Railtrack 'facing £6.8bn shortfall'

RAILTRACK is reportedly facing a £6.8bn funding gap, almost double its original estimate, raising fresh questions about the firm's grip on its finances in the weeks leading to its administration.

Administrators to the rail network operator have also told would-be bidder SwiftRail UK that it would be at least a year before its offer was considered, the Financial Times reported.

The reported funding shortfall comes just days after Railtrack revealed a 67% jump in first-half profits to £292m. It claimed the performance proved it was not facing a 'funding meltdown' - the justification Transport Secretary Stephen Byers used to put the firm into administration in October. Railtrack chiefs have said they plan to sue Byers to reclaim nearly £2bn worth of shares rendered worthless when the plug was pulled.

Railtrack had originally said it would need £3.6bn more than the £13.1bn it had been allocated by the Office of the Rail Regulator for spending on operations and maintenance from 2001 to 2006. It later raised the figure to £3.8bn.

But SwiftRail said it needs an extra £6.8bn from track access charges and Government grants. The figure was swollen by payments to train operators for poor performance. Railtrack conceded that a business review would show the gap was 'substantially' bigger than its last published figure, the FT added.

The FT said administrator Ernst & Young had told SwiftRail it would take three months to get into the data room, six months to complete due diligence and at least another three months for its bid to be evaluated. But E&Y denied claims by SwiftRail that administration was costing £1m a day in lawyers, financial advisers, accountants and other fees.