Shares rise as regulator prepares to announce easier ride for Railtrack

Click to follow
The Independent Online
THE RAIL Regulator Tom Winsor will today make concessions to Railtrack by proposing a less punitive charging regime than the much-criticised operator of Britain's rail network had feared.

Railtrack is expected to be allowed to earn a higher rate of return on its assets than the regulator had initially proposed. It will also be allowed to make more of its profits from risk-sharing deals with train operators.

Shares in the company rose 60p to 887p yesterday - a gain of 7 per cent - in anticipation of the lighter-than-expected regulatory formula. In the last two days they have added 11 per cent.

Chris Bolt, Mr Winsor's predecessor, had originally proposed that Railtrack's return be cut to between 5 and 6 per cent from April, 2001, compared with the present rate of 7.5 per cent.

He also recommended that the regulatory asset base on which it can earn a return be valued at only pounds 2.5bn. Mr Winsor is expected to propose a rate of 6-7 per cent - tougher than Railtrack faces at present but less onerous than feared. He is also expected to allow Railtrack to earn bigger returns by taking some of its revenues out of regulatory controls and linking them to passenger volumes.

One source said that "things have moved on" since Mr Winsor's predecessor published his initial set of proposals. But Mr Winsor is also said to be under pressure from the chairman of the Strategic Rail Authority, Sir Alastair Morton, and the Deputy Prime Minister, John Prescott, to go easier on Railtrack.

The company has warned that if its share price continues to plummet in the face of incessant regulatory attacks, it will not be able to fund the pounds 40bn investment programme the network requires.

Outlook, page 17