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TfL bids for Metronet as Lezala is shown the door

PPP administrators for Metronet, Ernst&Young, have received a formal offer to buy the tube upgrade contractor from Transport for London (TfL). Alan Bloom, PPP Administrator from Ernst & Young, also announced the departure of five Metronet executives, including chief executive Andrew Lezala.

Metronet went into PPP administration in June after it submitted a request to the PPP Arbiter Chris Bolt for a 551M lump sum from TfL, and an ‘Extraordinary Review’ to determine who should pay for a 1bn overspend - Metronet or TfL.

Bolt judged that Metronet would be entitled to just 121M, throwing the company into administration. Bolt published his timetable for the Extraordinary Review process last week.

TfL has funded the contractor since it fell into administration, and has made no secret of its desire to take over its running.

TfL proposes to transfer the two Metronet companies - BVC, which runs the Bakerloo, Victoria and Central lines, and SSL, which runs the Circle, District, Metropolitan and Hammersmith and City lines - in job lots to “two Transport for London nominee companies”, managed as stand-alone companies until the long-term structure is finalised with the Mayor’s office.

Ernst&Young confirmed to NCE that bankers Rothschild had completed the valuation of Metronet last week, but these figures have not been made public.

Tube Lines, the company managing the upgrade of the Northern, Piccadilly and Jubilee lines, told NCE that they had not yet seen the Rothschild valuation, and until they do, have not ruled themselves either in or out of a counter-bid for Metronet, according to a spokesman.

Ernst&Young PPP administrator Alan Bloom confirmed that five Metronet executives would be leaving: chief executive Andrew Lezala; chief financial officer Philip Pacey; commercial senior vice president (SVP) Ken Owen; change management SVP David Clarke; communications SVP Paul Emberley.

“I would like to thank Andrew, Phil, Ken, David and Paul for all their efforts through a difficult time,” said Bloom.

“They have all been fully supportive to the PPP Administrators and I wish them all the best for the future.”

Andie Harper replaces Lezala as chief executive immediately. Replacements for the four other executives will take their posts on 31 October 2007.

Bloom added: “Andie comes with a wealth of experience in the transport sector, including running the predecessor infraco for the Jubilee, Northern and Piccadilly lines whilst at London Underground between 1999 and 2002. More recently he has acted as project director for the Edinburgh Tram Project and programme director for Washington Group International, a large US construction company. The PPP Administrators are looking forward to working with Andie on transitioning the businesses from administration through to exit and beyond.”

London Underground’s managing director Tim O’Toole was critical of Bolt’s ‘initial thoughts’ on the Extraordinary Review, which suggested that Transport for London could end up paying Metronet up to £1.07bn. O’Toole could also run into government opposition, as Gordon Brown is thought to favour continued participation of the private sector in running the Metronet contracts.

O’Toole said: “In dealing with the collapse of Metronet, and through the administration process, we have had two key priorities. First, to ensure the continued safe and reliable operation of the Tube network for passengers.

“That has been achieved and I would like to pay tribute to the hard work and dedication shown by all Metronet and London Underground staff, as well as the Administrator and his team. We need to continue to work together for passengers.

“Secondly, once under Transport for London control, we seek to put in place a stable, economic and efficient structure that is better able to deliver our investment priorities that will lead to increased capacity on the Tube in future.

“We strongly believe that the best and most robust way to achieve our ultimate goal is for an exit from the Administration process as early as possible. It is for this reason that we have now lodged our formal bid for Metronet, which I trust can be concluded as swiftly and efficiently as possible.”

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