily extend this because the asset lasts about 35 years. The infrastructure planning and development such as putting wires up takes time. You can extend that beyond the 10 years, and you can easily take it up to 30. At 30, your certainty in the precision is becoming less because you are further out, for obvious reasons. Why would I stop at five years? One of the members actually questioned that. You can plan. After five years, you have a high level of certainty; after 10, a little bit less; at 30 less, and so on. There is no reason why you cannot do that.

I might have a slightly different view. Of course, five or seven years is also fine. That is what I see here in the UK market. However, you do not have security on what is happening after those five or seven years. Whoever is the owner, whether it is a ROSCO or a public train operator owning the train, has to price that risk in what will be done with that rolling stock after that five-to-seven year period. If I know that I have to change it because of decarbonisation, different rolling stock etc, shorter lease periods are fine. If I know that it is a sticky asset—it is what Sambit mentioned in the first session today—and I know the trains will be running in that region for 10, 15 or 20 years, why not extend the lease periods? That will drive down the residual value risk for whoever is the owner, the ROSCO or whoever else, and that reduces the prices. If we come in on a non-profit basis with our AA, that reduces the prices further.

You talked a bit about that method. At the moment, at this exact position in time, is there an additional incentive for investors to invest in low-carbon or electric traction engines, or is that still roughly on a par?

Last year, we invested £2.2 billion in pure R&D on Hitachi bi-mode. We had the opportunity to put a battery underneath it. Angel Trains is working with Hitachi. Other manufacturers are available. We worked with Hitachi, and we put the battery on it. We did a trial on that. That is £2.2 billion that I will not get back; it was pure R&D. What we learnt as an industry about battery technology was phenomenal. That is preparing us for future investments. We are in this for the long term. We are looking at battery, possibly hydrogen, electrification etc. That is the future. That is our incentivisation. I can get on with that.

Before I go to Christoph with the same question, what about fully electric?

Fully electric is a godsend. That is the most sustainable and the most practical, but it is not necessarily the most practical in terms of cost-benefit. There are parts of the UK that you will struggle to electrify on a cost-benefit basis. We talked about discontinuous electrification. We really support that. Discontinuous is where you put wires up where it is cheaper to do. It is on a straight line. You are avoiding tunnels and stations where it is costly to do. You then use the battery to run the final five miles into a station. That is what our trial at Angel Trains was all about. It is not whether I can run a train from Hull through to Liverpool, but whether I can use the battery where it is most efficient and then use it in combination with the overhead wires. We were able to prove that. We had a fantastic range of about 70 km, or 50-odd miles. It was good.

I appreciate, Christoph, you are looking at this more from a risk perspective than an asset ownership perspective. Do you have any other comments on that?

From our side, more than 90%, if not 95%, of our loan portfolio covers electrical vehicles or alternative drives—so, as of now, battery vehicles. So far we have not financed hydrogen solutions, and approximately only 5% is diesel. As mentioned previously, we give an incentive of two basis points, 0.02%, if someone uses an alternative drive or electric train.

There is actual market incentive to be there. That is interesting.

Yes, because we refinance ourselves. We are totally independent institutions, which means we go to the capital markets—for instance, pension funds, asset managers and asset trusts. We refinance green rail vehicles with a green bond and diesel vehicles with a grey bond. That also gives us a small advantage.

Ultimately, a consumer demand for green investments is causing that half-a-carriage-worth of —

I would say it is really the two basis points. That is a different story, but, yes, there is advantage.

It is not half a carriage, is it? It is much less than half a carriage, but it is still material.

Yes.

Okay. Just briefly before we go on, Malcolm, you mentioned in your written evidence the possibility of a national passenger rail fleet forecast, I believe.

Yes.

What do you believe is the Government’s current position on producing this forecast?

The honest answer is that I am not clear. I believe that there is work ongoing on it, but I could not tell you just now. It is maybe a question you should ask DFT or the Government.

Do you both believe there is an advantage to being involved with this? Perhaps less rhetorically, what could this do for the industry, and what sort of relationship would you like to have with it?

When we did this before—and we have done it before—we involved all parts of the industry. We involved manufacturers, train operators, Network Rail etc. The rail system is an ecosystem, and you have to draw in all those parts to get them contributing so that you get the best possible answer that you can. You can do it sitting in an ivory tower with a spreadsheet, but you are not going to come up with a practical, implementable and bankable answer on that basis.

