MINUTES OF A MEETING OF THE BOARD OF

NETWORK RAIL LIMITED York Campus, Engineers Triangle, York YO26 4AB

on Thursday 21 September 2017 from 08:50am

Present: Sir Peter Hendy (Chair)

Rob Brighouse Richard Brown Mark Carne

Chris Gibb Michael O’Higgins Jeremy Westlake Sharon Flood

Apologies: Silla Maizey Bridget Rosewell Michael Harrison – UKGI observer

In attendance: Stuart Kelly – Group General Counsel & Company Secretary Steve Davey – Secretary Francis Paonessa (min 17/146, 17/147, 17/148, 17/149 only) Anit Chandarana (min 17/146, 17/147) Mark Langman (min 17/148 only) Neil Thompson (min 17/148 only) Mike Gurtenne (min 17/150 only) Rob McIntosh (min 17/151, 17/155) Karl Budge (min 17/151 only) Charles Robarts (min 17/152, 17/153) (by phone) Clive Berrington (min 17/153 only) (by phone) Ian Iceton (min 17/154 only) Fiona Dolman (min 17/154 only)

MINUTE NO.

ACTION

17/140 Safety Briefing A brief was provided to the Board on safety arrangements for the day.

17/141 Chair’s Remarks The Secretary of State for Transport had appointed Richard Brown as his nominated director of Network Rail for another year, and reappointed Sharon Flood as a director of Network Rail for three years. The process had been commenced for the recruitment of an additional non-executive member to the Board. The Chair remarked on the success of the World Athletics Championships and the role that rail travel had played in the efficient and effective transport arrangements. Network Rail had published its Transformation Plan Update in September; this built on the Delivering for our Customers and original Transformation Plan publications, which had been published in July 2016 and February 2017 respectively. The Board discussed ways of effectively communicating the economic growth, jobs and housing benefits of the substantial suite of railway improvements over the next 18 months. The day before the meeting the Board hosted an event with stakeholders to discuss the East Coast Main Line. This too had highlighted the economic growth benefits to the North and North East regions of this important part of the railway. The award to Network Rail’s Freight & National Passenger Operators team by the Rail Freight Group for Customer Service recognised the commitment to customer service and improving the efficiency of the railway (and customers’ businesses). The delivery of the August Bank Holiday works was discussed. This was also

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discussed as part of the CEO Report. The Board welcomed the appointment of Meliha Duymaz as Anglia Route Managing Director.

17/142 Minutes of the previous meeting The minutes of the meeting held on 19 July 2017 were approved.

17/143 Action List The action list was discussed. Scorecard weightings had been changed to ensure the balance of the scorecard was preserved when the scorecard was aggregated. This change was APPROVED. The change and approval would be communicated to the DfT. The Board noted the update from the Freight & National Passenger Operator Route on the decline in coal traffic. To supplement the paper, the Board requested an analysis of costs and income broken down by sector. The Board noted that the ORR was looking at making changes to the charges paid by freight operators, including the split between fixed and variable costs. The Board asked for a paper to explain the changes, the potential impact on Network Rail and an update on this generally. The Board noted the update on Network Rail’s review of its assets following the Grenfell Tower fire on 14 June 2017. The Property Supervisory Board would receive an update relating to Network Rail’s responsibility as freeholder where it was only receiving peppercorn rent.

JW

MC (PMcM)

MC (JK)

JW

17/144 Directors’ Interests No new interests were declared.

17/145 CEO Report, Board Report, CFO Report, Finance Report 1. CEO Board Report

Bank Holiday Works The Board noted the Bank Holiday works that had been delivered. The works were overall a success, despite the derailment of a train during the blockade at Waterloo. Good passenger feedback had been received. The operations of the assets following handback had proven challenging; although the issues had been addressed and performance had improved in response. The Chief Engineer had been asked to carry out a review of the operations-design interface to ascertain the contributors to the sub-optimal performance of the handed back assets. The Board drew comparisons between different projects and the contributory factors that drove success. IP Review The executive has commenced a review of the entire enhancement process, as part of the transformation programme. This was welcomed by the Board. The review would include consultation with Board members. An update would be provided to the Board in the New Year. The terms of reference would be circulated to the Board.

Hansford Review The Hansford Review had been published, as had Network Rail’s immediate follow up. This had been well received by industry.

MC (II)

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Train Performance & Route Boards Train performance across most routes had improved although Western and Wessex continued to experience challenges. An update on the review of the route boards would be discussed at the Board meeting in October 2017.

System Operator The role of the System Operator had been presented to RDG Board and gained broad support. The Board discussed the role of the System Operator. SOFA The imminent publication of the Statement of Funds Available was discussed; and was further discussed later in the meeting. The Board noted that a review had been conducted on behalf of the ORR.

2. CFO Finance Report

The Board discussed the P5 CFO report.

17/146 Project Assurance and GOBE lessons learnt

Francis Paonessa and Anit Chandarana joined the meeting. The Board had a detailed discussion on paper 105/17, which provided an update on the project assurance framework. The Board was provided with assurance that the comprehensive framework had taken into account best practice which would, in future, provide early identification of issues similar to those experienced on the Gospel Oak to Barking electrification project.

17/147 Investment Projects Scale and Landscape of Operations The Board discussed paper 90/17. This paper provided an overview of the scale and contextual landscape within which Investment Projects operated. It provided a comparison to other similar size organisations and showed how process improvements had and were being made through the Enhancements Improvement Programme. The project delivery maturity of Investment Projects, which had been independently assessed, was noted as significantly improved since the baseline measure in 2014 and compared favourably with similar organisations. The Board discussed the appropriateness of some contracting strategies for particular circumstances. There was a lengthy discussion on the extent and depth of the assurance process. The Board asked for a paper to be presented to the Board’s Audit and Risk sub-committee on the progress of using earned value techniques as assurance. The Board welcomed the presentation which provided a factual counter-balance to the negative perception that were held by some. The Board asked for a paper to explain the outcome of the efficiencies review that were soon to conclude.

