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Government takes control of London and Continental

The company that built High Speed 1 and renovated St Pancras station has come under government control, with the line to be opened to competition.

On 14 May the Government received State Aid clearance from the European Commission to undertake a financial restructuring of London and Continental Railways (LCR).

LCR is now transferring ownership of its finance subsidiaries, which make up £5.169bn of debt already supported by a range of Government guarantees, to the Government, and buying shares of LCR for a nominal sum, taking it into direct Government ownership.

Taking control of the company will give the government the opportunity to complete the restructuring of LCR.

The next stage will be to sell an operating concession for the railway, Transport Secretary Andrew Adonis announced today. “London & Continental Railways has proven an extremely successful business with more people than ever using Eurostar services, the new high-speed line and St Pancras International Station,” he said.

“Domestic passengers will also soon benefit from high speed domestic services on the line linking Kent and London.Today’s announcement represents the latest phase in our plans to restructure the company - the net result will be to open up the high speed rail line to competition, resulting in better services for passengers and a better deal for taxpayers.”

As Lord Adonis sits in the House of Lords, Minister of State for Transport Sadiq Khan read his statement to the House of Commons this morning:

“As part of this restructuring LCR is transferring ownership of its finance subsidiaries, which together are liable for £5.169bn of debt in the form of bonds and securitised notes, to the Government.

“This debt is already supported by a range of Government guarantees. Separately, the Government is purchasing, for a nominal sum, the shares of LCR, taking it into direct Government ownership. The Government has held a special share in LCR since 1999 which has given it a wide range of controls over the company. LCR and its liabilities are already accounted to the public debt; consequently, there is no change to existing public borrowing requirements.

“The purpose of the restructuring is to separate HS1 Limited and Eurostar from their past construction liabilities. This will enable HS1 Limited to charge a commercial rate for access to the line and thereby attract more trains and a wider choice of operators. Being charged a proper market rate also offers Eurostar the best chance to develop its customer products and services on a sustainable commercial basis.

“It is for this reason that the Government has taken separate ownership of the finance subsidiaries currently within LCR that hold these past liabilities. This recognises the existing underwriting by Government of these debts and will see the cancellation of all the associated guarantees and future liabilities from Government to LCR and its operating subsidiaries.

“Doing so returns considerable value to LCR and its operating subsidiaries. The Government is determined that value accrues in full amount to the taxpayer. The simplest and most direct way of securing this is for Government to take ownership of LCR, making comprehensive the extensive rights already held in the company by virtue of Government’s existing special share.

“With the completion of this restructuring, the next step will be to prepare for the sale of a long-term concession in High Speed 1, the value of which will be used towards offsetting the public investment made in the construction of the railway. It is the Government’s intention to proceed with the sale of this concession as soon as the necessary contractual and regulatory structures are put in place in support of the future operation of High Speed 1 independent of Government and LCR and as and when market conditions allow.”

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