Lights set to go out again on Amey PFI

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The Independent Online

Fears over the financial strength of Amey, the contracting group with a strong public-sector bias, are putting off local authorities that might give it lucrative contracts.

Fears over the financial strength of Amey, the contracting group with a strong public-sector bias, are putting off local authorities that might give it lucrative contracts.

Amey has recently missed out on several large Private Finance Initiative (PFI) projects, where private firms are employed to deliver public services. These include the privatisation of the London Underground, where Amey was bought out of its membership of the Tubelines consortium because of its financial problems.

However, The Independent on Sunday has learnt that it may also lose contracts it thought were "in the bag". In Wakefield, West Yorkshire, Amey has been selected by the local authority as preferred bidder for a £130m scheme to install street lighting. But a source on the project said the situation was under review: "It is giving us concerns, but we haven't signed the contract yet. We won't be doing it if there are still concerns in the marketplace." He said it was hoped an announcement could be made in March.

Amey has suffered after a hard year of accounting changes, poor results and debt worries. New finance director Eric Tracey has worked to resolve the problems since his appointment in October, after his predecessor lasted just a month in the job. Mr Tracey is negotiating with lenders after the company breached the terms of its bank debt. In March he is expecting to announce results with profits hit by £50m and a goodwill writedown of £85m.

In the week before Christmas, Amey was sidelined in two large bids. It lost an £860m project to extend Manchester's Metrolink tram system, as two other consortia were named preferred bidders. It also lost a £766m contract for a public-private partnership (PPP) to provide Northamptonshire County Council and Milton Keynes County Council with a range of office management services.

It has also been rejected by Stoke-on-Trent City Council for a £104m project to upgrade street lighting.

Although Amey had been selected for a £345m PPP in Redcar and Cleveland to supply financial and accounting services, it was asked to re-tender because it was unable to fulfil some parts of the contract, and subsequently dropped.

Earlier this year it withdrew from a £500m project to build a tram link across the Pennines from Leeds.

Amey's plight has been reflected in a dreadful share price performance, with the stock losing 91 per cent of its value during 2002. This was despite bid speculation fuelled by the purchase of an 8 per cent stake in Amey by Sterling Investment Group, the UK vehicle of Swiss corporate raider Tito Tettamanti.

Mr Tettamanti's move has added to the pressure on Brian Staples, Amey's chief executive, blamed by many in the City for the company's woes. There is intense speculation he will resign in the new year.

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