Background

Railroads include light railways, metro/underground, commuter, fast inter-city railways and freight rails.  A typical railway project will consist of the trains only, the track only or both.  Such projects:

• Are technically simple, although signalling and scheduling can be complex.
• May contain rolling stock which needs to be imported
• Usually supply a captive market
• Do not usually generate foreign exchange
• Are subject to straightforward taxation calculations
• Produce a passenger/freight volume which usually increases gradually to the design capacity where it stays for the project’s duration unless further investments are made in rolling stock
• Are often based on a PPP (lease, BOT or concession)

Railway projects usually consist of one of the following.

• One party
The railway company owns, operates and maintains both track and rolling stock (revenues from passengers and/or freight), or

• Two parties
a train operating company which owns, operates and maintains the trains (revenues from passengers and/or freight) and pays for use of the track
a track owning company which owns, operates and maintains the track (revenues from the train operating company's usage of the track), or

• Three parties
a train operating company which leases and operates the trains (revenues from passengers and/or freight) and pays for use of the track
a rolling stock company which owns the trains (revenues from leasing the trains to the train operating company)
a track owning company which owns, operates and maintains the track (revenues from the train operating company's usage of the track)

Modelling Considerations   

As passenger demand increases, there comes a time when the operator needs to invest in additional rolling stock. It is not acceptable for the model to assume that revenues can go on increasing without such investment. To do this the model needs to contain a calculation of the required number of trains for each period over the operating life of the project. These calculations will include a headway calculation which forms the basis for a timetable. The model should also assume that a sinking fund will be used to fund the additional investment when it is needed. 

How Promoter handles Railway projects   

• Promoter handles the following type of railways: Passenger (light railway, metro/underground, commuter, fast inter city),
• It models any one of the projects described above.  In addition, it models the train operating company by itself in the three party system (equivalent to a train franchise in the UK)
• It takes into account the need for additional investment in rolling stock through the operating life of the project to ensure a constant level of service
• Operating costs are calculated separately for railway (including signalling, stations etc) and rolling stock
• Revenues can be from passenger fares and/or lease of railway line
• The user places key coordinates so that Promoter can illustrate the network
• It diverts net operating revenues from early opening to fund parts of the project still under construction

Typical Project Cash Flows

The following chart illustrates the cash flows for a railway project. Note the gradual increase in revenues from increasing demand and the corresponding increase in capital costs as additional trains are added.