Tube PPP backers in line for 20% profit

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The companies backing the £16bn public private partnership of the London Underground could get up to a fifth of their money back every year, the Government will admit tomorrow.

Stephen Byers, the Transport Secretary, has said he will publish the contracts for the three PPPs for the Tube tomorrow. Two have been won by the Metronet consortium, backed by Balfour Beatty and WS Atkins among others, and the other by Tubelines, whose shareholders include Amy, Jarvis and Bechtel. London's Mayor Ken Livingstone has claimed that the backers could make annual returns of 35 per cent on their investment.

This is an exaggeration. The contracts will reveal that the expected profits will be between 15 per cent and 20 per cent per annum.

Initially, the backers will put around £700m of equity investment into the project, and will raise a further £4bn for the debt markets.

This will be enough money for the first seven years of what is intended to be a 30-year contract.