French utility group could be a buyer for London Underground

The London Tube network could fall into French ownership, it emerged yesterday, when Generale des Eaux, France's largest utility group, threw its hat into the ring as a potential bidder. Chris Godsmark, Business Correspondent, assesses the growing interest in the Underground.

Jean-Marie Messier, chairman and chief executive of Generale des Eaux (GE), said in London yesterday that the acquisitive multinational utility empire would be interested in buying part of London Underground if the Government decided to press ahead with a full-scale privatisation. "It's an interesting idea," said Mr Messier, who said he was waiting to see the outcome of the review of the tube launched by John Prescott, Minister for Transport and the Environment, after the election.

However GE warned that it would only become involved as a train operator and had ruled out taking over responsibility for infrastructure such as track and signalling. "We don't want to be the World Bank provider of finance on environmental infrastructure," he said. One possibility was that the French group would join a consortium which would reflect expertise in both areas.

GE pledged to continue its aggressive expansion in the UK, which has seen its turnover rise to almost pounds 2bn in just 10 years. Mr Messier said GE intended to invest "some hundreds of millions of pounds" in the UK over the next three to five years, on top of the pounds 2bn invested so far.

The company claims to be the largest passenger transport operator in the UK, with control of two of the biggest privatised rail franchises on London commuter routes, Connex South Central and Connex South Eastern. It also owns four drinking water companies, has a 40 per cent stake in General Cable, the cable telephones and TV group, and is the UK market leader in waste disposal.

The interest in tube privatisation could further complicate the discussions between the Treasury and Mr Prescott's office. Price Waterhouse has drawn up a list of possible sell-off options which were sent to the Prime Minister's office last month. They include dividing responsibility for track and train operation, mirroring rail privatisation, breaking up the tube into separately run vertically integrated lines, or a sale as a single business.

However Mr Prescott is known to prefer selling a concession to run the track and signalling, lasting around 20 years, but keeping train operation in state ownership, a move which would dent GE's ambitions. Railtrack and WS Atkins, the civil engineering group, have both been tipped as potential infrastructure bidders.

However, the pressure from other interested private sector train operators, including Virgin, could force a reappraisal in Whitehall.

Meanwhile Mr Messier fuelled the pressure from business for the UK to join the single European currency. He said the euro would "not be the euro until the British pound joins". The decision to join some time after the next election seemed perfect, he added. "I cannot imagine the UK staying outside for too long."