Rail: Ontario-Quebec High Speed Rail Study

[MisterF]

First, a website with unsourced information from 1991 calling itself "railfaneurope" isn't exactly reliable. Second, gross profit isn't a relevant metric. The point I have been trying to make is that none of that includes interest costs, which are the main ongoing costs involved with HSR.

Yes I suppose they just made the numbers up.

By the early 1990s, the TGV had captured 90 percent of the Paris-Lyon travel market. The return on investment - infrastructure and rolling stock included - averaged 15 percent or higher.
-from On the Fast Track by Jacob Meunier, pg 224

No, it didn't. I'm sorry you don't seem to understand the role interest costs have on these projects, but the Taiwan HSR has lost billions since opening because the debt levels for these things are way too high. Interest payments alone, as in no repayment of the principal, represent 75% of the railway's total revenue. Out of every dollar the company takes in, three quarters goes strait towards covering interest.

These billions you keep mentioning are Taiwan dollars. Converted to Canadian or US dollars it doesn't sound so alarming, the deficit including depreciation and interest was about US$760 million. We'd have to know what the current interest rate is to know if refinancing (and higher ridership) will eliminate the deficit, but with an expected rate of 2.6%, it wouldn't surprise me if it did. Even with disappointing numbers, Taiwan's ridership and revenues doubled in the second year, and are trending for modest improvement in 2009 despite the recession.

edit: The original rate was 8% according to this article, which means the interest payments will be a fraction of what they are now.

I don't know why Taiwan's system has had lower than forcast ridership, but in other countries like France ridership was higher than expected (the TGV carried 37 million riders in 1991 and 94 million in 2005). Ridership forecasts are likely much more reliable here than they were in Taiwan.

 

[Whoaccio]

These billions you keep mentioning are Taiwan dollars. Converted to Canadian or US dollars it doesn't sound so alarming, the deficit including depreciation and interest was about US$760 million.

Even converted to USD, the loses still stand in the billions, and cumulative loses stand at more than half of the firm's capital, in only two years of operation. That is awful!

We'd have to know what the current interest rate is to know if refinancing (and higher ridership) will eliminate the deficit, but with an expected rate of 2.6%, it wouldn't surprise me if it did. Even with disappointing numbers, Taiwan's ridership and revenues doubled in the second year, and are trending for modest improvement in 2009 despite the recession..

For the year 2008, where interest costs represented 75% of revenue, the interest rate would have been in the vicinity of 4% (17.4/400=0.045). If you drop the interest rate down to 2.6%, that is still roughly half of revenue going strait to interest payments which is simply unsustainable. No one in Canada would accept 2.6% on this kind of debt either. T-Bills yield more than this, and have a fraction of the risk, the only reason it exists is because it has been flogged aggressively to pseudo governmental-companies that tolerate awful returns.

By the early 1990s, the TGV had captured 90 percent of the Paris-Lyon travel market. The return on investment - infrastructure and rolling stock included - averaged 15 percent or higher.
-from On the Fast Track by Jacob Meunier, pg 224

That rate of return figure was promotional. From the relevant footnote: "The socioeconomic rate of return was around 30%, according to SNCF's High Speed Department... much controversy surrounds the method by which this later figure was obtained." The figure was reached by, for instance, including spending by workers or suppliers for the system as "return" and by including arbitrary benefits to France's self of nationhood.

 

[kEiThZ]

Lending is irrelevant in the Canadian context. There is no way any HSR is going to get built in Canada without full funding by the government. We don't allow shady accounting like the French railways. VIA could risk its existence if it took on that much debt. There is no business case strong enough and no private operator large enough to justify taking a risk of tens of billions of dollars. HSR has to be built because the government believes that it is a missing infrastructure component needed for our economic well being. There is no other way. If the government(s) can't be convinced it won't happen.

 

[MisterF]

For the year 2008, where interest costs represented 75% of revenue, the interest rate would have been in the vicinity of 4% (17.4/400=0.045). If you drop the interest rate down to 2.6%, that is still roughly half of revenue going strait to interest payments which is simply unsustainable. No one in Canada would accept 2.6% on this kind of debt either. T-Bills yield more than this, and have a fraction of the risk, the only reason it exists is because it has been flogged aggressively to pseudo governmental-companies that tolerate awful returns.

This from a line that was built withough politics?? Regardless, somebody's interested in that financing apparently. Considering it was brought up as a comparison to HSR here, our forecasting seems to be more conservative than theirs. So it's doubtful that our ridership would miss its target like that.

That rate of return figure was promotional. From the relevant footnote: "The socioeconomic rate of return was around 30%, according to SNCF's High Speed Department... much controversy surrounds the method by which this later figure was obtained." The figure was reached by, for instance, including spending by workers or suppliers for the system as "return" and by including arbitrary benefits to France's self of nationhood.

