Metronet says regulatory review of Underground contract 'quite likely'

Metronet says regulatory review of Underground contract 'quite likely' - report

	Published : Wed, 25 Apr 2007 08:21 By : Agencies Print this Story

LONDON (Thomson Financial) - Controversial London Underground maintenance firm Metronet said a regulatory review of its contract to renew two thirds of the Tube is 'quite likely', according to a report.

Metronet is ready to face an extraordinary review by the Public-Private Partnership arbiter if it fails to reach a negotiated deal with London Underground over who should pay an estimated 750 mln stg of cost overruns, the Financial Times quoted Metronet chief executive Andrew Lezala as saying.

Lezala said a negotiated deal would be preferable to the longer process of an independent review, but added: 'I respect the fact there are large sums involved here and we are quite prepared to go through the extraordinary review process, and that's quite likely.'

Metronet has faced scathing criticism from regulators, London Underground, London Mayor Ken Livingstone, and passenger watchdogs, over delays and cost overruns in the 30-year contract to maintain and upgrade nine of the capital's 12 Underground lines.

A damning report from the Public Private Partnership Arbiter in November said Metronet's two subsidiaries responsible for the contract had failed to perform their activities 'in an overall efficient and economic manner, and in accordance with good industry practice'.

Last week, Metronet shareholder WS Atkins said it was facing a 36 mln stg exceptional loss due to continued delays and higher-than-expected costs. Another shareholder, Balfour Beatty PLC, said in a separate statement that Metronet's finances were under increasing pressure and that the chances of a review had increased significantly.

London mayor Ken Livingstone claimed yesterday that Metronet could face insolvency if its five shareholders decline to fund liabilities relating to the overspend, the FT said.

Livingstone was wrong to assume LU would end up paying none of the 750 mln stg overspend, because much of the expenditure resulted from LU demands to increase the scope of the upgrade work, the newspaper quoted Lezala as saying.

philip.waller@thomson.com

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Metronet says regulatory review of Underground contract 'quite likely' - report