Metronet set to crash
Unless there’s a last minute intervention by the Treasury this morning, Metronet – the private-sector company responsible for most of the maintenance and upgrading of London’s underground network – will go into administration today.
It would be the first serious blow to Gordon Brown as Prime Minister. As Chancellor, he forced a reluctant Ken Livingstone to adopt a so-called Public Private Partnership for refurbishing and improving the Tube.
The collapse of Metronet has been triggered this morning by a decision of the PPP Arbiter – whose purpose is to ensure that this largest of Public Private Partnerships delivers value for money – to award only a fraction of the cash Metronet said it needed to keep going over the coming year.
Since Metronet has exhausted most of its borrowings and faces years of receiving less cash than it wanted for the work it is doing, its directors have almost no choice but to put the business into administration under insolvency procedures. The personal-liability risks for them of keeping the business going outside of administration protection will be giving them the heeby-jeebies, to put it mildly.
Metronet directors are meeting this morning.
To state the obvious, Metronet has been a disaster for its five shareholders, WS Atkins, Balfour Beatty, Thames Water, Bombardier and EDF – two of whom, Atkins and Balfour Beatty have disclosed that they value their investments in Metronet at zero.
The losses for Metronet’s lenders may run to hundreds of millions of pounds.