Metronet Rail BCV Limited, the company responsible for the renewal of the London Tubes’ Bakerloo, Central, Victoria, and Waterloo & City lines, yesterday announced it has asked the PPP Arbiter to conduct an Extraordinary Review of its operations.
The company, which this week has seen shareholders write off 220 million pounds off their holdings in the company, hopes to recover almost £1billion from London Underground.
The company says of this sum, approximately £550 million has been incurred, or is committed over the next 12 months, with future projections of obligations beyond June 2008, amounting to approximately £440 million.
Graham Pimlott, Metronet’s Chairman said the company had “entered into the Public Private Partnership in good faith.”
“Where we have made mistakes our shareholders have borne the cost. However, the PPP terms are clear – where additional spending is required to meet London Underground’s demands, then we are entitled to be paid.”
“It’s disappointing that we have been unable to reach a mutually acceptable solution with London Underground, therefore we are now left with no option other than to begin this process of Extraordinary Review.”
Mr Pimlott said he was “confident of a large recovery from London Underground.”
In a submission due to be filed on Monday London Underground will advise the Arbiter “that it does not believe it should be liable for any additional payments to Metronet, for work undertaken as part of its Infraco BCV PPP contract.”
LU Managing Director, Tim O’Toole welcomed the move saying the body had “been calling on Metronet to seek an Extraordinary Review since February 6 this year.”
“We believe Metronet have not performed in an economic and efficient manner and that their financial position is a result of it and its shareholders failure to properly plan, manage and execute its maintenance and renewal activities.
“It therefore remains our belief, and is our submission to the PPP Arbiter, that Metronet’s cost overruns should be largely or entirely borne by Metronet and its shareholders.”
Metronet’s submission to the PPP Arbiter includes a claim for a temporary increase in their BCV Infrastructure Service Charge at the start of the Extraordinary Review process.
In February this year a report by the PPP Arbiter concluded that “neither of the two Metronet Infracos has performed in line with the required standard over the period as a whole.”
Andrew Lezala, Metronet’s CEO, said the company had made improvements commenting “today’s Metronet is significantly different from that of two years ago.”
“Inefficiencies have been addressed and we’re making progress on maintaining the reliability of the aged assets. Gradually, we’re fixing the legacy of many decades of under-investment. And with the exception of stations, all our major upgrades are on or ahead of programme.”