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Network Rail seeks to borrow cash for new lines


MAJOR NEW rail schemes like the high speed line linking London and Scotland became more likely this week after Network Rail confirmed plans to raise finance without government guarantee.

The move to break away from government-backed borrowing was widely seen as an indication that the rail operator is looking to move beyond its maintenance and renewal remit and build new schemes.

Network extensions were previously the remit of the Strategic Rail Authority, which has now been disbanded.

'This is a clear sign of an increasingly confident Network Rail, ' said Railway Forum director general Adrian Lyons.

'It also signifies an underlying shift in government policy. After all, the government is not stopping Network Rail doing this.

'What Government is in effect saying is that if Network Rail can start producing schemes that have an economic benefit, then they can go and borrow money and do it, ' he said.

Last month Network Rail set out an ambitious £29bn programme of work that it wants to start in the next regulatory period (NCE 6 July).

Set in the context of increasing pressures on government spending, this week's announcement is seen as realisation that government funding is unlikely to pay for new lines.

'Doing this means we can borrow more money if there is a strong business case for a scheme, ' said a spokesman.

'For example if we could produce a commercial case for a north-south railway we could fund that investment.' Network Rail admitted that borrowing without government guarantee would come at a higher rate of interest and that it would be looking for an investment grade rating.

Credit ratings firm Standard & Poors said that although Network Rail's existing debt programme has a AAA rating, this may not automatically transfer to new borrowing.

'Ultimately, when you are assigning a rating you are taking a view of the future, but you are also mindful of the past, ' said an S&P analyst. 'The last three years' track record is valid but we would have a view of Railtrack and one of its major problems was cost overruns on the West Coast Main Line.' Network Rail said that it would spend the next 12 to 18 months discussing its plans with the rail regulator before starting to raise new debt independently from 2009.

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