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LU scraps Balfour Beatty PFI deal

17 Aug 12 London Underground is calling a halt on a 30-year private finance initiative (PFI) contract with a Balfour Beatty consortium half way through the term.

It has realised that the deal does not offer value for money and the work can be done more cost-effectively in house, like it always used to be.

LU entered into a 30-year PFI deal with Powerlink in 1998 to manage, operate and maintain the Tube's electrical power network. The contract included a half-way break clause, at which point LU has the option to terminate the contract early. It is now exercising this option.

Powerlink is made up of UK Power Networks, ABB and Balfour Beatty.

LU has served formal notice on Powerlink that the contract will come to an end in August 2013, 15 years before the scheduled expiry date. LU said that it would work with Powerlink over the coming months to ensure a smooth transfer of staff and activities back to LU next year.

LU believes that ‘the move will have no impact on the day to day operation of the Underground’.

LU commercial director Sarah Atkins said: “We've taken a good hard look at every aspect of how we operate the railway and found that we can make significant savings by terminating this arrangement early, avoiding expensive financing costs that would have come with continuing the contract to its end.

“Although the contract has been performing well, the move to restructure the PFI arrangement will give us increased operational flexibility, and mean we can invest the savings made in further transport improvements for our customers.”

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