For me, it is enough to be a passive reader of that pipeline. We do not have to be engaged in the establishment of that pipeline.

It is a critical question. People get very fixated on new trains. Everybody likes buying a new train. Everybody loves cutting a ribbon, choosing the fabric for the seat and all that. The train is for a long period of time and it will go through various refurbishments both in the passenger environment and under the solebar on the bogies. Our engineers have a high level of knowledge in predictive maintenance—when that will be required. That can be overlaid into the forecast as well. It is not just about new trains; it is about existing trains in the national fleet. You can estimate within a couple of years that we are going to need to refurbish that train. With Alstom, we did it last year. We did £125 million on the Pendolino fleet in Widnes. Alstom was able to tool up Widnes with over 100 people who were able to run the project over two years. What you are then getting into is not necessarily guarantees but a level of predictability. From that, you can then start going, “Well, actually, if I bring this project forward, I can do it then and maybe extend that project out,” and you smooth out the peaks and troughs.

Yes, I have.

Mr Pasternak, I do appreciate you will not be able to go into anything that is subject to any confidential commercial discussions, but given our move to Great British Railways do you think there is potential for UK operators to access EUROFIMA financing in the future?

I hope so. We started the initial discussions back in 2022 with the Conservative Government. It has gained speed since last year. We have very positive discussions with colleagues at DFT. If I may say so, compared to other transport ministries across Europe, I am very much surprised by the high level of professionalism and the different industries that the people at the DFT have. In other transport ministries, you very often have just legal people. I hope I am not offending anyone here with a legal background. Here you have a wide range of professionalism and knowledge. That helps very much in the discussions we had. Just two weeks ago we had a workshop on legal issues about the UK joining our state treaty, the so-called EUROFIMA convention from 1956. I hope that we can clarify all outstanding legal issues on legal due diligence and afterwards get an approval ratification. In my ideal world, I would love to support procurement like ScotRail in 2026.

That is very interesting, thank you. Mr Brown, what is the view of Angel Trains on the idea of the UK participating in a EUROFIMA way of doing things?

We welcome it. We can work together. I can work in partnership with EUROFIMA. There is no issue with that whatsoever. If it makes commercial sense and if it reduces the cost to the taxpayer, why would I not work with EUROFIMA? If I am competing against EUROFIMA, which I can do as well, that is a good thing ultimately because you are creating a competitive market. We are getting the right results, as I say, ultimately for the taxpayer. The market for rolling stock leasing and financing has changed radically since 2015. There have been a number of new large entrants into the market. If we get the pipeline going, there is a lot of rolling stock that needs to be procured and railway that needs to be invested in in the UK, and we need more participants in it. In that way, it frees up the balance sheet for the Government to do projects as was announced last week, the £15 billion, where there is not necessarily private finance for it. So utilise our balance sheet and free up the Government’s balance sheet for other projects.

I have a question for Christoph. Do other nations that you operate in produce an overall report or register of the status of their rolling stock assets? Do such documents help potential investors to enter that particular market?

There is no perfect railway market in continental Europe, but there are bits and pieces across different countries. One example is the organisation of public transport authorities in Germany. Just for your knowledge, open-access long-distance traffic and freight is a topic for the central Government in Germany, while everything related to commuter traffic and regional train traffic and everything that runs under concessions or on franchises is covered by the federal states. Here the organisation of the regional PTAs publishes on its website all the upcoming procurements for the next couple of years. I can see how many train kilometres are upcoming, whether it will be for new or second-hand rolling stock, and further on what kind of traction technology will be possible. That is visible and accessible to everyone. Yes, there are examples where there is a high level of transparency.

Okay. If this Committee was to examine one example in more detail, would you recommend the German approach?

As a starting point, but it could be improved, yes.

Mr Brown, I am very grateful to you for attending the Committee, particularly given that several other ROSCOs were invited but none was able to field a witness. To the extent that you feel you can say, would you say that the views you have shared with us today are broadly representative of the sector as a whole?

Clearly I cannot speak for the other ROSCOs.

Of course.

