Newspaper article The Evening Standard (London, England)

Tube PPP Firms Set to Make Billions

Newspaper article The Evening Standard (London, England)

Tube PPP Firms Set to Make Billions

Article excerpt


THE Tube's new private investors are to make billions from its sell-off.

Figures reveal for the first time the fivefold profits bonanza that the private sector companies being brought in to run London Underground are expecting to gain.

The Evening Standard can today reveal that eight construction and maintenance companies who make up the Metronet and Tube Lines consortia are privately admitting they expect to earn returns of [pound]2.7 billion on their direct investments of [pound]530 million over the life of the Public-Private Partnership contracts.

The contracts are expected to be signed next month, with financial closure pencilled in for June. In the first detailed profits forecast, Tube Lines chairman and Amey chief executive Brian Staples tells shareholders he expects Amey to make about [pound]10 million a year on its [pound]60 million Billions down the Tube investment. Translating that over the 30-year life of the PPP contracts, the three investors in Tube Lines, which include maintenance group Jarvis, are together expecting a return of more than [pound]900 million on their [pound]180 million injection.

Stephen Byers's Transport Department hit back with the extraordinary claim that [pound]2.7 billion was not a great deal of money.

A spokesman insisted it was a fair return on the companies' investment and said: "OK, [pound]2.7 billion sounds a lot, but if you put that amount of money [[pound]530 million] into a bank or the Stock Exchange over 30 years, it's not that big a figure."

Payouts are not guaranteed under the PPP contracts, but depend on the companies hitting targets for improving the Tube. "If they hit every single target over 30 theory they could make these billions."

However, his claims were rubbished in the City. In a top-rate savings account, the investment compounded over 30 years would be worth less than [pound]1.7 billion.

On the stock market a 17 per cent increase year-on-year in the FTSE 100 is rare and the market has in fact dropped by 24 per cent over the last two years.

The five investors in Metronet - including construction group Balfour Beatty, Seeboard and Thames Water - are pumping in [pound]70 million apiece and will be looking for returns of more than [pound]350 million each. …

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