5. Financial and Economic Evaluation

• Assessment of rolling stock requirement and indicative outlays

• Assessment of infrastructure requirements and indicative outlay estimation (prepared to Railtrack level 2 status)

• Estimation of annual operating and maintenance costs including rolling stock vehicle maintenance: traction energy / fuel,train crew; and infrastructure maintenance

• Estimation of annual passenger demand and revenue effects. Passenger demand and revenue assessment are based on a review of existing and historic CAPRI revenue results together with results from our own demand spreadsheet model built specifically for this study. This model is in effect an Isle of Wight MOIRA model using Passenger Demand forecasting Handbook recommended assumptions. The model incorporates ferry timings and takes account of delays to the ferry service (averaging 5 minutes delay). UK Rail incremental earnings associated with Island Line travel are included as economic benefits. As this incremental demand is mostly off-peak and small compared with total travel on these mainline routes, we assume that it can be carried at no additional cost to mainline operators.Island Line revenue gain is also shown and is used for the financial evaluation

• Estimation of economic benefits to rail users and road users. The UK Economic value of each option comprises the incremental rail revenue to all operators plus unpriced benefits and costs incurred on the Isle of Wight. This approach is based on our assessment that the incremental demand (which is largely off peak) can be carried at no additional cost to mainline operators and that there are negligible unpriced impacts on the mainland (where most of the passengers new to the Island Line would have the same travel options as previously). The basis for our conclusions is a maximisation of this economic NPV which provides the best value for money in situations where available subsidy is not constrained. We note SRA use a variety of evaluation measures in their decision making which include both quantified and unquantified factors (such as those representing integration and accessibility). Additional measures including, for example, Benefit/Cost ratio and NPV/ Subsidy are used to enable benchmarking taking into account limits placed on the total subsidy available. Economic benefits are increased at a rate of 2.25% - in line with forecast GDP growth

• Calculation of Present Values and economic performance measures. A 30 year life and 6% discount rate is assumed for the economic evaluation

• Replacing the rolling stock with more modern cascaded tube stock in 2004 with investment in vehicle refurbishment and in Driver Only Operation appears justified from either a commercial or economic perspective, even with just a 10 year time horizon (Option A2 plus DOO);

• Survey and analysis of peak traffic volumes indicates a requirement for 12 vehicles diagrammed in traffic. This implies a fleet size of either 7 two-car units or 5 three-car units. The former would be preferable in terms of flexibility to match loadings, however the latter may prove more cost effective as fewer modifications to ex-LUL stock would be required as they are already three-car units. Detailed cost evaluation of these alternatives will be informed once purchase and conversion costs of replacement LUL vehicles are established

• Service enhancement to provide four trains per hour on the Pier incorporating an even 30 minute interval Shanklin service appears justified within this 10 year horizon in the economic evaluation albeit commercially unprofitable. This enhancement would appear to become financially worthwhile from a UK rail financial perspective within 20 years (option B1);

• Further enhancement to deliver four trains per hour (15 minute clockface interval) through to Shanklin, requiring track upgrading to improve journey times and a passing loop at Brading appears worthwhile over a 30 year economic evaluation (Option B4)