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Railtrack aims to spend big
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March 30, 2000: 5:47 a.m. ET
British rail operator plans to invest 52B pounds to fix decaying track
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LONDON (CNNfn) - Britain's Railtrack plans to spend £52 billion ($82.5 billion) in the next 12 years to update its decaying rail network, as the company that manages the U.K.'s railroad tracks and stations comes under intense public, government, and regulatory scrutiny following a train crash in west London last year that killed 31 people.
The company's 450-page statement of spending plans over the next few years contained a bigger increase in investment than either analysts or industry regulators expected. Alistair Morton, chairman of the Strategic Rail Authority, which monitors train operators performance, had called for spending of at least £40 billion in the next 10 years.
 Railtrack said it estimates that passenger traffic will grow at 60 percent, more that the 30 percent anticipated when it planned last year to spend £27 billion over ten years. The company said Britain's previous Conservative government, ousted in 1997 after selling the former state-run rail network to the public, seriously underestimated growth in passenger numbers.
In the privatization of the railroad system, the government established Railtrack to operate the network, stations and signaling, and invited private-sector companies to bid for licenses to operate train services across Railtrack's network.
"Our job over the coming months is to concentrate on running the railway better, sustaining the record levels of investment and leading the debate for a regulatory review that enables and encourages the investment the railway needs," Chief Executive Gerald Corbett said.
Railtrack shares surged 9 percent to 753 pence in a falling London market by mid-morning Thursday.
The announcement provided some relief for a stock price that has  fallen against a backdrop of tough pronouncements by Tom Winsor, the U.K.'s recently appointed Rail Regulator, who has expressed his intention to punish rail companies for any failure to improve services and infrastructure. At the same time, investors have shifted funds to technology, media and telecom stocks shifted from "old economy" sectors such as transportation. Railtrack shares have trailed the FTSE All Share index by some 30 percent in the past year.
Railtrack's Corbett warned that there continues to be "uncertainty" in the company's working environment as the government formulates its policy toward public transport, the industry regulator reviews the level of charges the company levies on train operators, and train companies renegotiate their operating franchises.
"There's a lot of political pressure on Railtrack to improve its efficiency," said Michael Wilkins, an analyst at Standard & Poor's. "If investors are to be attracted to the company's debt offering to undertake these projects then there has to be some positive outcome from regulatory reviews."
That review is expected to squeeze Railtrack's return on investment, analysts said.
The company must also improve its project management skill, said analysts. It's facing cost overruns on its £2.1 billion project to upgrade track on the main western route between London and Glasgow, a distance of some 450 miles.
"Railtrack is expressing a hypothetical wish list," Wilkins added. "This will be whittled down. Even if the company could borrow all that money through equity and debt they wouldn't find the engineering capacity to complete the work."
Still, the company plans to spend about £8 billion over the next 5 years to reduce train delays by eliminating bottlenecks, reopening closed lines and upgrading track. 
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Railtrack
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