Metronet calls in administrators

[WLT892]

news.bbc.co.uk/1/hi/business/6903977.stm


Metronet calls in administrators

Metronet said it was facing financial uncertainty
Metronet, the firm which maintains the bulk of the London Underground network, has called in the administrators amid serious financial problems.
Responsible for the upkeep of nine Tube lines, including the Bakerloo, Victoria and Central, Metronet was hired under a private-public financing initiative.

Following a cost over-run, Metronet said it was no longer able to meet its obligations without additional money.

London Mayor Ken Livingstone said the crisis "would not undermine services".

"All trains will continue to run and all stations will remain open," he stressed.

'No funds'

Metronet is not responsible for operating trains with London Underground, which is overseen by Transport for London (TFL), dealing with the day-to-day running of the Tube.

This company has now established that it has no access to such further funds

Metronet


Changing the Tube

London Underground said it had planned for the eventuality of Metronet's collapse, adding that it was vital that planned improvements to the Tube were not delayed too long.

Unions are set to meet Metronet and TFL officials to discuss the crisis on Wednesday.

Ernst & Young has been appointed as administrators and will now take over the running of the business in an effort to put its finances in order.

METRONET LINES
Bakerloo, Central, Victoria, Waterloo & City, Circle, District, Metropolitan, Hammersmith & City and East London

Ultimately, Metronet's responsibilities will be transferred to a newly-formed company - although the financial implications of this are as yet unclear.

Metronet has been involved in a long-running dispute with Transport for London about who should pay for the spiralling cost of upgrading the network's infrastructure.

Budget wrangle

Metronet planned to invest £17bn over the next 30 years under the terms of a public-private partnership (PPP) scheme, a method of funding and financing large projects opposed by Mr Livingstone but supported by the government.

But it estimates there will be an overspend of as much as £2bn by 2010.

The financial crisis was triggered by a PPP arbiter's decision earlier this week not to award Metronet about £550m in funding which the firm said it needed to pay for budget over-runs which were out of its control.


Services will not be affected by the financial crisis

Instead, Metronet was awarded an interim £121m payment, a decision which left it unable to meet its running costs.

"Metronet Rail requires additional funding to enable it to carry out its contractual obligations," the firm said in a statement.

"This company has now established that it has no access to such further funds."

Engineering firm Atkins, one of Metronet's shareholders, said the decision to seek administration was "clearly disappointing, while not unexpected".

Metronet's other shareholders are Bombardier, Thames Water, EDF and Balfour Beatty.

"Their company was no longer viable," said London Mayor Ken Livingstone. "It has ceased to exist."

"The shareholders have lost hundreds of millions of pounds," he added.

Tube Lines, the private contractor which maintains the other Underground lines, has not suffered any substantial cost over-runs.

[Deleted]

gn1982 said:

news.bbc.co.uk/1/hi/business/6903977.stm


Metronet calls in administrators

Metronet said it was facing financial uncertainty
Metronet, the firm which maintains the bulk of the London Underground network, has called in the administrators amid serious financial problems.
Responsible for the upkeep of nine Tube lines, including the Bakerloo, Victoria and Central, Metronet was hired under a private-public financing initiative.

Following a cost over-run, Metronet said it was no longer able to meet its obligations without additional money.

London Mayor Ken Livingstone said the crisis "would not undermine services".

"All trains will continue to run and all stations will remain open," he stressed.

'No funds'

Metronet is not responsible for operating trains with London Underground, which is overseen by Transport for London (TFL), dealing with the day-to-day running of the Tube.

This company has now established that it has no access to such further funds

Metronet


Changing the Tube

London Underground said it had planned for the eventuality of Metronet's collapse, adding that it was vital that planned improvements to the Tube were not delayed too long.

Unions are set to meet Metronet and TFL officials to discuss the crisis on Wednesday.

Ernst & Young has been appointed as administrators and will now take over the running of the business in an effort to put its finances in order.

METRONET LINES
Bakerloo, Central, Victoria, Waterloo & City, Circle, District, Metropolitan, Hammersmith & City and East London

Ultimately, Metronet's responsibilities will be transferred to a newly-formed company - although the financial implications of this are as yet unclear.

Metronet has been involved in a long-running dispute with Transport for London about who should pay for the spiralling cost of upgrading the network's infrastructure.

