Returns on the controversial public-private partnership were branded "obscene" yesterday as one of the selected consortia on the £14bn project revealed that it expected to make returns of about 20 per cent.
Ken Livingstone's Transport for London authority, which is vehemently opposed the PPP, insisted the actual figure was much higher than the 15 to 20 per cent annual return on equity announced by Amey, which is part of the Tube Lines consortium.
Bob Kiley, Commissioner of Transport for London, said: "It is no surprise to me the private-sector bidders for the London Underground PPP are now crowing about the profits they expect to make, since this PPP's annual rates of return are truly obscene."
The TfL said the Tube Lines contract, which reached "commercial close" on Wednesday, contained a guaranteed rate of return of 25 per cent, which climbed to 45 per cent on a best-case scenario.
Tube Lines has three equal equity partners, made up of Amey, Bechtel and Jarvis, each investing £60m. It plans to upgrade the Tube's Jubilee, Northern and Piccadilly lines. Financial close of the contract is expected by 30 June. Amey, which was hit by accounting problems earlier this year, saw its shares close up 12 per cent at 238.5p. The consortium said it would make a £18m profit in the first year of the PPP, on turnover of up to £600m.
A spokesman for Tube Lines denied there was any guaranteed rate of return or that returns could climb as high as 45 per cent.
According to TfL, the other consortium, Metronet, which was selected for the other two contracts, covering the remaining underground lines, will see a rate of return of 17 to 20 per cent on its £350m investment, rising as high as 58 per cent on a best-case scenario – if all the contingency funds are converted to profit.
Metronet, made up of five companies – Balfour Beatty, Bombardier, Seeboard, WS Atkins and Thames Water – said it expected to earn a "normal" rate of return for a PPP scheme of 10 to 20 per cent.
TfL said it was still waiting to see the contracts signed on Wednesday and when it did, its lawyers would examine them for possible legal challenges.
Mr Kiley said: "This PPP is not a done deal. TfL has a plan that is safer, cheaper and would deliver real improvements to Tube services and stations much more quickly than the Government's discredited PPP scheme."Reuse content