Invensys uses rail sale to plug pension deficit

Invensys will sell its rail division to Siemens as part of plans to provide a long-term solution to its pension scheme deficit.

Siemens will assume responsibility for the Invensys Railways Pension Scheme, a defined benefit (DB) plan, which had an IAS 19 deficit of £181 million at 30 September 2012.

The sale, which is expected to be completed in the second quarter of 2013, is conditional on shareholder approval, The Pensions Regulator’s approval, certain anti-trust consents and lending bank approval.

Conditional on the completion of the sale, Westinghouse Brake and Signal Holdings, one of the Invensys organisations being sold to Siemens as part of the arrangement, will make a contribution of £400 million into the pension scheme no later than five business days following completion.

Invensys will immediately follow the completion of the sale by paying £225 million into a trust (the Reservoir Trust), which will cover any remaining deficit and act as a buffer for future contingencies.

The cash contribution and payment into the trust will also address the current estimated technical provisions deficit of £570 million for the pension scheme.

Wayne Edmunds, chief executive at Invensys, said: “This transaction enables the group to create a long-term pension solution and therefore increased financial flexibility going forward.

“The agreements we have reached with the trustee of the UK pension scheme for the £400 million contribution and the £225 million reservoir trust will result in the cessation of the current deficit reduction payments of [between] £40 and 47 million per annum and we anticipate that no further contributions will be payable into the scheme.”