Despite the announcement of record operating profits last year - up 8 per cent to pounds 430m - and a 9.5 per cent increase in the dividend, Railtrack shares retreated by almost 3 per cent to close 35p lower at 1,332p.
Gerald Corbett, Railtrack's chief executive, warned that the company faced "a critical period of uncertainty" with a new regulator arriving in the middle of the regulatory review. He also served notice that if the review was too punitive then Railtrack would not be able to finance its 10-year pounds 27bn investment programme in the rail network.
More than 90 per cent of Railtrack's income is fixed through the access charges it receives from train operating companies. The outgoing regulator, Chris Bolt, has recommended that Railtrack's rate of return be cut to 5-6 per cent from 2001 and based on regulatory assets of pounds 2bn. But Mr Corbett said he was hoping to persuade the new regulator, Tom Winsor, who takes over in July, to agree to variable access charges and higher rates of return of 11-12 per cent on risk and revenue sharing deals between Railtrack the train operators.
Mr Corbett said the current framework of economic incentives was hindering progress and that he hoped to "engage the new regulator intellectually".
Rail traffic has grown by 25 per cent since privatisation but reliability and punctuality have declined. In return for variable access charges, which would allow Railtrack to benefit from the growth in rail usage, Mr Corbett said it would provide the train operators with pounds 40m of performance incentives.
Railtrack failed to hit its own target last year of reducing delays by 7.5 per cent. Railtrack only achieved a 6 per cent reduction, resulting in pounds 13m reduction in payments under the industry's performance regime.
Outlook, page 21