STANDARD & POOR’S Ratings Services published a report on March 29 suggesting that capital investment in high speed rail projects across Europe will grow rapidly over the next 10 years.
Fast Track to a Borderless Europe: The Credit Dynamics of High Speed Rail starts from the European Commission’s view that ’rail is forecast to be allocated 60% of the €400bn to be spent on the Trans-European Network to 2010, and two-thirds of this rail investment is directed towards high speed corridors’.
Drawing attention to the risks associated with major projects such as high speed lines, it warns that schemes ’should not rely entirely on private financing’, suggesting that ’investors typically look towards government for some level of comfort regarding full and timely debt servicing’.
According to S&P’s Infrastructure Finance credit analyst Robert Bain, ’a particular credit concern is the fact that high speed rail remains politicised due to its size, complexity, and widespread environmental and socio-economic impact’, and ’we don’t expect the risk of government interference to diminish.’
Despite this, Bain notes that ’appropriately focused, credit-enhanced transaction structures could steer Europe’s high speed rail projects towards the upper end of the credit spectrum.’
Tackling issues ranging from traffic and revenue forecasts to the future of credit quality in light of this month’s EU enlargement, the report notes that ’cross-border rail transactions face particular challenges’, and that ’no integrated approach exists for the planning, evaluation and funding of cross-border links.’
