RAILTRACK

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RAILTRACK

• Interim Results for the six months ended 30
  September 2001

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Key Results Issues

• Business WAS clearly solvent on 5 October
• No financial meltdown whatsoever we were
  trading profitably and cash outflow was
  favourable to budget
• Huge 1.4bn investment over 4x pre-tax profits
  enabled by access to financial markets which is
  no longer available
• Network operational performance was moving in the
  right direction

Government must address the implications of
forcing Railtrack into insolvency
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Key Financials
2001
2000
Operating profit m Profit before tax m Earnings
per share Interim dividend
197 175 36.8p 9.75p
333 292 48.8p -
69 67 33 -
6 months ended 30 Sept
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Key Ratios
30 Sept 2001
30 Sept 2000
Net debt m Equity Shareholders funds m Gearing
Adjusted interest cover
2,186 3,213 68 4.9x
4,551 2,933 155 3.8x
Debt Equity Operating profit interest
before capitalisation
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5
Operational Delivery

• Railtrack attributable train delays down 52 on
  the previous 6 months (back to pre-Hatfield
  levels)
• Broken rails down 12 compared to first half
  2000/01 (down 36 over two years)
• TSRs down 39 to 696
• Average track quality at highest level since 1994
• TPWS commissioning doubled HMRI target succeeded

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Infrastructure delays were trending to
pre-Hatfield levels but performance payments
under Schedule 8 totalled over 200m
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Record 1.4bn Investment

• Renewals up 29
• Enhancements up 35
• CTRL on time and budget

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8
Average Track Quality 1994 - 2001
points difference from line standard
1994/5
1995/6
1996/7
1997/8
1998/9
1999/00
2000/01
2001/02
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Investment Record 1995-2002

• Net debt up 4bn to finance investment
• 1996-2001 Invested 2bn over Regulators
  allowance
• Rail infrastructure spend GDP 82-95 UK0.12,
  Europe0.25

m
Forecast
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TPWS commissioning rates have doubled
Per Quarter

• HMRI targets met for the last 3 quarters
• Paddington completed, 3 weeks ahead of target.

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Way Ahead for Railtrack Group

• Separate Group and PLC
• Work closely with shareholder groups
• Prepare for robust legal challenge
• Secure value of Group cash, CTRL franchise and
  property
• Intense scrutiny of Administrators stewardship
  of value and proposed transfer process

Value maximisation of Group assets will be
vigorously pursued for as long as it takes
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Railtrack Group PLC

• Appendix

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So why didnt you oppose the order?

• Secretary of States action precipitated material
  adverse change
• No additional government support (4bn funding
  gap)
• Reneged on Renewco transaction (worth 1.3 bn by
  2003)
• Disabled Regulators right to credibly intervene
• Allowed Government intent to be leaked to media

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Implications of Secretary of States Action

• Ability to draw down on our 1bn plus of bank
  lines destroyed
• Unequivocal QC advice - trading whilst insolvent,
  bankers would foreclose and railway could cease
  operating

FACT Railtrack (and its successor) can only
exist with underlying if not explicit, Government
support that was taken away
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What would Plan B have looked like?

• Announcement that discussions with Government had
  not delivered a solution
• Update on timetable for addressing the funding
  gap
• WCRM status and options provisionally agreed for
  review with Government
• Plan to access bond markets in Spring
  Discussions with Banks were underway
• Timetable for ORR interim review possibly
  accelerated, depending on Renewco status

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What would Plan B have looked like?

• Review of five year spending commitments
  especially 2004-6 in advance of ORR review
  decision (to increase covenant headroom)
• Trigger cost reduction plans and zonal
  restructuring to build credibility and deliver
  efficiencies

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Channel Tunnel Rail Link Phase 1

• Railtrack Groups ownership confirmed in
  principle
• Committed to buy rights to infrastructure assets
  of Section 1 at cost of construction - 1.7bn
• Lease over Section 1 until July 2086

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Channel Tunnel Rail Link Phase 1

• Building of route 85 complete
• Railwork 75 complete
• 192m (135m) spent in first six months
• 3.2km tunnel under North Downs completed
• 1.2km bridge over River Medway completed

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Five year business plan spend Renewals,
Maintenance Opex, excl West Coast
17.1
14.5
13.3
12.9
32 20 41
bn
Controlperiod 1
ORRDetermination
August costsubmission
Businessplan
changeon controlperiod 1
Control period 2
bn 00/01 prices
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CP2 value gap vs ORR allowance
3.6bn
Recoverable
Hatfield Direct 0.6 Hatfield Indirect 0.9 Safety 0
.5 2.0 RAB Adjustments 0.6
2.6bn
Efficiency challenge
Average250m p.a 2002/6
1.0bn
Excluding - 0.2bn efficiencies announced
April 2 - 0.5bn performance gap -
un-remunerated West Coast spend
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