Chinese railway companies are the frontrunners to operate
HS2 trains because two domestic bidders are beset by crises and unwilling to take on the financial risk,
The Times has learnt.
Guangshen Railway Co, an arm of the Chinese state rail company, and MTR, which runs Hong Kong’s rail network, are on course to win the contract, sources said.
Their bid is the most likely to win the tender to run the 220mph trains from a shortlist of three that also includes two British-led entries — one from a consortium involving Virgin and another led by First Group.
Virgin Trains handed back control of the east coast main line last Sunday after overbidding for the franchise. First Group has reported losses of £326 million and its chief executive resigned last month.
Terms in the tender for the West Coast Partnership, which includes HS2, could be too onerous for both. A senior rail source said that the companies’ issues “could let in the Chinese as they have deep, state-backed pockets and would have a blank cheque”.
The comments are likely to cause concern. Two years ago Theresa May delayed signing off government support for the Hinkley Point C nuclear power plant, partly over the security implications of Chinese involvement.
In April, the National Cyber Security Centre wrote to telecoms providers to warn them that equipment and services from the Chinese state-owned company ZTE could pose a national security risk. MPs also expressed concern after Chinese investors acquired Global Switch, the £5 billion London-based sensitive data storage company.
Final bids are due early next month for the West Coast Partnership. The contract is to take over the running of the west coast main line in and out of London Euston to the late 2020s, while preparing for, then taking over, the running of the trains on HS2 between Birmingham and London from 2026.
At issue is the amount of capital the bidders are expected to put up in bonds to run HS2, when its future popularity is far from clear. It is also understood that the government wants the final salary pension scheme for employees on the west coast main line to revert to the winner of the bid. The liabilities would be very difficult for the likes of Stagecoach, which is part of the Virgin consortium, and First Group to bear.
The source said that, after problems with delays and industrial action, “the government cannot afford to stuff this up”, adding: “Unfortunately, they appear to be tendering a contract which is proving far from easy to bid for.” Chris Grayling, the transport secretary, is due to make a final decision next May.
The Virgin consortium is 20 per cent owned by Sir Richard Branson’s company, 50 per cent by Stagecoach and 30 per cent by SNCF, the French state railway. The First Group consortium is a 70-30 joint venture with Trenitalia, the Italian state railway.
MTR is regarded as a safe pair of hands. It used to run the London Overground, is First Group’s partner on South Western Railway and has the contract to run the trains on Crossrail. All three bidders declined to comment, as did the Department for Transport.