SMRT fined S$2 million

Money to be donated to Public Transport Fund to help needy; SMRT has 14 days to appeal

For its failures resulting in the December train disruptions, public transport operator SMRT was yesterday slapped with the maximum fine of S$2 million by the Government.

The disruptions on Dec 15 and 17 affected more than 200,000 commuters. In a statement announcing the penalties, the Land Transport Authority (LTA) said the money will be donated to the Public Transport Fund to help needy families with transport fares.

SMRT has 14 days to appeal, and the operator – which had already lost S$4.4 million because of the disruptions – declined to comment in response to TODAY’s queries on whether it is accepting the fines or planning an appeal.

Nevertheless, SMRT said in a statement that the LTA “has informed us … of its intention to fine us S$1 million for each of the two disruptions”.

SMRT reiterated that, since the incidents, it has been “implementing various initiatives to prevent recurrence and improve service reliability and incident response in collaboration with the LTA”.

It will implement further improvements and work closely with the LTA to enhance reliability and service levels, SMRT said.

According to the LTA, its investigations found that SMRT had “failed to meet its licensing obligations for the North-South and East-West Lines (NSEWL)”.

The regulator said: “It has failed, among other things, to exercise due diligence and vigilance expected of a public transport operator, and to maintain its network in good and efficient working condition.”

SMRT was also found to be in breach of the Operating Performance Standards for the NSEWL in both incidents.

The LTA also revealed that its internal investigation on the causes of the incidents is consistent with the findings of the Committee of Inquiry – in particular, that the incidents were preventable.

The LTA said it has also assessed that there were “overall shortcomings in SMRT’s maintenance and monitoring regime”.

Members of Parliament and analysts told TODAY that they had expected the LTA to mete out the maximum fines.

Member of Parliament (MP) for Pioneer, Mr Cedric Foo, who chairs the Government Parliamentary Committee for Transport, pointed out that the disruptions had a massive impact on commuters.

Mountbatten MP Lim Biow Chuan also welcomed the move to channel the fines to the Public Transport Fund, rather than “into the State coffers”. “It’s a good idea that the fines are not seen as benefitting the Government but going to the needy to help with their transport needs,” said Mr Lim.

Both Mr Lim and Nee Soon Group Representation Constituency MP Lee Bee Wah felt that, beyond paying the fine, SMRT should do more to compensate commuters inconvenienced by the breakdowns.

Mr Lim suggested a “fare rebate or a fare holiday”, while Ms Lee said she would “like to see commuters get a more direct compensation”.

On concerns whether the fines would be passed on to commuters, Ms Lee said the Government would need to ensure that does not happen. But she noted that it would ultimately depend on the fare formula, which is currently under review.

Last week, at SMRT’s annual general meeting, its chairman Koh Yong Guan revealed, for the first time, the losses that SMRT incurred because of the disruptions.

The money went towards legal and professional fees – including for services engaged for the public inquiry – as well as rail-related studies and consultancy.

Analysts said the quantum of the fines would have been incorporated into forecasts on SMRT’s financial health.

CIMB Analyst Lee Wen Ching said the S$2-million fine work out to 1.4 per cent of SMRT’s forecast profit of S$143 million in the current financial year. “We view (the fine) as a one-off expense that should not eclipse the permanent elevation in the group’s cost structure arising from higher repairs and maintenance costs,” she said.

SMRT fined S$2 million

Money to be donated to Public Transport Fund to help needy; SMRT has 14 days to appeal

For its failures resulting in the December train disruptions, public transport operator SMRT was yesterday slapped with the maximum fine of S$2 million by the Government.

The disruptions on Dec 15 and 17 affected more than 200,000 commuters. In a statement announcing the penalties, the Land Transport Authority (LTA) said the money will be donated to the Public Transport Fund to help needy families with transport fares.

SMRT has 14 days to appeal, and the operator – which had already lost S$4.4 million because of the disruptions – declined to comment in response to TODAY’s queries on whether it is accepting the fines or planning an appeal.

Nevertheless, SMRT said in a statement that the LTA “has informed us … of its intention to fine us S$1 million for each of the two disruptions”.

SMRT reiterated that, since the incidents, it has been “implementing various initiatives to prevent recurrence and improve service reliability and incident response in collaboration with the LTA”.

It will implement further improvements and work closely with the LTA to enhance reliability and service levels, SMRT said.

According to the LTA, its investigations found that SMRT had “failed to meet its licensing obligations for the North-South and East-West Lines (NSEWL)”.

