Ministers seek £500m from investors to update railway power

Network Rail has missed 30 of 84 targets in the first 12 months of its five-year investment plan

The Government will try to tempt infrastructure investors to pour hundreds of millions of pounds into supplying Network Rail’s power at a meeting early next month.

It is thought that Infracapital, the infrastructure arm of M&G Investments, and Australia’s Macquarie Group are among the firms invited to help the Government start an overhaul of the state-backed company that runs and maintains 20,000 miles of rail track.

Ministers and officials are keen on fresh investment to improve Network Rail’s power supply, which includes overhead line equipment and the electrification of track. Investors, which could include major utilities, would receive a virtually guaranteed, long-term income stream.

“There will be quite an audience,” said a rail industry source. “This is going to get quite a lot of attention.”

The source added that the idea was “imposed by Whitehall” and expects the deal to be worth at least £500m – any smaller and many big name investors would not be interested. A second source said this was “early days” in the process.

Ministers have been greatly concerned by Network Rail’s recent performance, which culminated on Friday with the Office of Rail Regulation warning that the group has missed 30 of 84 targets in the first 12 months of its five-year investment plan. Last week also saw Network Rail announce that its pre-tax profit had halved to £506m on the previous year, while the Government is infuriated by poor train punctuality due to engineering work overruns.

The Treasury is keen on hiving off parts of Network Rail so that it concentrates on its core work of maintaining the railways at a time when they are struggling to cope with a surge in passenger numbers. Aside from handing over the power supplier to a private investor, officials are also looking at getting the private sector to run major stations and telecommunications, including wifi on trains.

Patrick McLoughlin, Transport Secretary, is considering imposing a special director on Network Rail’s board so that his views and concerns are aired at every meeting. Richard Parry-Jones’ position as chairman is thought to be under scrutiny.

Mark Carne, the chief executive, is trying to foster better links with Whitehall and senior politicians. Network Rail’s latest published board minutes, from February, state: “It was noted that in other similar arm’s-length bodies of government it was more common to have a broader group of executives having more frequent engagement with Westminster and Whitehall in a structured and co-ordinated way.”