You have asked the question. Angel Trains and I welcome the opportunity to be in front of the Committee. This is important stuff being discussed and debated, and it is an ideal opportunity for Christoph and me to share our views on what is the art of the possible and hopefully make our industry better. I cannot say that I have said anything that my competitors would violently disagree with, but, as I say, I cannot really speak for them. What I can say is that I think the industry itself has an opportunity. We are at a point of inflection where we can go forward and we can improve the travelling experience for the passenger, because, after all, that is really what we should be doing.

Hear, hear. On that point, the Government’s plans for nationalisation and GBR clearly see ROSCOs as still playing a central role. It is not something that they have opted to change in the context of their proposals. Do you feel that the UK ROSCO model is still the best one? What role can Angel Trains and others play in trying to tackle this boom-and-bust situation that we have been exploring today and have a more stable pipeline of rolling stock procurement?

Wow, that is a long question. I would say don’t get fixated on one model. We lease in different ways. There is no standard lease that I can think of. There are core leases. There are slight variations on it. They could be working with EUROFIMA. They could be working in partnership with the mayoral areas. You can adapt it. It does not have to be set in one single way. What you need is the skills to introduce trains, implement them and get them into service. That asset management piece is absolutely core. We can work with the financing structure and we can work around it. For example, we lease 733 vehicles to South West. We went through a re-leasing process about a month and a half ago. Angel Trains vehicles are all on lease for a five-year period to South West. It was a commercial negotiation regardless of whether it had “DFTO” above the door or “FirstGroup” above the door. Hopefully, we have a good, structured contract that will last the test of time. I get less hung up about the fact that it has to be either public sector or private sector. It can be both, and I think we can both bring different sets of skills to it.

The same for us. We can work with all the ROSCOs. We have engaged with six in the UK so far and are keeping them updated on the process of the potential accession of the UK to EUROFIMA. In addition, some of the UK ROSCOs are also active in continental Europe. Therefore, there is also a partnership between UK ROSCOs and EUROFIMA outside the UK. I cannot name the specific ROSCOs, but some of the UK ROSCOs are engaging in pre-qualification for night trains in France, which we are running not on a commercial basis but under concession. Here, EUROFIMA has provided indicative offers to a few ROSCOs, UK ROSCOs among them, for night trains in France. There is a different level of interaction. That is why I think we can have a friendly engagement. In addition to that, we have reached out to all those major metropolitan areas. We have talked to Transport for London, Transport for Greater Manchester, Merseyrail, Transport for Wales etc. We have seen, with devolution trends, that some requests are coming up. There was no brand of EUROFIMA in the UK market, so we built it up. One consequence of the engagements with the metropolitan areas was that EUROFIMA most probably from next year will extend its financing from heavy rail into trams, metro and subways. Feedback from many like Manchester was, “Okay, if you finance heavy rail, why can’t you finance a tram network?” We said, “Okay, why not?” We are now in the process of getting that internally approved. With that, we could also support not just heavy rail but also light vehicles and metros in the UK from next year.

I am looking forward to night trains coming back on the French network as a previous user and a regular daily commuter on South Western Railway as well, so thank you.

I have two final topics to ask about, and both of these are directed at least initially to Malcolm. The first is about the ORR and the review of the 2009 transparency order, which I think you have a particular standing in as one of the parties that has been approached.

Yes.

For the benefit of the Committee, could you talk us through what the significance of this process is and whether you think the current transparency order needs to be revised in light of the Government’s plans for rail reform?

