The announcement follows the failure on Monday of Metronet Rail’s BCV subsidiary to win sufficient emergency funding in an application to the arbiter of the 30-year, £30bn Underground public-private partnership programme (PPP).

BCV, which maintains and upgrades track, trains and stations on the Bakerloo, Central, Victoria and Waterloo & City deep-level tube lines, had asked the arbiter to force London Underground to pay it an extra £551m over the next year, but the arbiter ruled it was entitled to only £121m.

A statement said BCV needed further money to carry out its work over the next year but it had now established it had no access to such funds.

“Metronet Rail BCV will therefore be unable to carry out its contract and has asked the mayor to seek the appointment of a PPP administrator,” it said.

The company had also applied the logic of the arbiter’s decision on Monday to its SSL subsidiary, which had made no emergency application for funds but was expected soon to face problems because of a similar-sized projected overspend on its work.

Both BCV and SSL – which works on shallow, sub-surface lines such as the Metropolitan, District and Circle – have projected overspends of over £1bn over the first seven and a half years of their contracts, to October 2010.

The board of SSL had come to the conclusion that applications for extra funds for its work would reach the same conclusion as the arbiter reached on BCV.

“It has therefore also asked the mayor to seek the appointment of a PPP administrator for Metronet Rail SSL,” the statement said.

The announcement follows a prolonged campaign by Metronet – which is owned by WS Atkins, Balfour Beatty, Bombardier Transportation, EDF Energy and Thames Water – to reclaim the extra spending on its contracts from London Underground.

The arbiter ruled that some of the work the contractor was undertaking was additional to that originally outlined in the PPP contract. However, large amounts of Metronet’s expenses had been incurred because it had started work late, found itself paying higher-than-expected finance charges or failed to find available efficiency savings. He consequently allowed only a small proportion of the payments they had sought.

Alan Bloom, the Ernst & Young administrator who handled the administration of Railtrack, the former operator of the national rail network, is expected to be appointed administrator at a court hearing on Wednesday morning.

Balfour Beatty, which carries out track and stations work for Metronet as well as owning 20 per cent, said the administration decision might mean it had to take further write-offs relating to Metronet than the £100m it announced last month.

WS Atkins said it did not expect the decision to force it to take any write-offs beyond the £121m it announced last month. Bombardier said it did not expect any further financial impact as it had already announced a $164m (£82m) write-off.

Officials from Transport for London, London Underground’s parent, are expected to announce plans for handling Metronet’s administration later on Wednesday. They will stress that Metronet has entered a special form of administration aimed at ensuring the railway continues operation with no disruption to passengers, employees or payment to suppliers.

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UK rail contractor Metronet calls in administrator

Reuters: Jul 18, 2007

LONDON - Metronet, the company upgrading two thirds of London's underground rail network, has asked for an administrator to be appointed after overspending led to a cash shortage, its owners said on Wednesday.

"This news, while not unexpected, is clearly disappointing," said WS Atkins a partner in Metronet alongside Balfour Beatty Plc, Bombardier Inc., EDF Energy and Macquarie Bank-owned Thames Water.

Metronet's owners made the decision after learning on Monday it would receive less than a third of the 551 million pounds ($1.12 billion) it had requested from London Underground to cover rising costs.

Independent arbiter Chris Bolt said he awarded Metronet only 121 million pounds because the consortium had not been working efficiently and economically.

The administration will not lead to a liquidation or a sale of assets, but will include a debt restructuring, refinancing and renegotiation of contracts, said a spokeswoman.

Metronet's 30-year contract includes 17 billion pounds of investment.

The contractor was cut off from its funds earlier this year by its lenders after it emerged its initial 8 billion pound investment plan was expected to incur another 750 million pounds of costs.