Network Rail may take track renewals work in-house - broker
AFX News Limited: 04.11.2006,
LONDON (AFX) - UK rail infrastructure group Network Rail (NR) may take track renewals work away from private contractors, according to a broker.
Senior management of the not-for-profit company, which owns, runs and maintains the UK's rail infrastructure, hinted to investors at a lunch meeting on Monday that the group could take track and points renewals work in-house when current contracts end in about four years' time, ABN Amro said.
'One of the key parts of the discussion centred on the likelihood that NR may well take both plain line track renewals and switches and crossings work in-house,' ABN's analyst Mark Howson said in a note.
Howson told AFX News this afternoon: 'They didn't say 100 pct that they are going to take it back in-house, but they gave every indication that they are currently discussing that as we speak.'
The analyst said he believes the move is likely when the present five-year deals with contractors end and NR's current financial settlement with the government comes up for review in 2009.
'In our view it's a real risk after that,' he said.
NR has recently let track and S&C renewals contracts to firms including Balfour Beatty PLC, Carillion PLC, First Engineering, Grant Rail, Jarvis PLC and Amey-Seco.
An NR spokesman said the deals had delivered good efficiencies to date and NR has no current plans to take them in-house.
However, he added that the company would consider whether to take them back 'if at some point in the future they fail to deliver to targets.'
'We have been happy with these so far, but we reserve the right to keep them under review over time,' an NR spokesman said.
Network Rail (NR) has already taken track maintenance in-house following the rail crashes at Hatfield and Potters Bar in Hertfordshire and incidents elsewhere on the rail network. It said it has saved about 200 mln stg in maintenance costs since it took all maintenance back in-house in July 2004.
NR is spending 793 mln stg on track and S&C renewals in 2005/6 and plans to spend 799 mln stg on it in 2006/7.