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Arbiter says Metronet due up to £1.07bn from London Underground

The PPP Arbiter, Chris Bolt, has issued his initial thoughts on the Metronet Extraordinary Review, suggesting that Metronet's Infrastructure Service Charge (ISC) should be increased by £140M-£470M over the first 7.5 years of the project.

Metronet BCV, which manages the upgrade of the Bakerloo, Central and Victoria lines, called for an 'extraordinary review' in June, asking the arbiter to determine who should pay for £992M in cost overspend - London Underground or Metronet.

Metronet had also asked for an additional 'interim ISC' of £551M. Bolt had decided to award only £121M, causing a financial drisis for the Metronet BCV, forcing it and its sister company Metronet SSL into administration.

Under PPP administration, Metronet abandoned its request for interim ISC, but it has not yet abandoned the full extraordinary review.

Bolt said in his introduction, "On 28 June, Metronet BCV referred to me matters relating to an Extraordinary Review of its PPP Agreement with London Underground.

"Although Metronet BCV and Metronet SSL have since gone into PPP Administration, the reference remains on the table. Under the terms of the Greater London Authority Act 1999, I therefore still have statutory functions to exercise, and am expected to do so without unreasonable delay.

“I have completed my preliminary analysis of the submissions made to me in June. I am publishing the results of this analysis of Metronet BCV’s cost increases, and my initial thoughts on the extent to which these costs are efficient and economic, in order to reduce uncertainty about the outcome of the Extraordinary Review and to provide a focus for further work," he said.

Bolt also said that the overspend for Metronet SSL, which manages the upgrade of the Circle, District, Metropolitan and Hammersmith and City lines runs to around £1.1bn, and that, "economic costs recoverable by Metronet SSL is likely to be in the range £230 - £600M".

The full range which London Underground could give to Metronet could be between £370M and £1.07bn

Draft directions on efficient costs and revenues (Net Adverse Effects) will be issued in mid-November.

Unless the extraordinary review is withdrawn, the Arbiter would expect to consult formally on the timetable to completion in mid October, and confirm it by the end of October.

Metronet is owned jointly by Atkins, Balfour Beatty, EDF Energy, Thames Water and Bombardier.

Accountants from Ernst&Young are running the business under PPP Administration with emergency funds from London Underground until a buyer or alternative solution can be found to bring Metronet back from its financial crisis.

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