Budget wrangle

Metronet planned to invest £17bn over the next 30 years under the terms of a public-private partnership (PPP) scheme, a method of funding and financing large projects opposed by Mr Livingstone but supported by the government.

But it estimates there will be an overspend of as much as £2bn by 2010.

The financial crisis was triggered by a PPP arbiter's decision earlier this week not to award Metronet about £550m in funding which the firm said it needed to pay for budget over-runs which were out of its control.


Services will not be affected by the financial crisis

Instead, Metronet was awarded an interim £121m payment, a decision which left it unable to meet its running costs.

"Metronet Rail requires additional funding to enable it to carry out its contractual obligations," the firm said in a statement.

"This company has now established that it has no access to such further funds."

Engineering firm Atkins, one of Metronet's shareholders, said the decision to seek administration was "clearly disappointing, while not unexpected".

Metronet's other shareholders are Bombardier, Thames Water, EDF and Balfour Beatty.

"Their company was no longer viable," said London Mayor Ken Livingstone. "It has ceased to exist."

"The shareholders have lost hundreds of millions of pounds," he added.

Tube Lines, the private contractor which maintains the other Underground lines, has not suffered any substantial cost over-runs.

I really cannot see how Ken Livingstone can make the claim it will not affect services. Yes Metronet do not operate trains but they maintain the track. If the track is not maintained TfL cannot operate the trains they would be breaking the law.

Metronet are only in Administration and will still be operating but under the control of an Administrator. They will need to try to keep the company solvant whilst they try to sell it. The probability though is they will need to cut cost and staffing level and may choose to abandon some of the TfL work. It's wait and see but it has to have some impact on both services & costs. Initially it may be things like trains having to operate at reduced speeds and some stations having to close.

Probably a lot of the blame lies with Ken Livingstone who totaaly ignores costs. We may see similar problems arrising with the bus companies.

[WLT892]

I don't think Red Ken can be blamed for this fiasco, remember he went to the high court to block the PPP but failed as PM Gordon Brown (as Chancellor back then) along with his government pressed ahead with it and once it happen ken was simply "paralized", he was simply a toddler in this issue . Remember it's the national government who has the power of controlling the tube and the person who is more responsible is Gordon Brown! Ken is now simply playing Rumpelstiltskin singing "I told you so" with the PPP fiasco.

Anyway I found this so called metronet consultation for people who want to know what will happen next. It's a long read so you need extra time for this ;D


London Underground acts to ensure safe and reliable
operation of Metronet lines
*
Metronet Rail BCV Limited and Metronet Rail SSL Limited, the
companies responsible for the maintenance and renewal of the
Bakerloo, Central, Victoria, and Waterloo & City lines (BCV) and
Circle, District, Metropolitan, Hammersmith & City and East London
lines (SSL), today entered administration.
*
Under the terms of the PPP contracts and the Greater London Authority Act 1999, a PPP Administrator has now been appointed by the Courts.

The PPP Administrators are Alan Bloom, Maggie Mills, Roy Bailey and Stephen Harris of Ernst & Young LLP.
*
Tube services will not be affected by the appointment of
Administrators. London Underground passengers and staff are being assured that all action necessary is being taken to ensure thecontinued safe and reliable operation of Underground services on the lines maintained by Metronet.
*
The purpose of the PPP Administration is to ensure the continuation of Metronet's maintenance and renewal activities pending the transfer of the Infraco's activities to a new operating company.
*
This will have no immediate impact on Tube services and all trains
will continue to run and all stations will remain open.
*

London Underground routinely carries out business continuity planning and treats failure of any of its key suppliers as a key business risk that it keeps under continuous review.
*
Our priority is the delivery of a safe and reliable Tube service for
passengers and therefore we had no option but to undertake
considerable planning for the possibility that Metronet's financial
difficulties would require it to enter administration.
*
It is also important that this issue does not distract from the
ultimate objective and that is the renewal of London Underground. We will be working with the Mayor, Government and the PPP Administrator to ensure that the renewal of the Tube is not delayed. The capacity enhancements that will be delivered by the upgrade of the Tube are absolutely essential for London's future prosperity and growth.
*

