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Sunday, 10 November, 2002, 11:06 GMT
Amey 'to sell its PFI stake'
Tube train
The modernisation of the Tube could be delayed
One the leading contractors involved in the privatisation of the London Underground may be forced to sell its PFI stakes to its bankers.

Amey, is a key member of the Tubelines consortium is set to take over the maintenance and upgrading of the Jubilee, Northern and Piccadilly lines, is in deep financial trouble.

Last week it said it was unable to pay a dividend to its shareholders and was in discussions with its banks about its loan covenants, effectively putting itself up for sale.

Now reports suggest that Amey may be willing to sell its equity stake in key Private Finance Initiative projects such as the maintenance of the Edinburgh school system, to its bankers, HBOS, for 70m.

The firm is in urgent need of cash, and may face break-up or takeover.

Rival PFI construction firm John Laing is also said to be in the bidding.

Illegal actions

London Underground has had to delay the signing of one of the contracts for part-privatisation of the network after Amey admitted to severe financial problems.

But the PPP plan, backed by Tony Blair and Gordon Brown, now faces a fresh legal challenge in the courts by London mayor Ken Livingstone.

He and his Transport Commissioner Bob Kiley have already spent months and 4m fighting the PPP through the courts.

Now he wants to appeal against the European Union's approval for the tube plan.

Mr Livingstone's lawyers will argue that the EU Competition Commission was wrong when it said the British government did not breach rules on state aid.

He argues that a pledge by the government to fund the 35m bid cost for Amey before they had even received the Tube contract was illegal under EU law.

The case could take up to three years to resolve.

Any further delay is likely to embarrass the government as the public private partnership (PPP) is its preferred way of modernising the infrastructure of the Tube network.

And it will discourage other companies from taking part in the Private Finance Imitative, which the government wants

Shares fall

Amey has already had three finance directors in the past few months, with finance director Michael Kayser resigned a fortnight ago only five weeks into the job, and being replaced by Eric Tracey.

The company' s shares have dropped 90% since March to 26p.

In a statement, Amey said that "the delays in the Tube closure have been an albatross around Amey's neck."

Other firms bidding for the Tube PPP contracts, including W.S. Atkins, are also believed to be in difficulties if the contracts are delayed.

Amey's problems have arisen because the costs of its elaborate Tube bid have to be taken as costs in this financial year, while the benefits - the payments it will receive in the future - have been delayed to the next financial year.

Tubelines is made up of Amey, rail contractor Jarvis and US engineering giant Bechtel.

Once the contracts are signed Transport for London will take over responsibility for managing them.

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07 Nov 02 | Business
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