The South Eastern Franchise (SEF) was one of the first Passenger Rail Franchises to be awarded by the Office of Passenger Rail Franchising (OPRAF), in 1996. The SEF provided passenger rail services throughout Kent, parts of East Sussex and South East London. Its first incumbent was Connex South Eastern (CSE), like all other franchisees a private-sector company. The franchise was to be for a period of 15 years to 2011. OPRAF was to pay total subsidies of £535 million over the lifetime of the franchise. Annual subsidies were scheduled to decline year on year, from about £125 million during the first 12 months of the franchise to about £2.8 million in the final year.
In February 2001 the Strategic Rail Authority (SRA) took over responsibility for monitoring passenger franchises. By July 2001, according to a subsequent parliamentary report,[1] CSE was aware of its own financial difficulties, but looked to sort out the situation itself, rather than involving the SRA. In December 2001 CSE asked SRA for an extra £400 million of subsidies and a two-year extension of its franchise. This triggered a review by the SRA of the status of CSE's finances, using advisers KPMG. By the end of 2002, SRA agreed to pay an additional £58.9 million of subsidy during 2003, in return for a strengthening of CSE's financial controls, more transparency and a curtailing of the franchise to 2006.
However, over the course of the first half of 2003, following further adverse reports by other consultants, the SRA completely lost confidence in CSE and in June 2003 decided to terminate the franchise at the earliest feasible point. In November 2003 a wholly owned subsidiary of the SRA, South Eastern Trains, took over the franchise for a planned 18 months, though it took on all the leased rolling stock and most of CSE staff including senior management. In the event it took over two years to relet the franchise to a private company. With the commencement of the Integrated Kent Franchise which was subsequently to incorporate domestic passenger services from east Kent to London via High Speed One, the life of the SEF finally ended on 31 March 2006.