£992m arbiter ruling could boost private interest in Metronet

Potential bidders for collapsed tube maintenance company Metronet will submit offers this month to administrator Alan Bloom of Ernst & Young.

Transport for London was the only organisation that had voiced an interest as Construction Manager went to press. Private sector companies were expected to be put off by the disastrous state of Metronet’s finances, but its value could be boosted by an extraordinary review being undertaken by the PPP arbiter.

The arbiter is considering Metronet’s claims for an additional £992m for work carried out on its BCV contract for the first 7½ years of its contract. A further claim for extra cash on its SSL contract is also expected to be lodged.

A source close to the talks said: ‘Tfl assumed that it would be the only bidder, but that might change depending on the results of the arbiter’s review and the valuation.

‘An influx of extra cash for past work could provoke interest from other areas.’

The Metronet story:

• Metronet went into administration on July 18. Its two operating arms, Metronet Rail BCV (Bakerloo, Central, Victoria and Waterloo & City lines) and Metronet SSL (Circle, District, Hammersmith & City, Metropolitan and East London Lines) are now being run by administrator Ernst & Young.
• Metronet ran up vast cost overruns and was more than £2bn in debt at the time of its administration. The final straw was a ruling from independent financial reviewers at the PPP Arbiter.
• Metronet claimed an extra £551m from London Underground for work it was due to carry out in the next 12 months. But the arbiter ruled it should only get £121m and it went into administration the next day.
• The £551m is part of a larger claim for £992m Metronet was seeking through an Extraordinary Review of its BCV contract.
• The PPP arbiter has now resumed that review and was due to unveil the results as Construction Manager went to press.