Remaining PPP firm ordered to make £1.35bn of savings in draft determination
The boss of the one remaining London underground PPP company, Tube Lines, has left as the firm was told it would have to make £1.35bn worth of savings over the next seven years.
Dean Finch, the Tube Lines chief executive, announced he was leaving the company late yesterday to become chief executive of coach and train firm National Express. The decision was announced on the eve of the draft decision this morning by the PPP arbiter Chris Bolt of the fees Tube Lines should receive from London Underground.
Bolt found that LU should pay Tube Lines £4.4bn over the next seven and a half years, compared with the £5.75bn Tube Lines was asking for. London Underground had said it should pay £4bn.
Dean Finch added: "National Express is a leading international transport company and it operates a series of first class businesses in Britain, Spain and North America. I am looking forward to strengthening all parts of the group, fostering a culture of operational excellence enabling us to deliver real shareholder value."
However, speaking as chief executive of Tube Lines, he said the arbiter's decision “did not reflect the reality of the Underground working environment”, and left LU with a choice to either do less work or raise additional finance.
Tube Lines said it would make “robust” representations to the arbiter in the next six weeks in an attempt to change the determination.
Chris Bolt said: “I have reviewed carefully the submissions from Tube Lines and
London Underground, and taken expert advice. On the basis of my analysis, I consider that a company operating in an overall efficient and economic manner and in accordance with good industry practice - the test in the PPP Agreement - could deliver its obligations at a substantially lower cost than projected by Tube Lines, though not as cheaply as suggested by London Underground.”
He found that Tube Lines would need to make further legal claims against London Underground in order to bring in the required revenue.
In addition he said he would be seeking clarification from London Underground as to whether it would be able to fund the extra £400m required. If not, he said, it would have to review the scope of the proposed works.