Metronet to call in administrators today

Ernst & Young is be appointed as administrator to Metronet, the Tube contractor.

The accountant will be called in today after two days of intense meetings between the company and its five shareholders, WS Atkins, Balfour Beatty, Thames Water, France's EDF Energy and the Canadian train maker Bombardier.

It is understood that they have concluded that they have no prospect of making a return from Metronet without up to £2bn of extra funding. And they have refused to put up any more of their own cash beyond the £70m each invested at the start of the public-private partnership to upgrade the London Underground that was championed by Prime Minister Gordon Brown while still Chancellor of the Exchequer.

The company's initial request for £551m of extra funding to cover massive cost overruns on work to upgrade the Bakerloo, Central, Victoria and Waterloo & City Lines, was turned down by Chris Bolt, the public-private partnership arbiter. Mr Bolt said Metronet could have just £121m and savaged the company for failing to operate in an "efficient and economic manner". There is now a serious threat that much of the debt incurred by Metronet could end up back in public hands.

The company is thought to have drawn down £3.5bn of a £7bn credit line to fund the initial works. The banks backing the project are covered because 95 per cent of their lending is protected by a Crown guarantee.

The administrator's job will be to ensure that work continues while attempting to find a new operator to take on the work - and the debt. If one is not found the contract, and debt, will revert to Transport for London.

Ken Livingstone, London's Major, and TFL chiefs fought a bitter battle against the public-private partnership, arguing that it was too complex and costly.

Metronet is known to have been preparing to ask for a further £1bn. Tubelines, Metronet's rival which handles the rest of the network, has made no such requests. Unlike Metronet, which parcelled out the work between its shareholders, Tubelines introduced a competitive tendering process and has largely completed the work on time and on budget.