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November 12, 2021

SBST’s Downtown Line to shift to new rail financing framework

DTL's transition to NRFF V2 aims to minimise commercial volatility for the operator.

The Downtown Line (DTL) in Singapore will soon move to the New Rail Financing Framework Version 2 (NRFF V2), a move that will enable the government and operator SBS Transit (SBST) to co-share risks and profit.

Land Transport Authority (LTA) and SBST have already completed the review of the new framework for DTL.

Starting from 1 January 2022, DTL will operate under NRFF V2 through a single 11-year licence along with other SBST-operated rail lines, North East Line (NEL) and Sengkang-Punggol LRT (SPLRT).

The aim is to minimise commercial volatility for the operator and provide rail services in a financially sustainable way.

In 2011, DTL became the first rail track to be placed on the NRFF.

Under NRFF version one, the operator accumulates fare revenue from passengers and pays a licence charge to the government for utilising operating assets. In this version, the operator faces commercial risk due to lack of a scope for risk sharing.

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NRFF’s second version incorporates profit and risk sharing mechanisms, the LTA will share some of the losses due to fall in fare revenue on low ridership levels.

However, the second version also allows the LTA to secure a higher share in the event of profit outperforming expectations.

This will be realised through increased charge paid by the operator, which will be poured into a fund utilised for renewing operating assets.

“This also effectively caps the operator’s profit margins,” stated LTA.

As agreed, SBST will also transfer its rail advertising business to LTA from 1 January 2024.

Following an evaluation, LTA may also ask SBST to pay a concession fee to continue running the business from 2024.

LTA recently awarded two civil contracts for the design and construction works of the Cross Island Line Phase 1.

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