The regulator said: “It has failed, among other things, to exercise due diligence and vigilance expected of a public transport operator, and to maintain its network in good and efficient working condition.”

SMRT was also found to be in breach of the Operating Performance Standards for the NSEWL in both incidents.

The LTA also revealed that its internal investigation on the causes of the incidents is consistent with the findings of the Committee of Inquiry – in particular, that the incidents were preventable.

The LTA said it has also assessed that there were “overall shortcomings in SMRT’s maintenance and monitoring regime”.

Members of Parliament and analysts told TODAY that they had expected the LTA to mete out the maximum fines.

Member of Parliament (MP) for Pioneer, Mr Cedric Foo, who chairs the Government Parliamentary Committee for Transport, pointed out that the disruptions had a massive impact on commuters.

Mountbatten MP Lim Biow Chuan also welcomed the move to channel the fines to the Public Transport Fund, rather than “into the State coffers”. “It’s a good idea that the fines are not seen as benefitting the Government but going to the needy to help with their transport needs,” said Mr Lim.

Both Mr Lim and Nee Soon Group Representation Constituency MP Lee Bee Wah felt that, beyond paying the fine, SMRT should do more to compensate commuters inconvenienced by the breakdowns.

Mr Lim suggested a “fare rebate or a fare holiday”, while Ms Lee said she would “like to see commuters get a more direct compensation”.

On concerns whether the fines would be passed on to commuters, Ms Lee said the Government would need to ensure that does not happen. But she noted that it would ultimately depend on the fare formula, which is currently under review.

Last week, at SMRT’s annual general meeting, its chairman Koh Yong Guan revealed, for the first time, the losses that SMRT incurred because of the disruptions.

The money went towards legal and professional fees – including for services engaged for the public inquiry – as well as rail-related studies and consultancy.

Analysts said the quantum of the fines would have been incorporated into forecasts on SMRT’s financial health.

CIMB Analyst Lee Wen Ching said the S$2-million fine work out to 1.4 per cent of SMRT’s forecast profit of S$143 million in the current financial year. “We view (the fine) as a one-off expense that should not eclipse the permanent elevation in the group’s cost structure arising from higher repairs and maintenance costs,” she said.

Dec disruptions burn S$4.4m hole in SMRT’s pockets

The two train service disruptions in December last year cost SMRT a whopping S$4.4 million in the last financial year, SMRT chairman Koh Yong Guan revealed for the first time yesterday in his speech at the transport operator’s annual general meeting.

The money went towards the legal and professional fees incurred after the disruptions, including rail-related studies and consultancy, an SMRT spokesperson said.

After a turbulent few months following the disruptions – during which a six-week public inquiry threw up damning assessment of SMRT’s maintenance regime and research houses expressed concern over its financials – Mr Koh sought to reassure shareholders present at the AGM that SMRT will seek to maintain its policy of paying at least 60 per cent of its profits after tax as dividends.

According to SMRT’s annual report, its profits after tax fell to S$119.9m, down from S$161.1m in the preceding financial year.

SMRT reduced its dividend per share to 7.45 cents, compared to 8.5 cents previously. Mr Koh said the reduction was “prudent” given SMRT’s cash availability, reduced profit and pressure on margins. He added: “The Board is mindful of the need to provide shareholders with a reasonable return.”

While expenses such as the S$900 million asset renewal plan it previously announced would have an impact on operating costs, Mr Koh said many of the recommendations made by the Committee of Inquiry can be incorporated with no significant additional cost. SMRT is also working with the Land Transport Authority on cost-sharing for projects like the re-signalling and re-sleepering projects.

Mr Koh also stressed that SMRT is “first and foremost an engineering and operations company” and its most important core business is to run a “safe and reliable MRT system in Singapore”. “We do not see running an efficient and reliable MRT system and running SMRT profitably as a public company as contradictory,” he said.

Mr Koh added that SMRT has already taken steps to augment its engineering and technical team, and SMRT will appoint more members with technical backgrounds and relevant expertise to its Trains Board to review and enhance the operator’s maintenance regime.

The operator’s allocation of resources and budget is consistent with its emphasis, said Mr Koh. He pointed out that 90 per cent of its 7,000 staff are working in the areas providing the train and bus services, and 90 per cent of its annual recurrent expenditure goes to these areas.

Mr Koh also highlighted the challenges of being a multi-modal public transport operator. While SMRT’s taxi business ha “turned around” last year, “the current regulatory regime and operating environment will not allow us to run a sustainable, profitable bus business”, Mr Koh said, citing structural issues where cost, particularly fuel cost, has “far outstripped fare adjustments”.