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Debt-Laden Network Rail Plans Sale Of Power Lines To Raise £2Bn

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The “big four” accountancy firm KPMG has been asked to look into selling Network Rail’s electricity assets, which could fetch the indebted state-backed group around £2bn.

The Government wants Network Rail to focus on its main job of repairing, maintaining and running Britain’s creaking Victorian-era railways – 20,000 miles of track, 40,000 bridges and tunnels, and 6,300 level crossings.

Ministers fear the organisation has been distracted by responsibilities such as running a property portfolio and looking after a huge electricity distribution network – Network Rail is the country’s biggest energy customer.

The group has suffered a string of embarrassments over the past 12 months, including chaotic scenes caused by engineering problems at London stations and the delay of two electrification schemes. It also has a debt pile that is expected to hit £50bn by 2020.

Richard Parry-Jones was dumped as chairman this summer in favour of Transport for London commissioner Sir Peter Hendy, who has just completed a review confirming the reorganisation of Network Rail’s latest £38.5bn capital spending programme, known as CP5.

George Osborne confirmed last month that Network Rail would be able to raise additional cash for CP5 by selling parts of its property estate, including retail units in stations and depots. This could fetch around £1.8bn, while the Government has also upped Network Rail’s borrowing limit by £700m.

But some sources believe the energy assets, which include overhead pylons, could be sold for even more, though others are sceptical about the £2bn figure at this early stage of the process.

KPMG has six months to determine how a sale would best be structured. A likely deal is Network Rail’s distribution network being sold to a private investor, energy utility or National Grid, which would then have a guaranteed revenue stream from charging Network Rail for the use of those pylons and cables.


However, Sir Peter warned in his review: “While Network Rail and DfT [the Department for Transport] consider it is right to sell assets to fund enhancements [of capital projects], there are clearly implications for the future funding of the railway. Less income from property means more will have to come from elsewhere.”

So even higher fares on the way to make up for the loss of income and increased fixed rental costs that Network Rail won't be able to escape? And I'm guessing all of these purchases will be paid for by new "debt".

George Osborne doing all he can to increase everyone's costs.

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lol. £50bn in debt by 2020. They YOU are so GOING TO GET screwed.

Drop in the bucket, and WE are all going to get screwed with ever more expensive train tickets in order for NR to service its debt obligations.

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Always after short term cash, forgetting about the long term expense! They are going to have to rent it all back! As for the £50bn of debt, what's another £50bn to the public debt pile... small change! :P

it's cheaper to rent.

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