Tube group set to award £1bn orders

By Michael Harrison,Business Editor
Tuesday 08 October 2013 20:44

The private sector consortium which has taken over part of the London Underground is set to place £1bn worth of orders for new Tube trains and equipment.

Tube Lines, which took control of the Jubilee, Northern and Piccadilly lines is expected to announce the first two contracts - a £160m order for additional carriages and a £240m track replacement deal in the next two weeks.

The order for 59 new carriages for the Jubilee line is expected to go to the Anglo-French contractor Alstom, which will manufacture the trains at its Washwood Heath factory in Birmingham. The track replacement contract may be awarded to Jarvis, one of the three shareholders in the Tube Lines consortium and the maintenance contractor responsible for the line at Potters Barwhere a crash last year killed seven people. The biggest of the contracts, a £400m order for new train control systems, is due to be awarded in August or September. This will be followed shortly afterwards by a £150m-£200m order for communications systems.

Terry Morgan, chief executive of Tube Lines, stressed that Jarvis would only be selected for the track order if its bid was the most competitive.

Jarvis, which announces its results today, has come under severe criticism over the Potters Bar crash which was caused by a faulty set of points. The company claimed that the points might have been sabotaged but an investigation by the Health and Safety Executive ruled this out.

Tube Lines, whose other two shareholders are Bechtel and Amey, the PFI contractor bought recently by Spain's Ferrovial for £81m, intends to invest £4.3bn in its three Underground Lines in the next seven years.

Mr Morgan said that in its first six months of operations Tube Lines was slightly ahead of the performance targets set down in its agreement with London Underground. These measure the "ambience" of stations, the reliability of the service, the condition of the assets and the number of trains operated.

If Tube Lines falls behind its agreed targets in terms of delays then it is penalised. "We had a difficult start, particularly with the snow in January which affected parts of the network badly, but in overall terms we are just ahead of plan," said Mr Morgan.

He said that Tube Lines expected to improve reliability - judged by the number of lost customer hours - by 15 per cent in its first year. The introduction of the new carriages will increase the length of Jubilee Line trains to seven cars and enable it to increase services at peak times from 24 to 28 an hour. But the trains will not enter into service until 2006.

Jarvis's results today will include the first contribution from Tube Lines. Analysts are expecting the company to report annual profits before goodwill and amortisation of about £62m. The company forecasts it will make £12m a year from its £60m equity investment in Tube Lines although no dividends are payable until 2008.

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