Frequently asked questions
********************************
*
1. Has Metronet ceased to operate?
*
No. The Administrators' remit is to enable Metronet's management to continue to operate with safety and business as usual being the principal objectives. Metronet will continue to maintain and renew London Underground's trains, stations and infrastructure.
*
2. How is the Administration being funded?
*
Sufficient funds have been made available to enable the
Administrators to ensure that Metronet continues to operate
throughout the period of its administration.
*
3. Who is in control of Metronet now?
*
The directors of the companies remain in place and will be
responsible for the day-to-day operations and the safe running of the network. The Administrators will fully support the directors with the full support of London Underground Limited ("LUL") and Transport for London ("TfL").
*
4. Who owns Metronet?
*
The current structure of the company has not changed and the ultimate shareholders remain unchanged. These are Balfour Beatty, Bombardier, EDF Energy, Thames Water and W S Atkins.
*
5. Does this affect both BCV and SSL?
*
Yes, both companies are in PPP Administration.
*
6. What is an Administration?
*
This is an insolvency process in which office-holders
(called "Administrators") appointed by the Courts take control of an insolvent company and run it in accordance with certain statutory objectives. The primary objective is to rescue the company as a going concern.
*
The Administration process allows for a statutory moratorium on
creditor action. This effectively means that the insolvent company is ring-fenced from its creditors for a period so that the company can continue to run in isolation of financial and other liabilities.
*
The Metronet Administration, however, is unusual because slightly
different rules apply (which were enacted within the framework of the Greater London Authority Act 1999) to ensure that essential services continue to operate in the public interest.
*
7. What does insolvency mean?
*
A Court may only appoint an administrator if it is satisfied that the
company is unlikely to be able to pay its debts as and when they fall due. This is the case with Metronet.
*
8. Why has a PPP Administrator been appointed?
*
A PPP Administrator has been appointed as the directors have
concluded that Metronet would be unable to pay its debts as they fall due.
*
9. Who are the PPP Administrators?
*
The PPP Administrators are Alan Bloom, Maggie Mills, Roy Bailey and Stephen Harris of Ernst & Young LLP.
*
10. Who took the decision to appoint a PPP Administrator?
*
The Court made the order on the application of the Mayor.
*
11. How long will the PPP Administration last?
*
We hope that Metronet's future will be clarified and its position
progressed quickly. It is, however, too early to speculate on timing
now.
*
12. What are the PPP Administrators doing now?
*
The Administrators' staff are on site at head office assessing key
priorities and ensuring that business runs as usual.
*
13. What do the PPP Administrators know about running this service?
*
The Administrators - Alan Bloom, Maggie Mills, Roy Bailey and Stephen Harris - are specialists in corporate restructuring. They are all licensed insolvency practitioners. For the purposes of running the service, they will rely on and work through the existing Metronet management.
*
Their skills lie in running businesses, often at short notice,
pending the resolution of financial difficulty via sales, assets
disposals and a range of other solutions designed to preserve
companies or the business of those companies. Many of the team
working on the Metronet Administration were involved in the Railtrack Administration.
*
Their teams are, therefore, expert at addressing the management needs
of a wide range of complex – sometimes unusual, sometimes ordinary businesses at great speed and with great skill.
*
They are trained to assess areas critical to the continuance of
troubled businesses. Their skills lie, fundamentally, in team
management based on an inclusive, collaborative approach. These skills, as they relate to the Metronet Administration, will be
deployed to ensure the safe and continuous running of the service pending its transfer to a new company.
*
All essential safety and operational aspects of Metronet's business will continue to be carried out by the Metronet management team, working with LUL colleagues.
*
14. Does the Metronet Administration affect the arrangements for
safety?
*
No, the Metronet Administration does not affect this. Metronet will
continue to operate entirely as normal and all safety protocols and procedures will continue.
Certain individuals within Metronet are allocated specific roles as
part of the safety management system. These individuals will continue to operate as normal to ensure safety standards are maintained as normal.
*
15. Is it safe to keep running the Tube?
*
Yes, safety responsibilities will continue to be managed by qualified Metronet staff. The Administrators will have no direct role in the day-to-day operations of Metronet and will fully support and fund Metronet's management to ensure that safety is maintained.
*
Maintaining the Safety of the railway is of primary importance.
The appointment of Administrators for the Metronet companies is
designed to ensure that the companies' activities can be continued in a managed way and ensure that the vital engineering services and works the companies provide can continue uninterrupted.
*
16. What will happen to Metronet staff?
*
The Administrators are keen to reassure all staff that their pay and conditions will not be affected by the Administration. The unions have been contacted and notified of the appointment of the Administrators.
*
17. Are the Trades Unions being consulted?
*
Yes – they have been contacted and they also have copies of the
documents sent to the employees. Meetings will be held with the
unions as soon as possible and will continue to be held on a regular basis.
*
18. Will suppliers to Metronet get paid amounts owed at the date of Administration?
*
Third party creditors of Metronet will be paid their arrears in
respect of approved invoices for work done or goods delivered to
Metronet, that are outstanding as at the date of appointment of the Administrators on the agreed payment terms.
The Administrators will be having separate conversations with the
shareholder companies and their subsidiaries and affiliates in
relation to arrears owed to them.
*
19. What is happening with suppliers from the date of Administration?
*
The approach to the Administration is business as usual and the
Administrators would like all suppliers to continue to work with
Metronet as previously. During the period of the Metronet
Administration, suppliers should receive orders or instructions in
the usual way from Metronet staff.
Going forward, suppliers will be paid for approved invoices at their
usual rates and in accordance with existing terms and conditions
agreed with Metronet for work carried out (or goods delivered) during the period of the Metronet Administration.
*
20. What is the position in relation to claims suppliers may have?
*
The undertaking to pay arrears of approved invoices does not includeany claims, for example, for damages or breach of contract. The Administrators do not make assurances in relation to claims.
Suppliers should submit details of any claims and these will be
reviewed in due course.
*
21. Does this mean maintenance of the Tube has returned to LUL?
*
No. Metronet continues to maintain and renew the Tube network in accordance with the PPP arrangements. It is business as usual and the operations of Metronet will continue unchanged.
*
22. Does this mean maintenance of the Tube will return to LUL in the future?
*
At this stage in the Administration there are no defined plans for
the transfer of the business. The Administrators will be considering this over the coming weeks.
In terms of any longer term changes we expect the structure to
include a partnership between the public and private sectors.
*
23. What will happen in the longer term?
*
The Administrators are obliged to transfer the business to a new
owner in due course. The Administrators will start their
considerations of this as soon as possible.
*
24. Will the Extraordinary Review for BCV continue?
*
The Administrators will need to review this when they have considered the representations made in the PPP Arbiter's initial findings.
*
25. Are Tube Lines going to take over Metronet's infracos?
*
The Administrators have had no conversations with Tube Lines in
relation to this.
*
26. How will this affect the investment programme including the line upgrades?
*
It is business as usual. The long term strategy will, of course, be
reviewed with LUL.
*
27. Will all the planned closures such as early closing of the
Victoria line continue?
*
It is business as usual and we expect planned closures to be
implemented.
*
28. What impact will there be on passengers?
*
It is business as usual and passengers should not be affected in any
way by the Administration.
*
29. Where can I find out more?
*
The Administrators will continue to issue communications on
Metronet's website and, when appropriate, will issue communications to individual groups of stakeholders

