Transport Minister Stewart Stevenson told the Scottish Parliament on March 5th that the government intends to procure the line from Edinburgh - Tweedbank using a non profit distributing vehicle basis.
He said: "As part of the project development and strategy, several procurement routes were reviewed and a decision has been made to take forward this procurement using a non-profit distributing vehicle. The use of NPD models for railways is already well established. For example, the financial structure of Network Rail."
"The details of our financial approach will be developed by Transport Scotland in conjunction with the Financial Partnerships Unit and Partnerships UK having taken full account of market soundings and the need for a competitive procurement process."
Mr Stevenson revealed that costs associated with the 35 miles route re-instatement have risen significantly since it was estimated by the previous administration at £130M at 2002 prices which is equivalent to £175 - £185M at 2012 prices.
"I will not provide an exact cost as a headline number would prejudice commercial negotiations but l can indicate that , at this stage in the development of the project, capital costs are indicated to be in the range of £235 - £295M," he said.
The cost increases are primarily associated with the rise in land and property prices in the Scottish Borders, partly driven by the expectation of the rail connection to Edinburgh’s growing financial services sector. There will be six intermediate stations. Outline design work in in progress. Mr Stevenson said that, following detailed assessment by Transport Scotland, the Benefit Cost Ratio had risen from 1.21 to 1.32.
Last year Transport Scotland took over the authorised undertaker role for the project from the Waverley Rail Partnership but the three local authorities in that partnership, Scottish Borders Council, Midlothian Council and Edinburgh CC, are still key stakeholders.
It is envisaged that the project capital borrowings from the financial markets will be re-paid over asset life by the financial contributions from the local authorities and by annual service charges met from Transport Scotland budgets.
The earlier time scale for the scheme, which envisaged proceeding with a design and build contract, was to begin on site in 2009 with completion by the end of 2011.