SMRT is about to become just "S", and here's why it's a great thing for us


Martino Tan | July 15, 2016, 02:36 PM

The Land Transport Authority (LTA) will make an opening offer to buy SMRT's assets -- trains, signalling system, maintenance equipment, fire protection equipment -- therefore making SMRT essentially just "S" in the future.

This is why SMRT shares stopped trading this afternoon.

SMRT Trains and SMRT Light Rail's operating assets were on September 30 this year estimated to be worth about $991 million ($1.06 billion with GST) in Net Book Value.

Now, all this may sound like it's flying over the everyday person's head, we agree. But here's what's in it for you, a commuter, if SMRT becomes S:

1. LTA will be the owner of all operating assets under something called a New Rail Financing Framework (NRFF). This means LTA will be in charge of the building of train infrastructure, replacing and upgrading the operating assets (your trains, train tracks, power system and such), and it is in their direct interest to do this in a timely manner.

2. SMRT, or S, can focus on providing reliable and well-maintained rail services for commuters.

3. This move makes the industry more "contestable", meaning it'll be less of a monopoly or duopoly, the way it currently is for SMRT and SBS Transit. The government can re-tender the operation of rail services more often, which hopefully will motivate any transport operator handling our MRT or LRT services to perform well. LTA will also shorten their license tenure from 30-40 years, under the previous framework, to 15 years.

4. S will also comply with a set of new Maintenance Performance Standards to improve its maintenance processes.

Here are answers to three additional questions that might be on your mind:

- Didn't LTA always own and buy the trains and infrastructure in the past?

Actually, no. At the beginning, yes, the government bought the trains and built the tracks and everything. In 1998, though, the LTA sold the trains, signalling and maintenance equipment, among other assets, to SMRT. So prior to this all-your-trains-and-stuff-are-belong-to-us deal, SMRT did own and look after replacing (e.g. that sleeper replacement programme that you might have seen them showing signs and banners about and closing earlier to do), upgrading and maintaining all these things.

- Who's gonna pay for the maintenance now? 

The LTA says SMRT will essentially be "renting" all the stuff needed for our train services — trains, signalling system, maintenance equipment — from the LTA, so they'll have to pay them an annual licence charge, which will go into something called the Railway Sinking Fund. This will pay for any maintenance that needs to be done, by SMRT.

- Is Singapore moving towards a nationalised rail sector?

LTA says no to this, as it defines a nationalised system as one where the government also operates the rail services.

Under the NRFF, private rail operators licensed by the LTA will continue to run the trains. It's just ownership, building, upgrading and replacement that will be taken over by the authorities.


Top image: SMRT's Facebook page.

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