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Tube cash deal covers legal challenge risk

GOVERNMENT LAWYERS have agreed to skew payments for the first stage of the Tube's £16bn privately financed upgrade into its first few months, transport secretary Alistair Darling announced last week.

The decision acknowledges the risk of a legal challenge to the project as late as September next year. It allows contractors to avoid drawing down bank loans until the end of next year.

London mayor Ken Livingstone is thought to want to challenge a recent European Commission ruling that the part-privatisation project did not constitute state aid.

He has until late January to launch this appeal. But according to preferred bidder Tubelines, government lawyers have said he may be able to file other appeals until September 2003.

Last week Darling announced that he was indemnifying preferred bidders against the financial risk of an appeal succeeding.

This means the government would have to reimburse preferred bidders Tubelines and Metronet for any investment they have put into the Tube if Livingstone won an appeal.

Investment will involve Tubelines placing immediate orders for new trains including 59 Jubilee Line cars, which will take several years to deliver (NCE last week).

Tubelines is poised to upgrade the Jubilee, Northern and Piccadilly (JNP) lines. It comprises Jarvis and Bechtel-Halcrow.

Metronet, which is Balfour Beatty, Bombardier, Atkins, Seeboard and Thames Water, will maintain and upgrade the Bakerloo, Central, Victoria, and Waterloo & City lines (BCV) and the Circle, Metropolitan and District lines (SSL).

Financial pressure forces Amey out

TUBELINES consortium member Amey last week stepped back from investing in the Tube upgrade under pressure from its banks.

Other Tubelines investors Halcrow-Bechtel and Jarvis have agreed to take over Amey's £60M stake, splitting it equally.

Amey now has until 30 June next year to take up an option to buy back the stake.

On Monday the contractor announced that its 2002 profits would be hit by a series of asset write downs and goodwill write offs.

These included an £85M write down of its investment in the Croydon Tramlink and other private infrastructure projects.

It is also writing off £15M to cover costs of discussions with its banks and fees associated with its internal reorganisation and disposals programmes.

Another £20M was written off against its investment in a meter reading business.

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