COMPANY WATCH

RMTnews :: october 2007 :: www.rmt.org.uk 8 T ube maintenance consortium Metronet may have collapsed in July after running up £2 billion of debts, but it has not stopped some of the companies involved chalking up huge profits. Metronet was made up of Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy and Thames Water. Balfour Beatty reported pre- tax profits up 36 per cent to £76 million for the six months to 30 June 2007. EDF Energy enjoyed pre-tax profits of £402 million for last year. Thames Water’s financial statement for the year to 31 March 2007 showed profits of £256 million. Also out the ashes of the PPP disaster, EDF has been named as an official sponsor of the 2012 London Olympics. Moreover, the hugely complicated PPP contracts-the brainchild of our new PM Gordon Brown-ensure that if the lenders request re-payment from Metronet then Transport for London/LUL is responsible for 95 per cent of the debt – so much for taking risks. By July 2006 Metronet and Tube Lines had been paid £3.3 billion in performance-adjusted Infrastructure Service Charges. Given this huge taxpayers' subsidy, it is not surprising that the Infracos have generated such huge profits for their shareholders. Between 2003/04 and 2005/06 Metronet BCV, Metronet SSL and Tube Lines made pre-tax profits of £286 million. Predictably, performance did not match profit margins. No fewer than eight reports cast serious doubts on the PPP's ability to deliver the upgrade of the London Underground in an economic and efficient manner. In June 2004 the National Audit Office published two reports into the PPP. The London Underground PPP: Were they good deals? detailed the PPP's huge start-up costs including £109 million spent by London Underground on external advisors and £275 million paid by LU to reimburse private- sector bidder costs. The report warned that final PPP costs remained uncertain. Not known for its radical language, the NAO stated: “there is only limited assurance that the price that would be paid to the private sector is reasonable". At least we now have the answer and it looks like the taypayer will foot the bill. Shortly after the demise of Metronet, the Office of National Statistics decided to reclassify Metronet and Tubelines from the private sector to the public sector for ‘National Accounts’ purposes, highlighting that the growing cost of the PPP is being borne by the public purse. London Mayor Ken Livingstone wants to take control of the company and split up the remains of its £17 billion contract. However, Metronet administrator Ernst & Young is trying to value the company with a view to selling it to the highest bidder to pay off creditors. Worse still, a preliminary ruling from Tube arbiter Chris Bolt claimed that Metronet could recover between £140 million and £470 million for the Bakerloo, Central and Victoria lines and £230 million to £600 million for the sub-surface routes such as the Metropolitan, District, Circle, Hammersmith & City and East London lines, leaving TfL facing a bill of over £1 billion. Mr Bolt said his findings would "narrow the range of uncertainty over what these contracts are worth", thereby helping Ernst & Young to find a buyer for the business. Some would say that corporate welfare is the overriding issue here, but we couldn’t possibly comment. COMPANY WATCH Metronet special…