Railtrack's flotation received a boost yesterday when the rail regulator, John Swift QC, decided that the company could keep 75 per cent of any windfall profits from property development.
The decision to allow the company to keep the lion's share of a property portfolio that some analysts estimate could be worth pounds 2bn follows fierce lobbying by Bob Horton, Railtrack's chairman.
He argued that without a decent reward there would be no incentive for Railtrack to put effort into maximising the returns from its property, which includes a number of main stations.
Sir George Young, the transport secretary, also backed the idea of putting what Railtrack's advisers call a "property kicker" into the sale, so that the company can be marketed as a high-yielding utility with the added spice of potential property development profits.
Mr Swift, who is responsible for setting Railtrack's track access charges, issued a consultation paper suggesting a three-to-one split with the train operating companies for Railtrack's extra income from property sales.
Last year, Mr Swift intimated that Railtrack would be able to keep only a small amount of these windfall profits but he is anxious to ensure that Railtrack is attractive in the private sector. He appears to have bowed to Railtrack's arguments that the company needs to be allowed to retain a substantial proportion of the net extra income in order to encourage further sales and property developments.
He said: "Railtrack's property is held for the benefit of its customers, passengers, other users of the network and shareholders. The 75:25 share of any additional proceeds would provide the most powerful incentive to develop its property assets and build a stronger business without compromising its duties to concentrate on and develop a better railway infrastructure."
Railtrack's routine property sales have already been included in Mr Swift's assessment of Railtrack's access charges and therefore the announcement relates only to unexpected or particularly lucrative sales.
Railtrack will be allowed to carry over any shortfall in previous years to offset against these windfalls. The formula will come into play once the excess income from property is more than 0.1 per cent of Railtrack's fixed-track access charges in a particular year.