U.K. Seeks East Coast Rail Offers in Privatization Rebid

Britain’s government asked for bids from operators seeking to run the East Coast rail line, a move that could see Richard Branson’s Virgin Rail Group vie with Eurostar Group Ltd. for control of the London-to-Scotland route.

Bidders have until Dec. 2 to signal their interest, with an initial shortlist due in January, the Department for Transport said in a prospectus published today. Those making the cut will have three months to make their bids, with a contract award planned in October ahead of the start of the franchise service in February 2015, it said.

The East Coast franchise, which stretches 581 miles (935 kilometers between London and Aberdeen and Inverness in Scotland, has been run by government-appointed Directly Operated Railways Ltd. since 2009. The former operator, National Express Group Plc (NEX), invoked a clause allowing it to withdraw from the contract after revenue fell during the recession.

“We need a strong partner to ensure we successfully deliver the 240 million-pound program of infrastructure investments on the route and the improvements in rolling stock that the multibillion Intercity Express Program will provide,” Transport Secretary Patrick McLoughlin said in the prospectus. “We want to see a revitalized East Coast railway.”

Eurostar, which runs the trains on the Paris-London link, and the Keolis unit of French state train company Societe Nationale des Chemins de Fer Francais said last month they would jointly pursue the East Coast contract.

Transport union RMT is opposed to the privatization, saying it will mean reduced service quality.

‘Vast’ Subsidies

“It is simply outrageous that the government are firing the starting gun this morning on the reprivatization of the East Coast,” RMT General Secretary Bob Crow said in an e-mailed statement. “Every objective analysis shows that this is a successful and reliable service contributing a billion pounds back to the government while the private operators are milking huge profits and soaking up vast taxpayer subsidies.”

In March, the U.K. government committed to the sale process as part of a wider revamp of its franchising system following the botched award of the West Coast line to FirstGroup Plc. (FGP) The contract was voided after complaints from Virgin triggered a government probe that faulted the selection process.

Virgin, the incumbent, will continue operating Europe’s busiest mixed-use rail line, with the franchise set to come up for renewal in April 2017 after the contract was extended to remove a conflict with the tendering process for the East Coast. That should make it easier for Branson to win the East Coast franchise and expand in an industry he’d threatened to quit after being initially stripped of the West Coast contract last year.

Stagecoach, which owns 49 percent of Virgin Rail Group, said on its website it is “considering closely” the East Coast opportunity.

To contact the reporters on this story: Robert Wall in London at rwall6@bloomberg.net; Thomas Penny in London at tpenny@bloomberg.net

To contact the editor responsible for this story: Eddie Buckle at ebuckle@bloomberg.net

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