Banks warm to GEC over Jubilee Line

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THE banking consortium that has lent more than pounds 600m to the troubled Canary Wharf project is actively pursuing an offer by Lord Weinstock's GEC, which may save the pounds 1.8bn Jubilee Line extension to London Docklands.

GEC has told the banks that an industrial consortium led by the electronics group is ready to put up pounds 75m of the pounds 400m contribution sought by the Government from the private sector.

Discussions are understood to be at an advanced stage between the GEC-led consortium and the banks that have taken control of the Canary Wharf development from Olympia and York, the developer.

'The offer by GEC would be extremely helpful if it can be pursued to conclusion,' said one of the leading bankers in the consortium.

GEC has already secured the contract to manufacture new trains for the Jubilee Line and is a strong contender to supply signalling systems.

But it is also interested in helping to finance and operate the link, which is due to open in 1996 and would greatly enhance the prospects of attracting TENAnts to Canary Wharf.

No other firms have admitted involvement in the consortium, though companies expecting contracts on the Jubilee Line extension include Wimpey, Taylor Woodrow, Costain and Alfred McAlpine.

The original plan had been for the banks themselves to provide the entire pounds 400m - pounds 100m now and the rest in instalments over the next 20 years - thus guaranteeing that the extension of the London Underground from Green Park to Stratford in east London went ahead.

However, some members of the consortium of 11 banks did not want to put in any money unless they received guarantees from the Government that it would move civil servants to offices at Canary Wharf. But the Government's plan to move the Department of the Environment to Docklands has been shelved.

Six of the banks, including Lloyds, which heads the group, and Barclays, then agreed to fund the contribution unconditionally. However, this group has been unable to work out the details of a plan and the discussions with London Underground have become bogged down on the question of whether there should be penalty clauses if the project starts overrunning.

'Some of the banks, especially ones which have lent to Eurotunnel, want quite draconian penalty clauses,' said a source close to the talks. 'However, it is not clear how London Underground could fund any repayments even if it agreed to them.'

Despite these problems, senior London Underground officials are predicting that a deal will be struck next month and work can start on the Jubilee Line extension in February, nine months late.

GEC has also indicated that it may be ready to offer funds to enable the pounds 300m rail link between Paddington station and Heathrow Airport to get off the ground.

The project is a joint venture between British Airports Authority, which owns Heathrow, and British Rail. It was originally due to open in 1997 but has been stalled by uncertainty over funding and disputes with British Rail over its charges for use of the railway tracks.

(Photograph omitted)