Contracts will not be finalised until January rather than next month because banks fear legal action.
Tube consortium Metronet is to wait longer than expected to sign its public–private partnership deal with the government.

The group, which is scheduled to carry out two-thirds of the work on the Tube, was expected to finalise contracts next month but insiders now say that date has been put back to January.

The delay will intensify City concern over the PFI process and focus attention on cash-strapped firms in the two consortiums, such as Atkins and Amey, whose bid costs will not be reimbursed until the deals are signed.

Sources at the Metronet said the latest delay is being caused by the 60-day appeal period that follows the European Commission's clearance of the project at the start of this month. Banks will not release funds until that period ends in December.

One source said: "There is at least a possibility that Ken Livingstone can seek a judicial review. The banks are refusing to sign the deal until this is cleared up. The market is essentially shut down in December so you can't look to raise bonds then. It looks like it could well slip to January."

The source said the consortium had appealed to the government to underwrite the loans during the appeal period, but the Treasury had refused. He said: "We could sign next month if this was sorted out."

There is at least a possibility that Ken Livingstone can seek a judicial review

Metronet source

Metronet is seeking £1bn in loans, £1bn in bonds, £600m from the European Investment Bank and £250m from the five consortium members to back the deal.

A Metronet spokesperson said the group, which also includes Balfour Beatty, wanted to sign as soon as possible. He said: "Everybody is keen to get this sorted before Christmas. There has been three years of talking."

The other consortium, Tube Lines, which has financial backing in place, said it expected to reach close before Christmas. A spokesperson said: "We are quite optimistic we can make it."

Tube Lines member Amey this week was hit by the loss of another senior executive. Finance director Michael Kayser, who had been in the post for just over a month, resigned on Wednesday.

In a statement, Amey expressed disappointment at his departure. He will be replaced by an unnamed partner from accountant Deloitte & Touche, who will become acting finance director.

Whatever happened to those predictions?

January 2001
What was said Companies vying for the deals say they expect the preferred bidders to be named by the end of the month.
Reality Preferred bidders not announced until May 2001. July 2001
What was said Tube Lines spokesperson claims deals could be signed “in 12 weeks” after Bob Kiley is sacked as chairman of London Transport.
Reality Deals still to be signed. August 2001
What was said Transport minister John Spellar says he expects work to start on the Tube by the end of the year.
Reality Work will not start until the deals are signed. August 2002
What was said Balfour Beatty tells investors the deals will be closed by November.
Reality Looks more like January.