Infrastructure - UK high speed rail

High Speed 1, London & South-East

In 2012, HS1, the UK company with the concession to run the first piece of high speed rail and connected stations in the UK until 2040, required a suite of operating models to report to shareholders and run the company on a daily basis.

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High Speed 1

London & South-East, UK

Lazuli Solutions built interfacing models.   A Strategic Operating Model for the long-term and an Operating Model for the short-term.

Rail franchise modelling

Regulated rail franchise modelling has its own peculiarities. The requirement for thirteen rail periods per year, as opposed to 12 months.  Paths, tariffs and discounts plot the track usage for the franchisee across a series of charges arranged to reward past and future investment and ongoing costs.

Macro-economic indexation underpins all revenue charges and costs.

VAT and working capital play a very important part in describing the company cash flows.  Lazuli Solutions introduces the cash flow waterfall with a distinct priority of payments to facilitate the calculation of investor and shareholder reward.

Highly structured finance through a multi-company legal arrangement completes the picture for what has become a standard across regulated and privatised parts of UK infrastructure.

Two models

This was going to be a large Excel model or models.  Mixing a long-term time-frame with a short-term operating horizon for a business as detailed as high speed rail was not going to work.

The solution was to divide and conquer.  Two models but with a common interface.   The clear candidate for the interface was the common result to both models: the statutory financial statements.

The short-term operating model would produce a three-year forecast seeded by 2 years of management accounting actuals.   The long-term strategic model would use this 5 year base to forecast out 25 years, carrying on from where the short-term model.

Each model would meet the different requirements set by the company directors.   But both models would not produce versions of the same, rather do what each did best.

Project:
Long-term strategic operating model & short-term operational model for high speed rail franchise in UK.

Location:
London & South East, UK

Service type:
Strategic operating modelling, short-term operating modelling

Client:
HS1 (highspeed1.co.uk)

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