Tube firms to make billions

The Tube's new private investors are to make billions from its sell-off.

Figures reveal for the first time the five-fold profits bonanza that the private sector companies being brought in to run London Underground are expecting to gain.

The Evening Standard can today reveal that eight construction and maintenance companies who make up the Metronet and Tube Lines consortia are privately admitting they expect to earn returns of £2.7 billion on their direct investments of £530 million over the life of the Public-Private Partnership contracts. The PPP contracts are expected to be signed next month, with financial closure pencilled in for June.

In the first detailed profits forecast, Tube Lines chairman and Amey chief executive Brian Staples tells shareholders he expects Amey to make about £10 million a year on its £60 million investment. Translating that over the 30-year life of the PPP contracts, the three investors in Tube Lines, which include maintenance group Jarvis, are together expecting a return of over £900 million on their £180 million injection.

The five investors in Metronet - including construction group Balfour Beatty, Seeboard and Thames Water - are pumping in £70 million apiece and will be looking for returns of more than £350 million each. Mr Staples has told shareholders Amey will also cash in on "profitable" fees for seconding staff and expertise to Tube Lines as well as selling "services and products" to the Underground.

Mike Welton, chief executive of Balfour Beatty, said his company expects to secure "substantial amounts" of the £2 billion of Metronet's station refurbishment and maintenance contracts.

The startling revelations will anger passengers forced to endure a daily round of delays, cancellations and overcrow ding.

They will also come as another blow to Transport Secretary Stephen Byers, who has been championing PPP in the face of bitter opposition.

Passengers, Tube workers and managers have reacted with disgust to details of the profit windfall being made at their expense.

Mayor Ken Livingstone said: "I've always said it is a licence to print money rather than providing the infrastructure improvements that Londoners desperately need."

Sources at the Mayor's Transport for London said the consortia's return on investment figures are excessive compared with the eight per cent rate of return on contracts with London's bus companies.

Passenger groups criticised the lack of transparency and accountability of the consortia. John Cartledge, of the London Transport Users' Committee, said: "We do not object to these private companies making a profit.

"What we do object to is the levels of performance are not intelligibly set out and so passengers will not know whether they are getting value for money."

Tube workers leader Bob Crow, said: "It's an absolute disgrace. The returns are far in excess of what can be described as acceptable."

A spokeswoman for transport commissioner Bob Kiley said the scale of the profits showed that the PPP is a "grossly expensive" scheme allowing the companies to make excessive profits.

Mr Kiley's spokeswoman said: "This proves that the Tube PPP does not provide value for money for London, which should be its real aim.

"The way the financing has been structured is a grossly expensive option."

Later today Transport for London will reveal details of how the contracts being negotiated have shifted more and more in favour of the consortia.