[Steve80]

gn1982 said:

I don't think Red Ken can be blamed for this fiasco, remember he went to the high court to block the PPP but failed as PM Gordon Brown (as Chancellor back then) along with his government pressed ahead with it and once it happen ken was simply "paralized", he was simply a toddler in this issue . Remember it's the national government who has the power of controlling the tube and the person who is more responsible is Gordon Brown! Ken is now simply playing Rumpelstiltskin singing "I told you so" with the PPP fiasco.

One driver told me that ken is partly to blame for this fiasco. He said something like telling metronet to do this and do that and metronet said no they can't. Can't remember everything he said but mentioned that ken has now got rid of metronet which is what he wanted, and now he can get a new company and get them to run it under his orders.

Anyway, not too sure about this metronet thingy but I understand that the victoria line is being closed about 2 hours early, between brixton and victoria, for the next four months. Is it safe to assume that it may get closed alot longer than that or things may get worse because of the company going down under?

[WLT892]

Anyway, not too sure about this metronet thingy but I understand that the victoria line is being closed about 2 hours early, between brixton and victoria, for the next four months. Is it safe to assume that it may get closed alot longer than that or things may get worse because of the company going down under?[/quote]


It will also be closed between Finsbury Park and Walthamstow Central as well as testing of new trains and line upgrades are now on the way.

More info here:

www.tfl.gov.uk/assets/downloads/victoria-earlyclose.pdf