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CTRL will go ahead despite doubts over Railtrack's ability to buy

LONDON & CONTINENTAL Railways said this week that it was pressing ahead with section two of the Channel Tunnel Rail Link despite growing doubts about Railtrack's ability to buy it.

It said that it planned to award contracts worth £430M in the next week, including contracts for the station box at Stratford and the Thames tunnels.

Skanska was expected to win the contract to build the Stratford box as NCE went to press.

Work on the CTRL second section will be unaffected by Railtrack's ability to pay for it even though it has first refusal on buying section two. It has until 2003 to exercise this option.

The Government agreed to underwrite a £1bn bond issue for section two costs under the terms of the rescue package agreed by deputy prime minster John Prescott in 1998. These will not be issued until 2003.

However, LCR plans to start construction of section two using funds left over from the £2.7bn bond issue for section one plus Government grants already earmarked for the project. Once section one is complete, Railtrack has committed to buy the track for £1.7bn. This cash will also help to fund section two.

But Railtrack's ability to take up the option to buy section two of the CTRL was thrown into doubt on Monday when it announced that the Hatfield crash had cost it £580M in extra track repair costs and compensation to train operators.

In what is seen as a highly political move, Railtrack said it was 'impossible to commit to new schemes' at present unless it could renegotiate the timing of payments from the shadow Strategic Rail Authority.

It wants the sSRA to bring forward payments worth £1.1bn currently scheduled for the period 2006-2011.

It is estimated that Railtrack needs a total of £15bn from the sSRA over the next five years for maintenance and renewals. The Rail Regulator had only allowed for £14bn in this control period.

Because of the way the payments are structured Railtrack would have had to borrow £2bn to help fund the shortfall. Its ability to raise this money is now in doubt.

Railtrack also announced on Monday that it had accepted performance and efficiency improvement targets set out in the Regulator's review, published in October even though former chief executive Gerald Corbett had rejected them.

Commerzbank analyst Chris Tarry said it would have been 'tactically catastrophic' for Railtrack to not have accepted the review, given the current situation.

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