Forgive me if I tell you things that the Committee members are already aware of. In 2008, there was a referral of the three original ROSCOs, I think, to the Competition Commission. It had five findings, two of which centred around ROSCOs providing detailed information to prospective clients—to the train operators, as it were. The review that is taking place is a regular review; it happens every five years. One of the recommendations was that the ORR reviews the findings every five years. All we are in is a process that happened in 2020 and 2015, when things happened as well. This is a regular review that the ORR is obliged to do; it is part of its part of the deal. We get monitored every year on whether we are complying with the transparency order and whether we are providing the right information to prospective buyers. I am pleased to say that Angel Trains without exception has always complied. It is a “fail” or a “comply”, and we have always complied. To the best of my knowledge, so have our competitors. We have always been able to provide that information. We are in the process, as are all ROSCOs, whether it be the three original ones or the new entrants to the market, of participating in that review. We are all obliged to do that. We have had numerous meetings with the ORR. We have provided a whole pile of information. Literally yesterday—and I am sure I am not breaking any confidentiality—the ORR’s request was: “What type of trains do we currently have off-lease and how many?” We provided that information in a timely manner yesterday. That is the review that is going on at this point. It is not anything new. It happens every five years, and the ORR is obliged to do it. I am sure I am correct in saying that. Is the transparency order working? I would say yes, and I would evidence it in a number of ways. We have had a number of new entrants, as I said previously, into the ROSCO market. I think that is a positive thing. You referenced the six ROSCOs that EUROFIMA is talking to in the UK. That creates a healthy, competitive environment. We are not the high street. We are dealing with billions of pounds. I have plans to invest somewhere in the order of £5 billion over the next 10 years. You are not going to get a plethora of us—you are not going to get 30; it is not the high street—but we have new entrants coming in. We continually survey our customers, and currently our customer satisfaction as Angel Trains is running at 8.2 out of 10. This is a very high level of satisfaction. Various evidence points that we provide to the ORR demonstrate that we believe that the transparency order is working. How will it work in the future? It depends very much on what the structure and the procurement will be like under GBR. At this point in time, I do not have clarity on that. I do not think anybody has. I do not think there is anything wrong. They are forming that clarity at this point. I would be better able to say whether that works once I understand what the counterparty is on the other side of the table.

This question may need to be revisited sooner than five years because it relates to some that at the moment are franchised operations.

Yes. The transparency was clearly set up in 2009 under a different structure.

Okay. On the second point about value for money, you said earlier that the policy objective should be to create a market that offers best value for money for the taxpayer. The ORR separately has estimated that post-tax investment depreciation profit margins for the ROSCOs were 22% in 2023-24 and 34% the year before that. One of your competitors in 2022 paid out 75% of turnover in dividends. Can you say that the leasing market at the moment offers that best value for taxpayers?

I cannot comment on what other people have paid out in profits and dividends. We make profits to be able to reinvest. Sitting here today, I would be delighted to put orders into Alstom in Derby or Siemens in Goole of new train fleets. My balance sheet is healthy enough to do it. That is simply because I have a level of profit and a level of investment from my investors. If I do not have that, I do not have the balance sheet to invest.

The state treaty is the founding law of EUROFIMA, and it clearly says “European railroad financing company”. Basically, we can only finance rolling stock but no classical infrastructure.

I can finance infrastructure. We have recently financed the Tyseley depot in Birmingham. It is still operated by the train operators. We are not operators of depot. We have been able to look at the asset and say, “This is how we can improve it.” We have put £54 million in there. We are looking at other depots. I would happily work with Siemens on discontinuous electrification and provide the investment for that type of asset. We can look at different models. We can look at the concession model where the asset ultimately returns to Network Rail, I finance it for a 30-year period, Siemens operates it, and then the asset goes back. Again, I am very willing to look at different structures, different models and different assets on the rail industry. We have yellow plant. We have a fantastic business in Readypower. They are out there maintaining the railway when nobody else is on a Saturday night or Sunday morning. We are very happy to do that.

If I may add something to that, we can finance infrastructure vehicles. We have financed wonderful snow blowers in Austria. It may not be that relevant here around London, but we financed for ÖBB, the state railway in Austria, snow blowers to clear the snow from the tracks. We also financed some hopper wagons that transport the gravel needed for track building. We can do everything that is for a public mission—not the tracks, but what is needed to build and maintain the tracks.

It has to be. We have discussed the very practical nature of somebody specifying our procurement for, let us say, a tri-mode train, and, by the way, we plan to drop the diesel engine off that train in 10 years’ time because we are going to have wires up. That is not a good use of either time or money. The more that we can have them aligned the better. It does not have to be perfect. We tend to try to search for perfection here. If we know in X number of years that it will be electrified from Leicester up to Sheffield, then we can plan for that on that basis. These are long-term, capital-intensive assets.

If no one else has any other questions, I would like to thank you very much for your evidence today and thank all the witnesses for their evidence. It has been really helpful. We look forward to gathering further evidence as we move forward in this inquiry. That concludes today’s meeting.