A key tool for enabling third party investment in the rail industry is the Risk Fund Mechanism which aims to protect both Network Rail and investors against some of the risks associated with such investment. In light of the requirement to facilitate greater levels of third party investment and following feedback from users of the mechanism that it might represent a barrier to investment, ORR asked Arup to review it and answer four specific questions:
- Is the current mechanism to cover liabilities associated with the risk fees the most appropriate?
- What have been the successes of the current mechanism?
- Is there evidence that the mechanism has acted as a deterrent to investment?
- What alternatives to the Risk Funds can be identified to fund these risks and to encourage investment?
ORR will adopt in full Arup’s recommendations. We will also seek assurance from Network Rail that it will take steps to improve training and guidance for its project teams dealing with third-parties.
This report relates to control period 5 (CP5), which covers the period from 1 April 2014 to 31 March 2019.