Rail groups signal Tube interest

MORE THAN 100 private sector organisations, including Railtrack and the three train leasing companies, have signalled their interest in taking part in the partial privatisation of London Underground.

The list of organisations features more than 20 construction companies, 17 banks, a handful of other rail operators and a smattering of lawyers, accountants, consulting engineers and even one advertising agency.

Precise details of how the Deputy Prime Minister John Prescott's "public- private partnership" for the Tube will operate are fuzzy. But Mr Prescott has pledged that it will bring in pounds 7bn of private capital to modernise the Underground over the next three years while retaining ownership and operation of the network in public hands.

The Government is anxious that the exercise does not turn into the kind of gravy train for the private sector that British Rail privatisation proved. Former BR managers made a killing from the sale of the rolling- stock leasing companies. Sandy Anderson, managing director of Porterbrook, made pounds 33m after the business was sold on to Stagecoach within months of privatisation for a pounds 400m profit. Andrew Jukes made pounds 15m from the sale of Eversholt to HSBC, while John Prideaux made a similar sum from the sale of Angel Train Contracts to Royal Bank of Scotland.

A report from the Commons Transport and Environment Select Committee yesterday drove the point home, urging ministers to avoid the "extravagance" of their predecessors in spending large sums on consultancy.

Under Mr Prescott's proposals, the Tube's infrastructure and responsibility for maintaining it will be handed over to up to three private sector consortia. They will be responsible for track maintenance, station refurbishment, replacing rolling stock and maintaining signalling systems.

In return for investing in the modernisation of the network, London Underground will pay them an annual rental. The infrastructure contracts are likely to last between 15 and 35 years, with review every 10 years. Freehold ownership of the assets will remain in the public sector and the leasehold interest will revert to the taxpayer at the end of the contract. Responsibility for operating the system will remain with the public sector.

Mr Prescott hopes that the public-private partnership will be up and running by spring 2000. The 100 or so organisations that have registered an interest will be whittled down through a process of "market sounding" over the next month.

Bidders will be invited to pre-qualify in November or December and invitations to tender sent to shortlisted bidders early next year. The aim to is sign concession contracts by April 2000.

Outlook, page 13