Stephen Byers, the Transport Secretary, is planning to break up the train network run by Railtrack and offer part of it to the train operating companies (TOCs). He hopes to try the structure in three franchise areas, Midland Mainline, Scotland and Anglia. The first two are operated by National Express, the privatised former coach company, and Anglia is part of GB Railways.
The scheme is among the favoured plans for the restructuring of the network that Mr Byers hopes to put forward this week. He wants to take Railtrack out of administration, where it was placed last Sunday after a court order. The administrators, Ernst & Young, took charge after the group was faced with a probable rise in debts to £17bn.
The TOCs are likely to look favourably on this proposals – a position in stark contrast to their reaction to Mr Byers' plans to merge the Office of the Rail Regulator, run by Tom Winsor, with the Strategic Rail Authority. This proposal was effectively torpedoed on Friday night by a letter from the Association of Train Operating Companies saying they'd use their legal powers to block it.
Last Sunday's order put Railtrack plc into administration but left Railtrack Group still trading. Shares in the parent company were suspended on the London stock market, where they had been trading at 280p. Though a deal to pay Railtrack Group £400m for its stake in the Channel Tunnel Rail Link is expected to be struck tomorrow and the company will have a £3bn property portfolio, there are fears the shares could now be worthless. Shareholders aim to sue the Government and the directors of Railtrack for compensation. Investors say Railtrack may have misled the market about its finances.
"There may well be an issue about the information," said Peter Montagnon, investment director of the Association of British Insurers. The Financial Services Authority is also looking at the timing of the statement to see whether Railtrack complied with its listing rules.
Railtrack chairman John Robinson said: "The market was not misled. It was clear we were reviewing our options over the coming months, because I said so."
A statement issued at Railtrack's AGM on 24 July, the day before Mr Robinson met Mr Byers to discuss the company's troubles, warned of "poor performance on many of our investment projects" and said it was "reviewing all the strategic options, both financial and structural".
But the chairman agreed the future of a £2bn to £3bn bond issue was discussed at the meeting with Mr Byers. "What we were effectively saying was that we were putting that on hold while we sorted out that other things."
Railtrack's problems could also raise the cost of leasing trains. These are among the largest items of spending for TOCs, costing nearly £100m a year for the biggest operators.
The three main train leasing companies, HSBC, Angel Trains and Porterbrook, are reviewing their rates. One said: "It was always assumed that if a franchise went bust the Government would step in and pay the leases. After the Government's refusal to back Railtrack, this is an assumption we can no longer make."Reuse content