7. Infrastructure levy and franchise fees
(in millions of euros)
The infrastructure levy and franchise fees for the UK rail franchises contains an amount of €41 million (2017: nil) relating to the Central London Employment (CLE) mechanism which is included in the Greater Anglia franchise agreement with the Department for Transport (DfT). Of the total recorded CLE impact in 2018, an amount of € 19 million relates to prior years. The Greater Anglia franchise faces the implications of the DfT’s imposition of the CLE mechanism which has been set out earlier. Intended to provide the franchise protection against the risk of external economic factors having an impact on passenger revenues, the CLE mechanism is predicated on an assumed correlation between growth in central London employment levels and passenger growth with corresponding revenue growth. However, it is now clear that this correlation does not exist –due to changes in working travel patterns and growth in home working. As a result Greater Anglia, like other franchises in the London area, is facing a potentially further payment to the DfT for supposedly growth in CLE, without a corresponding rise in passenger numbers and revenues. Work is still ongoing to resolve the CLE issue. The current outcome of the CLE-mechanism has a significant impact on the future profitability of Greater Anglia.
Adjustment mechanisms HRN concession
The implementation agreement with the Ministry of Infrastructure and Water Management includes a number of correction mechanisms for determining the concession price. The correction relating to the average profitability during the concession is recognised as a receivable when the right arises in accordance with the calculation system, as laid down in the implementation agreement. The adjustment is recognised on a straight-line basis over the term of the concession. Other (one-off) payments under the agreement are recognised on a straight-line basis over the concession term.
Adjustment mechanisms for the main rail network franchise
The implementation agreement with the Ministry of Infrastructure and Water Management contains a number of adjustment mechanisms for determining the franchise price. The adjustment related to the average profitability during the term of the franchise is recognised as a receivable when the entitlement arises according to the calculation method used (as defined in the implementation agreement). The adjustment is recognised on a straight-line basis over the franchise period. Other (one-off) payments relating to the agreements are accounted for on a straight-line basis over the franchise period.