London Docklands rail extension funded by pounds 165m bond

A pounds 165m bond was yesterday issued through BZW, the investment bank, to help fund the pounds 200m Lewisham extension of the Docklands Light Railway in London. Work on the extension started yesterday, immediately after the announcement of the successful bidder.

The contract to run the extension has been won by City Greenwich Lewisham Rail Link (CGL), a consortium of John Mowlem, Hyder Investments, London Electricity and Mitsui and Co. And in a deal reminiscent of the Channel Tunnel project, the work is to be carried out by LRG contractors, a consortium comprising Mowlem Civil Engineering and MBK Rail Link Construction in a joint venture with Nishimatsu Construction.

The CGL consortium has a 25-year concession to finance, design, construct and maintain the 4.2km extension, which will run through two new tunnels under the Thames.

There will be seven new stations, although two will replace existing ones, and it will give an estimated 500,000 Londoners access to the combined DLR/ Tube network.

Passengers will be charged a premium rate to use the Lewisham extension, above the normal London zonal rates, to ensure that it generates sufficient funds.

Funding from Greenwich Council has now ensured that the station at Cutty Sark will be built and Lewisham Council will contribute pounds 4.8m towards the cost of the project.

The extension will now not be completed until early in 2000, a year later than originally envisaged. This will mean that it will be ready for most of the year's Millennium celebrations at Greenwich, although it will be finished too late for the big party expected for 31 December 1999.

The 24-year bond issue is being launched by BZW, whose staff are moving shortly to Canary Wharf, which is on the DLR. BZW said last night that there had been a good demand for the bonds which were priced on a yield of 9.33 per cent, 1.3 per cent above the comparable gilt-edge stock.