Sub-surface stock order confirmed
02 May 2008
Bombardier Transportation welcomed a 1 April announcement from Metronet which updates the negotiations on the transfer of Metronet contracts by the PPP Administrator and brings clarity to the proposed next steps in the planned modernisation programme for the London Underground.
The difficulties encountered by Metronet and its subsequent entry into Administration have caused a significant number of problems in relation to the scheduled modernisation programme for the London Underground network. Since Metronet entered into administration, London Underground Ltd (LUL) has been seeking to agree with the Administrator and the current contractors (including Bombardier) the basis upon which the Metronet undertaking can be transferred to an LUL nominee company.
The result of these negotiations, which is subject to a court decision that will be sought by the PPP Administrator, is that the Bakerloo, Central and Victoria Lines (BCV) programme, currently working to upgrade the Victoria Line with Bombardier's new trains and Westinghouse Rail Systems new signalling, will continue and complete its implementation as originally planned. Bombardier has continued to work on this contract during the course of Metronet's administration and work is progressing well.
The Sub Surface Lines (SSL) upgrade programme, which is less advanced in its implementation, will be re-scoped with regard to the signalling portion. The signalling portion of Bombardier's SSL contract, currently sub-contracted to Westinghouse Rail Systems Limited ('WRSL'), has been transferred to Metronet and re-negotiated directly between WRSL and Metronet. A payment of 95 million ($189 million) has been agreed between Bombardier and WRSL, in full and final settlement, to compensate WRSL for the de-scoping of their signalling contract. As proposed, this payment will have no material impact on Bombardier¹s financial results, as the accounting for the relevant contracts already included estimates for technical and execution risks, which will be reduced significantly. Bombardier will continue to supply new rolling stock to the SSL programme, with a small increase in scope as requested by the customer.
Bombardier's original train maintenance contracts for BCV and SSL will be amended so that the maintenance work remains with Metronet. Bombardier will retain a Technical Support and Spares Supply Agreement (known as a "TSSSA"). These changes were made at the request of Metronet to assist with the resolution of the industrial relations issues arising from the proposed transfer of staff to Bombardier.
The payment of an outstanding receivable of 28 million ($56 million) due to Bombardier will be made. This payment relates to signalling and rolling stock work performed predominantly under the original procurement contracts prior to the appointment of the PPP Administrator, and costs incurred related to the original maintenance programme. Other work performed has been paid in accordance with the contracts.
Bombardier emphasized that these contractual changes are subject to a Court decision that will be sought by the PPP Administrator on the transfer of the Metronet contracts to an LUL nominee company.
The net impact of these proposed changes on Bombardier Transportation will be a reduction in its Metronet order backlog of 1.3 billion ($2.6 billion) from 3.2 billion ($6.4 billion), and a reduction of Bombardier Transportation's total backlog from $33.5 billion to $30.9 billion. This adjustment has been reflected as at January 31, 2008.
The impact on Bombardier's Metronet backlog is broken down as follows: a reduction in the signalling work subcontracted to WRSL and integration and project management activities of approximately 950 million ($1.9 billion); a reduction in the scope of the maintenance contracts of approximately 400 million ($0.8 billion); and an increase in the rolling stock portion of the SSL programme of approximately 50 million ($0.1 billion).
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