Anit Chandarana left the meeting

MC (FP)

MC (FP)

17/148 GWEP update

Mark Langman and Neil Thompson joined the meeting. The Board discussed paper 91/17.

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The DfT announcement of deferred scope in November 2016 set out in the paper, was NOTED and the Board APPROVED this scope transfer from the project. The Board was informed of the current AFC projected for the project and noted that all the milestones set out for the project since the Hendy review had been met. The Board APPROVED the authority requested in the paper which was noted as in accordance with the Hendy baseline; and recognising that challenges remained it would re-examine costs early in 2018.

Mark Langman and Neil Thompson left the meeting.

17/149 East West Rail Phase 1 (EWR1) - Final Account Settlement for joint venture contractor The Board discussed paper 98/17. The Board: • granted AUTHORITY to invest in the sums set out in the paper. • APPROVED the close out of the final account for the joint venture contractor on

the terms set out in the paper.

Francis Paonessa left the meeting.

17/150 Train Performance YTD

Mike Gurtenne joined the meeting. The Board discussed paper 92/17. The overall train performance for the year to date was better than each of the equivalent periods in 2016/17. The train operators which had experienced improvements and those that had encountered challenges were discussed. Overall incident related delay had improved, as the increase in delay occurrences had been outweighed by the improvements made in recovering from delay incidents. The Board NOTED the challenges to train performance and welcomed the work that had been done.

Mike Gurtenne left the meeting.

17/151 Route presentation – LNE & East Midlands

Rob McIntosh and Karl Budge joined the meeting.

Rob McIntosh and Karl Budge discussed with the Board presentation 93/17. This included route safety, train performance in the route and route financial performance. The expectations for each of these areas in CP6 were also discussed. The potential for infrastructure investments including digital railway and third party investment was also debated.

Rob McIntosh and Karl Budge left the meeting.

17/152 PR18 regulatory framework consultation - strategic direction of NR’s response

Charles Robarts joined the meeting.

The Board discussed paper 94/17. The Board was provided with an overview of the ORR’s regulatory framework consultation. Network Rail’s draft response was discussed.

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The Board delegated AUTHORITY to the Chief Financial Officer to approve the final response for submission.

17/153 SOFA update

Clive Berrington joined the meeting.

The Board discussed paper 95/17. This paper provided an update on the progress towards a final Statement of Funds Available by the DfT and Transport Scotland.

Charles Robarts and Clive Berrington left the meeting.

17/154 Transformation and Efficiency Programme – measurement and assurance

Ian Iceton and Fiona Dolman joined the meeting. Ian Iceton and Fiona Dolman delivered a presentation on the developing transformation and efficiency plan. This included the programme dashboard, transformation plan, IP review, culture change and governance. The Board NOTED the publication of Network Rail’s Transformation Plan Update (September 2017) which had also been discussed in the Chair’s remarks. Management was asked to produce a short document (say, 3 pages or so) that distilled the whole of the presentation into a readily accessible narrative. The Board asked for a further update at the next meeting (to include an update on developing key performance indicators and an audit process).

Ian Iceton and Fiona Dolman left the meeting.

MC (II)

MC (II)

17/155 Midland Main Line Programme - Financial Authority for the London to Corby Electrification & Capacity Upgrade

Rob McIntosh joined the meeting.

Paper 99/17 was presented. This provided an overview of the London to Corby electrification and capacity upgrade project. Board members were concerned about the whole rail system planning activity needed to successfully deliver projects like this, including rolling stock strategy (train interface specification), train facilities (depot and stabling), train crew strategies and other services and infrastructure that were to be delivered independently to Network Rail’s infrastructure project. The Board asked for a note to confirm how the Network Rail project had addressed whole rail system planning issues as part of output discussions. Notwithstanding the Board’s reservations about the planning of the remainder of the rail system investments it provided investment AUTHORITY for those parts of the system that related to Network Rail’s infrastructure in the sums requested in the paper.

Rob McIntosh left the meeting.

MC (RMcI)

17/156 Project Osprey update Paper 100/17 was discussed. This provided an update to the Board on Project Osprey.

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The Board NOTED the options, analysis, market testing, feedback and the findings in the paper. The Board agreed that management would continue to work with the DfT to explore only the sentient options set out in the paper.

17/157 Committee updates The Board discussed the updates on the: • Audit & Risk Committee meeting held on 7 September 2017; and • Safety Health & Environment Committee meeting held in 6 September 2017.

17/158 Company Secretary’s Report The Board noted paper 101/17. The Board: • APPROVED the changes to the Board composition of the principal trading

subsidiaries as set out in the report; • NOTED the establishment of Route Supervisory Boards for the East Coast

Mainline and Wales; • NOTED the disclosure of interests by the CFO; and • NOTED the governance and corporate law developments set out in the report;

and • RATIFIED the sealings since the last report.

17/159 Prosecution Report & Incident Map The Board noted paper 102/17.

17/160 Executive Committee & Panel Approvals The Board discussed the contents of paper 103/17. The Board noted particularly the Kenilworth Interventions and Paddington Span Routes Large Projects panel approvals and asked for further details on the figures referred to in paper 103/17.

JW

17/161 Board forward agenda – October The Board noted the draft agenda for its October meeting.

17/162 Transformation in action – examples from across NR The Board noted paper 104/17.

17/162 Date of next meeting The next scheduled Board meeting was on 26 October 2017 in Milton Keynes

17/163 Any Other Business None.

There being no further business the Chair closed the meeting at 15:10. ……………………………………………… Chair

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