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Soaring Prism renews rail sale attack

The Government's controversial railway privatisation came under renewed attack yesterday as Prism Rail, the UK's first pure railway company to be quoted since the 1940s, saw its shares more than double on the first day of dealings yesterday.

Earlier this month, it won the franchise for the London, Tilbury and Southend "misery line" after the original management team were dropped amidst allegations of fraud.

Prism's shares soared from the 100p price at which they were placed on the Alternative Investment Market to end the day at 205p, valuing the company at pounds 26.6m and chairman Godfrey Burley's stake at around pounds 1.2m.

But the windfall for Prism shareholders, coming a week after shares in the Jarvis construction group soared on news it had acquired a former British Rail maintenance company, drew criticism that the LTS franchise had been sold on the cheap.

Jonathan Bray, co-ordinator of campaign group Save Our Railways commented: "It's no surprise that Prism's shares are going up when they plan to run fewer services than British Rail and charge the taxpayer more for doing it.

"Today's news typifies all that's wrong with privatisation - the cost to the taxpayer in extra subsidy increases, while profits for companies like Prism go through the roof.

"If Labour are elected we will be pressing them to ensure that all the pounds 2bn annual subsidy to the rail industry goes into improving services, not into lining the pockets of the likes of Prism."

Labour was, however, more cautious yesterday. Its spokesman on rail, Brian Wilson, said Prism's main costs, track access charges and train leasing, were fixed. "It is hard to see where else the industry's profits are going to come from other than staff cuts and fare increases."

Meanwhile, Opraf, the rail regulator in charge of franchising, defended its decision to award the LTS route to Prism. A spokesman said the company's bid to run the service at a cost of pounds 29.5m in the 1996-97 financial year, dropping to pounds 11.2m in 2010-2011, the last year of the franchise, was "significantly" less than BR's offer, which was worth pounds 34.6m in the current year. The company's offer was also below the management team's bid and had also been tested against third-party bidders.

"If the market thinks it an attractive company to invest in, then the market must decide for itself. But they have promised to bring in new services, buy new rolling stock, open a new station at West Ham and improve passenger charter standards, all for significantly less money," the spokesman added.

Tim Worlledge, a director of Williams de Broe, nominated sponsors and advisers to the company's AIM listing, denied they had got the pricing wrong. "It was placed in our view at the right sort of level. A majority of shareholders wanted to stay aboard."

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