Hmm "socioeconomic" return sounds a little hard to define at the best of times. But the quote was 15%, not 30. Sounds like the controversy was over the latter.

Lending is irrelevant in the Canadian context. There is no way any HSR is going to get built in Canada without full funding by the government. We don't allow shady accounting like the French railways. VIA could risk its existence if it took on that much debt. There is no business case strong enough and no private operator large enough to justify taking a risk of tens of billions of dollars. HSR has to be built because the government believes that it is a missing infrastructure component needed for our economic well being. There is no other way. If the government(s) can't be convinced it won't happen.

It would have to be borrowed money, whether it's entirely government financed or not. And the government would be able to get a lower interest rate than a private company. Still, it would likely be a PPP.

 

[Ansem]

Let's build a bullet train: Liberals

http://www.montrealgazette.com/build+bullet+train+Liberals/2042537/story.html

Liberal leader Michael Ignatieff will reportedly promise the building of a high-speed train as part of the Liberal Party’s election platform.

The train would be built along the Quebec City-Windsor corridor, and would have many economic spin-offs for Quebec and Ontario, according to a report in Monday’s La Presse.

A high-speed train for the corridor has been studied several times and estimated to cost $20 billion, so the timing of the project would have to depend on government finances at both the federal and provincial levels, the report adds.

An updated feasibility study is set to be released in early 2010

A high-speed railway between Montreal and Toronto could be built the fastest and would be profitable, according to experts. A second phase of the project, in which high-speed railways would be constructed between Quebec and Montreal and between Toronto and Windsor, would be completed later.

Ignatieff said recently he is convinced of the economic benefits of the high-speed train for Canada. “We have the technology, the know-how, the companies. We have everything we need,†Ignatieff told La Presse. “The problem is the timing. We’re dealing with a $56 billion deficit. We’ll have to make tough choices. When we see there is sufficient economic growth to pull us out of the hole, then we can launch†the high-speed train project.

© Copyright (c) The Montreal Gazette

 

[valkoholic]

So basically he's saying excactly what every other PM has said on the issue: "we'll do it the minute we can afford it". Yet he has the guts to make that part of his election platform?

 

[Voltz]

I'll believe it when I see the trains running.

 

[kEiThZ]

So basically he's saying excactly what every other PM has said on the issue: "we'll do it the minute we can afford it". Yet he has the guts to make that part of his election platform?

+1

I'll believe it when I see the trains running.

+1

It's another form of greenwashing. I like Iggy but promises like this make me wonder why. If you can't make a firm commitment than how can you possibly put in your platform. That said, I give him points for actually trying to commence a national discussion on the topic.

 

[Woodbridge_Heights]

^^ I think the frustration comes from the fact that there have been numerous studies done on the thing with no action to follow. It's pointless to commence another study without the commitment to spend the $$$ to build the thing at the end.

 

[Darwinkgo]

Not really, since why should a politico commit money, and then have a report come back that it would actually cost 3 times the amount they were willing to spend.

 

[afransen]

+1



+1

It's another form of greenwashing. I like Iggy but promises like this make me wonder why. If you can't make a firm commitment than how can you possibly put in your platform. That said, I give him points for actually trying to commence a national discussion on the topic.

My guess is wedge issue. Advocating the policy forces either the CPC to match or criticize billions of pork for Ontario and Quebec.

 

[Ansem]

My guess is wedge issue. Advocating the policy forces either the CPC to match or criticize billions of pork for Ontario and Quebec.

You're totally right. Opposing this project is exactly what Bloc Quebecois is waiting for. Most of the conservative seats are around Quebec city and this where thay made the most gains in Quebec. If they oppose this, and Quebec city really wants this, they will be wiped off the map...

I see them maybe trying to try harder to make Via go faster by maybe proposing faster trains and reserved rail for passenger trains.

 

[kEiThZ]

The average person doesn't really understand HSR. The government will simply point to all the recent investments in VIA and remind the public that these were substantially more than what the Liberals invested during their preceding terms. They'll then suggest that there's no money to build HSR but that continuous improvement of VIA is a good and cheap way ahead.

 

[Ansem]

The average person doesn't really understand HSR. The government will simply point to all the recent investments in VIA and remind the public that these were substantially more than what the Liberals invested during their preceding terms. They'll then suggest that there's no money to build HSR but that continuous improvement of HSR is a good and cheap way ahead.

I have to agree, TGV is kind of unnecessary. Just improving the corridors, having reserved rail for passengers and high speed trains going over 250 km. Using a all new technology I think at this time is kind of overkill. Imagine Ice rain on those lines...ouch

But seriously I would rather they do those improvements to Via Rail and give extra money to cities for public transit

 

[nfitz]

Uh-oh ... last time high-speed rail was political, they were planning to build the Toronto-Montreal piece through Hull, Montebello and Lachute to maximise the amount of contruction that be done on the Quebec side of the border ...