SMRT has faced public criticism for service disruptions in the past four years even as it expanded its network.

Bloomberg
Singapore

Singapore is studying options for subway operator SMRT Corp, including having the company sell its trains to the government, and plans to propose recommendations as soon as the first quarter of next year, people with knowledge of the matter said.
Possibilities under discussion include SMRT, which has a market value of S$2.4bn ($1.7bn), selling its physical assets to the government so it can focus on the business of operating subway services, according to the people.
State investment company Temasek Holdings is also considering whether it needs to keep control of SMRT, though it has no immediate plans to sell its 55% stake, the people said, asking not to be identified as the information is private.
SMRT has faced public criticism for service disruptions in the past four years even as it expanded its network. Singapore Transport Minister Khaw Boon Wan appointed an engineering specialist in October to advise on rail transformation and said the government was discussing changes in the industry structure to bring about “better alignment of incentives.”  “There is so much news recently about the trains breaking down, so that’s why the government is stepping in,” Roy Chen, an analyst at CIMB Securities Singapore Pte in Singapore, said by phone yesterday. “SMRT will be a beneficiary from an asset sale to the government because it can unlock capital and improve capital efficiency.”
Singapore’s Land Transport Authority, which designed the subway system and regulates train and bus operators, and Temasek are both involved in the study, the people said. In July, thousands of commuters were stranded across more than 50 stations on two main train lines, leading the government to fine SMRT S$5.4mn. The Land Transport Authority said in an e-mailed reply to questions that discussions with SMRT on the transition to a new rail financing framework “are still ongoing.” A spokesman for Temasek declined to comment. SMRT said in an exchange filing Friday it is making progress on talks with the authorities about transitioning to a new rail financing framework.
Shares of Singapore rail companies rose yesterday, after the transport minister suggested the industry regulator should also oversee train operators’ assets. SBS Transit Ltd gained 5.2% to S$2.02 at the close in Singapore, the highest since February 2011. Larger rival SMRT rose 5.4%, the most since September 17.
“If the new rail financing framework is implemented, it should be a positive for SMRT,” Abhishek Nigam, a Singapore-based analyst at Nomura Holdings Inc, said in an e-mail. “We expect improved profitability for the rail division besides healthier free cash flows, as the need to make significant capital investments in rail assets will be done away with.”
Khaw hinted at integrating rail network design and train maintenance under one entity in comments made at a forum yesterday that were published on the Straits Times newspaper website. Khaw said he had instructed the Land Transport Authority to build up an engineering crew “able to take on operations and maintenance, if we decide to move in that direction.”
“Creating an excellent rail system requires an integrated approach, from design and construction, right through to actual operations and maintenance,” Khaw was quoted as saying. “Our current model separates the designer and builder, LTA, from the maintainer and operator.” Any sale of SMRT’s trains would follow a similar restructuring announced for the city-state’s public bus system last year. Singapore will own all bus infrastructure, such as depots and vehicles, while bus operators will bid for the right to run services on routes laid out by the Land Transport Authority.