'Frenzied' Tube sell-off activity

by John Leitch



London Underground is involved in "frenzied behind the scenes activity" to keep the partial privatisation of the Tube system on track. The tight timetable means that service specification details - which have not yet been drawn up - must be published by November.

The Government wants the private sector to invest a total of £7 billion in improving the Tube. Consortia would lease the infrastructure, undertaking the required upgrade in return for annual Government payments of £400-500 million. LU's deadline for expressions of interest expired last week.

Contractors interested include Alfred McAlpine, Balfour Beatty, Bilfinger and Berger, Jarvis, Kier, Laing and Miller. Also showing interest were Brown and Root, WS Atkins, Serco Rail and Railtrack. Abbey National and the Halifax were two of the many financial institutions keen for an involvement, while Lovell White Durrant was one of several solicitors on the list.

A select group of those who have expressed interest have been called in to advise LU: Brown and Root, Balfour Beatty, Jarvis, Tarmac and Railtrack.

Progress with the project is being hindered by the Government's indecision on how it wants to split the network. It could be into either one, two or three parts. The length of lease is still up in the air and 15 years is only speculative.

A LU spokesman said: "In the service specification we will tell the private sector players what they must do. The terms will be quite specific. The consortia with the clever ideas, pointing to savings of £500,000 perhaps, will be the ones we ask to come back.

"It will take until October or November for us to produce a prequalifying document. Then later, when the 100 groups who have shown interest send their documents back in response, we'll prequalify them. I envisage a shortlist of four consortia, each with four to six members."

Other criteria for making the shortlist for the tightly specified £7 billion-worth of work include safety record, innovation, capacity for carrying out projects of a similar scale and financial backing.

The House of Commons' environment, transport and regional affairs committee has called for a Government-guaranteed bond to reduce the financing costs of the tube upgrade. The mechanism was used to help save the Channel Tunnel Rail Link but the Government had warned it was a one-off measure.

"There is no need for a bond in our case," insisted the LT spokesman. "London Transport is owned by the Government, so irrespective of whether bonds are issued, London Transport is not going to renegade on its agreements, nor is it going to go bust."