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Fri June 25 2021

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Renew expands rail electrification business

1 Jun Engineering services group Renew has acquired all the shares of Rail Electrification Limited in a deal worth up to £5.3m.

The transaction has been made through Renew’s subsidiary QTS Group. The intention is to expand Renew's rail electrification capabilities as moves accelerate towards delivery of a carbon-neutral rail network. REL adds overhead line electrification to QTS’s services, which already includes vegetation management, drainage, civil engineering and fencing.

The acquisition will see REL operate as a wholly owned subsidiary of QTS, which joined Renew in 2018.

All of the REL team, including the management trio of Scott Kernachan, Mark Potts and Kenny Barr, will join QTS at its Scottish HQ in Drumclog, South Lanarkshire.

The initial consideration for the acquisition was £3m in cash, with further deferred cash payments of up to £2.3m payable between now and September 2024, conditional upon the achievement of certain targets. The purchase has been funded from Renew's existing cash resources.

Scotland-based REL provides services and road-rail plant associated with the installation and commissioning of overhead line electrification (OLE) for both light and heavy rail infrastructure across the UK.

Renew said that the acquisition brings highly complementary capabilities to its existing rail business and will enable the group to capitalise further on the planned investment by Network Rail in rail electrification. It added that the deal further strengthens and expands the multidisciplinary maintenance and renewals engineering services it provides across the rail network.

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It is estimated that there will be about 15,000 single-track-kilometres of new electrification carried out across Network Rail-controlled infrastructure as part of the UK government's commitment to delivering a carbon neutral rail network by 2040 for England and Wales and by 2035 for Scotland. The recently released Williams Rail Review stated that electrification is likely to be the main way of decarbonising the rail network.

Renew chief executive Paul Scott said: "The rail network has a crucial part to play in supporting the UK's commitment to Net Zero 2050 and this acquisition will help enable Renew to play a bigger part in Britain's green economic recovery. REL is a highly regarded business with a strong track record and will enable us to broaden our service offering within our rail business. Our existing multidisciplinary rail capability, complemented by the electrification expertise of REL, leaves Renew ideally positioned to play its part in delivering a decarbonised railway. Rail electrification offers attractive long-term structural growth opportunities underpinned by highly visible committed regulatory spend in a sector that we know extremely well. I am delighted to welcome the management and staff of REL to the Renew family.”

Alan McLeish, managing director of QTS Group, said that the company has grown rapidly over the last decade and needed to add to its portfolio of capabilities in order to continue that growth. “The next natural step was electrification, which allows us to give a fully rounded service to our clients.  By adding REL to the QTS Group, we are joining forces with a leading business in this area, which will be a great benefit to the work that we deliver for our clients.”

Kernachan added: “Through this deal, we are opening up the future of REL to even greater possibilities. As QTS already has its Principal Contractor licence, and a number of frameworks in place, it really transforms the opportunities available for us as experts in electrification.

“It also opens up more prospects for our employees, which was an important factor in the sale. As a small business, the opportunity for progression was limited, however this acquisition will allow the ability for individual growth and career development. 

“I’ve always admired the way QTS operates and its ethos is very similar to what we have at REL, so I am confident it will be a great fit for us and for our clients.”

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