Railtrack's troubled journey

Railtrack owns the rail infrastructure and is responsible for investment

After two years of crisis, there are now some signs as to the future shape of Railtrack.

The government pulled the plug on Railtrack last October, saying that it would be restructured as a not-for-profit organisation.

Six months later - with the firm still firmly in the throes of administration - it now looks set to be taken over by Network Rail.

Network Rail is a company limited by guarantee. It will be run as a commercial operation, but does not have shareholders or pay dividends, so any profits made will be put back into the rail network.

Shareholders in Railtrack will now have the chance to vote on whether to accept a proposal from Network Rail, potentially coming under that firm's leadership.

Once profitable

Since the privatisation of the rail network in 1996, Railtrack has come under fire for making profits while passengers suffered from a poor service on a decrepit rail network.

Railtrack has had to spend huge amounts on investment

The company, which employs 11,000 staff, has its origins in a 1992 government white paper, which outlined the future of rail privatisation.

This paper led to the 1993 Railways Acts, which resulted in a complete restructuring of the UK railway industry.

Railtrack owns the national railway infrastructure and is responsible for all investment into it, whether funded by Railtrack itself or by third parties.

The 28 train operating companies, who run passenger services, pay for the use of these tracks, stations and signals.

The thinking behind the creation of Railtrack was that as a listed company it could raise money from the private sector to fund investment.

The company made profits until last year, when it recorded its first ever loss. This sent its share price tumbling and prompted its exit from the list of the UK's 100 biggest companies.

Safety crisis

In July 2001, Railtrack chairman John Robinson apologised to a packed room of disgruntled shareholders for the company's "appalling year", and promised to do better.

Railtrack's Gerald Corbett left the company following the Hatfield crash

This was followed a month later by the axing of its chief operating officer Jonson Cox - the man it brought in a year ago in an attempt to boost performance.

Its unpopularity had been sealed by the Ladbroke Grove and Hatfield train crashes, which highlighted safety shortcomings in the rail network.

The Ladbroke crash had prompted the resignation of chief executive Gerald Corbett - though his first offer to quit was rejected by his board.

In June it was called to account for its role in the Ladbroke Grove crash and slammed for its "lamentable failure" over the circumstances leading up to the disaster.

Lord Cullen's report into the crash was deeply critical of the company's response to previous safety alerts prior to that accident when signals were also passed at danger.

"This activity was so disjointed and ineffective that little was achieved," he said.

Public/private confusion

It was estimated before Railtrack was put into administration, that it needed about £3.3bn to help maintain the rail network.

The company had already been awarded a payment of £1.5bn from public funds - a sum it had not been due to receive until 2006.

The uncertainty surrounding the company's funding led some Railtrack shareholders and many members of the public to call on the UK government to take an equity stake.

Investors in Railtrack had a bumpy ride. When the company was privatised in May 1996, shares were priced at £3.80, valuing the company at £2.54bn.

The stock hit a closing high of £17.68 in November 1998 before beginning a long slide. When it was forced into administration Railtrack's shares cost £2.80.

While Network Rail has already raised £9bn in bridge financing, it still remains to be seen whether City investors will take the risk of stumping up cash for Railtrack's successor.

And, even though Network Rail will not have to impress shareholders if its bid is accepted, the huge challenge to satisfy passengers still stands.