Economists question Railtrack value

A HIRED firm of economic boffins is arguing that Railtrack is worth just £200m at most, equivalent to less than 40p a share. Nera Economic Consulting, part of the Mercer Consulting Group, has drawn up a report in preparation for the Government's sale of Railtrack. Nera has run several economic models, concluding Railtrack's equity value ranges from £200m at best to minus £2.5bn in the worst case scenario.

The findings will be a blow to Railtrack investors. They have argued the rail network operator's assets could be worth around 360p a share, against the 280p at which the shares were suspended.

Nera concludes that the enterprise value of Railtrack (its assets plus its liabilities) is less than the debt outstanding in October of £4.8bn, often by a 'significant' amount.

Nera, formed in 1961, describes itself as a firm of consulting economists 'who understand how markets work'. It claims 'we are widely recognised for our independence'. The company is owned by Marsh & McLennan, the US consulting, risk and insurance and investment management group.

Apart from the Government's preferred Company Limited by Guarantee vehicle, WestLB, the German bank leading the Swiftrail UK consortium, is interested in bidding for Railtrack. Nera's findings imply any potential purchaser would pay only a nominal sum for the assets and would want Government undertakings to cover cost overruns.

Railtrack Group, the holding company for Railtrack plc in administration, has joined forces with the Railtrack Shareholder Action Group to launch legal action against Transport Secretary Stephen Byers.

They wrote to the Treasury Solicitor, the Government's in-house lawyer, on Monday, giving Byers a four-week deadline to release documents leading to his decision to pull the plug on the firm.