Three PPPs

1 In recent decades, London Underground (LUL) has experienced difficulties in delivering modern services for the Tube. LUL's ability to provide better infrastructure was constrained by the uneven flow of subsidy from the Treasury (due to differing success in its requests for funding at each annual spending review), which meant that long term maintenance and renewal programmes were disrupted. The effects of the funding constraint were compounded by significant cost overruns on the Central Line upgrade and the Jubilee Line Extension project (in excess of 30 per cent in each case), each completed in the 1990s, and a number of other smaller renewal programmes.1

2 Between December 2002 and April 2003, LUL signed three 30 year Public Private Partnership contracts (PPPs) with private sector organisations Metronet and Tube Lines. The PPPs are a joint public-private approach aimed at overcoming LUL's historical problems in financing and managing the Tube infrastructure. LUL retains the ultimate ownership and responsibility for the daily operation of trains and stations, and for safety, while the private sector partners are expected to maintain and renew infrastructure including the trains, stations, track and signalling, in a whole life manner. Using a 6 per cent discount rate, London Underground evaluated the net present value of all three PPPs over 30 years at £15.7 billion (with a value of £9.7 billion at 2002-03 prices over the first 7½ years). The Department for Transport (the Department) has agreed a stable funding regime under which it makes annual grant payments to Transport for London (TfL) to cover LUL's service charge payments, subject to ongoing monitoring and review.

3 At contract signature, Metronet and Tube Lines acquired three separate infrastructure companies (Infracos), previously wholly owned subsidiaries of LUL, covering all 12 London Underground lines, as follows:

■ BCV Infraco - Bakerloo, Central, Victoria and Waterloo & City lines (run by Metronet);

■ JNP Infraco - Jubilee, Northern and Piccadilly lines (run by Tube Lines); and

■ SSL Infraco - District, Circle, Metropolitan, Hammersmith & City and East London lines (run by Metronet).

See Figure 1 - Who's Who? for an understanding of the responsibilities of the key parties and how they interact with one another

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¹ See London Underground: Final Assessment Report, February 2002; and Jubilee Line Extension Project: Post Implementation Review, Department for Transport, September 2002.