From 1 April, the Land Transport Authority will take over ownership of the trains, signaling systems and other operating assets of the North-East Line (NEL) and the Sengkang and Punggol Light Rail Transit (LRT) systems from transport operator SBS Transit.
The Land Transport Authority (LTA) will acquire SBS Transit’s rail operating assets at net book value, which is estimated to be about S$28.8 million (EUR 17.7 million). The LTA will make 60% of the payment on 1 April, and the remainder over the next two years.
SBS Transit will pay an undisclosed licence charge annually for the right to operate and earn revenues from the rail lines. Its existing licence of 30 years, which began in January 2003, will be replaced by a new licence of 15 years with a possible extension of five years. It will have to meet LTA’s maintenance performance standards and operating performance standards as part of the licensing agreement.
Under the licence charge structure, if fare revenue falls below the target by 2 to 6%, the LTA will share half of the shortfall. If the shortfall exceeds 6%, the LTA will bear 75% of the incremental burden. As for profit-sharing, LTA will take a cut if the earnings before interest and tax margin exceeds 5%. It will share the shortfall if SBS Transit’s earnings before interest and tax margin falls below 3.5%.
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