HS1 Ltd Five Year Asset Management Statement Consultation 18 October 2013 Five Year Asset Management Statement Table of Contents 1. Foreword ......................................................................................... 4 7.1. Traffic demand in CP2 ........................................................... 45 2. Executive Summary ........................................................................ 5 7.2. Financial assumptions ........................................................... 47 Part A: Background ................................................................................... 10 7.3. Asset management plan assumptions .................................. 47 3. Introduction .................................................................................... 11 8. Our outputs .................................................................................... 49 3.1. HS1 ....................................................................................... 11 8.1. Key outputs ............................................................................ 49 3.2. Industry context ..................................................................... 16 8.2. Responding to what customers want .................................... 49 3.3. Our vision .............................................................................. 17 9. Our safety plans ............................................................................ 53 3.4. Steps for delivering the vision ............................................... 18 9.1. Safety vision .......................................................................... 53 4. Periodic Review............................................................................. 20 9.2. Safety objectives for CP2 ...................................................... 53 4.1. Scope of PR14 ...................................................................... 20 9.3. Strategy for delivery of the safety vision and objectives during CP2 53 4.2. The PR14 process................................................................. 23 9.4. Our security obligations ......................................................... 54 Part B: CP1 ............................................................................................... 25 9.5. Delivery of safety and security during CP2 ........................... 54 5. CP1 outturn ................................................................................... 26 10. Our asset management plans ................................................... 56 5.1. Overview ............................................................................... 26 10.1. Introduction and overview ................................................. 56 5.2. Initial Asset Management Statement .................................... 27 10.2. The process ....................................................................... 58 5.3. Safety .................................................................................... 28 10.3. Key parts of the analysis ................................................... 59 5.4. Operational performance ...................................................... 29 10.4. Performance management ................................................ 61 5.5. Asset stewardship ................................................................. 31 10.5. Key initiatives and improvements ...................................... 63 5.6. Cost efficiencies .................................................................... 31 10.6. Asset information strategy ................................................. 65 5.7. Renewals and the escrow account ....................................... 39 10.7. Maintenance volumes in CP2 ............................................ 65 5.8. Upgrades ............................................................................... 40 10.8. Renewals in CP2 ............................................................... 67 5.9. Regulatory framework ........................................................... 40 10.9. Renewals for CP3+ ........................................................... 68 Part C: CP2 Proposals .............................................................................. 42 10.10. Upgrades ........................................................................... 72 6. Overview ....................................................................................... 43 11. Proposed cost levels ................................................................. 75 7. Key assumptions ........................................................................... 45 HS1 Ltd 2 Five Year Asset Management Statement 11.1. Introduction ........................................................................ 75 13.7. Capacity reservation charge ............................................ 111 11.2. CP1 exit ............................................................................. 76 13.8. Performance regime ........................................................ 112 11.3. Identifying efficient costs for CP2 ...................................... 76 13.9. Possessions regime ........................................................ 118 11.4. NR(HS) O&M costs ........................................................... 76 13.10. Freight supplement .......................................................... 118 11.5. HS1 costs .......................................................................... 84 13.11. Outperformance sharing .................................................. 119 11.6. Pass through costs ............................................................ 87 14. Risk .......................................................................................... 121 11.7. Freight costs ...................................................................... 89 14.1. Risk inherent in the business .......................................... 121 11.8. Traction electricity costs .................................................... 90 14.2. Plan delivery risks ........................................................... 123 11.9. Renewals in CP2 ............................................................... 91 Part D: Conclusions ................................................................................. 125 11.10. Renewals for CP3+ ........................................................... 93 15. Concluding statement .............................................................. 126 11.11. Upgrades ........................................................................... 97 15.1. ORR determination .......................................................... 126 12. Charges ..................................................................................... 99 15.2. Impact on passenger services ......................................... 127 12.1. Structure of charges - OMRC ............................................ 99 15.3. Impact on freight services ............................................... 128 12.2. Access charging model ..................................................... 99 16. Next steps................................................................................ 129 12.3. CP2 OMRC by operator .................................................. 102 Part E: Stations ....................................................................................... 130 12.4. Traction electricity charge ............................................... 104 17. Stations review ........................................................................ 131 12.5. Upgrades and Additional IRC .......................................... 104 17.1. HS1 stations .................................................................... 131 13. Regulatory Framework ............................................................ 106 17.2. Station charges and regulatory framework ..................... 131 13.1. Introduction ...................................................................... 106 17.3. LTC review process ......................................................... 132 13.2. Structure of charges ........................................................ 107 17.4. Emerging results.............................................................. 132 13.3. OMRC apportionment re-opener ..................................... 109 17.5. Timeline ........................................................................... 134 13.4. Wash up provisions ......................................................... 110 Part F: Appendices .................................................................................. 135 13.5. Pass through cost categories .......................................... 110 Appendix 1: Glossary/acronyms ......................................................... 136 13.6. Carbon costs ................................................................... 111 Appendix 2: Summary of consultation questions ................................ 138 HS1 Ltd 3 Five Year Asset Management Statement 1. Foreword HS1 has three strategic mantras: (1) This document distils the work we have done and the comments already protect and grow, (2) punching above made. It covers: our weight and (3) winning by inches. The first demonstrates our commitment (1) Our understanding of customer requirements for the asset for the short to looking after the HS1 assets for the and long term. Their requirements are in turn informed by their nation for the long term. The second customers to provide a clear line of sight from infrastructure to recognises that we are