Govia, the train company behind the under-fire Thameslink and Southern networks, is poised to net hundreds of millions of pounds if Transport Secretary Chris Grayling delays a key decision on the hugely profitable Southeastern franchise.
The Department for Transport is supposed to have picked and “mobilised” a new owner for Southeastern by June 22.
But experts say this changeover requires at least four months' notice, meaning a further delay is likely. As a result, Govia and joint venture partner Keolis could be granted a lucrative contract extension.
Mr Grayling’s
department has dragged its heels on a decision about the new Southeastern operator after originally proposing to make a selection in August last year.
Govia and Keolis, the French state operator that is in charge of the Docklands Light Railway, are vying to retain the franchise in a bidding process with Stagecoach and Dutch firm Abellio.
Delays began when bidders were sent back to the drawing board to re-calculate pension contributions and the DfT announced the
launch of the biggest review of the railways for decades.
Govia and Keolis have already been granted two extensions on Southeastern as Whitehall officials struggle to make their mind up over the winning bid.
The latest three-month extension to June has netted the Govia’s listed parent Go-Ahead £200m in extra revenue, analysts say.
“Mobilisation requires around four months and therefore, with less than four months to the start date, there is a possibility that the franchise is extended again,” wrote Investec’s Alex Paterson.
“Go-Ahead would benefit from a further extension for Southeastern,” he added.
Insiders suggested Govia was increasingly worried by the Government’s radio silence on Southeastern. With only weeks to go before Govia could have to hand over the reins, it is being forced into costly short-term arrangements with suppliers instead of agreeing more efficient medium and long-term deals.
Compared with its London-listed peers - Stagecoach, FirstGroup and National Express - Go-Ahead makes the largest proportion of its earnings from the railways.
Of this, Southeastern is the largest contributor.
Go-Ahead has been subject to waves of criticism over the operation of Govia Thameslink, Britain’s biggest rail network, which includes Southern, Greater Northern and Thameslink. It was badly affected by a bungled timetable overhaul last May, has been fined millions of pounds and had profits capped by ministers.
Govia Thameslink accounts,
released last week, revealed pre-tax profit had fallen to just £3.7m on more than £1bn of annual revenue. While no dividends were paid, £40m was separately handed out from its Southeastern and London Midland operations.
With key upgrades largely completed, such as the overhaul of London Bridge, and a deal with striking guards agreed, Govia Thameslink is increasingly optimistic about its future.
A spokesman said last week: "GTR performance is currently the best it’s been in the history of the franchise.”
A DfT spokesman said: "The current Southeastern franchise is expected to end June 22, and we haven’t taken a decision on this franchise."
