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Financial problems in Croydon

It has been reported that Tramtrack Croydon Ltd., the concessionaires for Tramlink, have financial problems. TCL, which was formed by a consortium led by Amey, was in 1996 awarded a 99-year contract to build and run Tramlink. Although patronage is rising and expected to top 22 million passengers per annum this year, operating losses more than doubled to £1.58m in the year to the end of March 2002. This, along with the cost of serving the construction debts of more than GBP100 million, has caused cash flow problems. It is understood that refinancing discussions are under way and that there is a realistic prospect of interim funding if a refinancing deal is not agreed in the next few weeks.

The current problem may add further doubts about the suitability of the private finance initiative (PFI), which involves private firms in the construction and operation of public sector programmes such as Tramlink. Transport projects often produce losses in the early years and firms participating in PFI schemes need to assess the risk when formulating their bids.

Day to day operation of the system is carried out by the operating company, Tram Operations Ltd, a division of First Group PLC, and would not be directly affected in the short term by the problems of TCL.

7 February 2003

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