Tuesday 27 September 2016

Luas operator Transdev put up €10m bond for non-performance

Transdev's losses will widen in 2016 due to strikes but it should avoid multi-million penalty, writes Sarah McCabe

Published 03/04/2016 | 02:30

Luas operator Transdev is obliged to pay the state a €10m penalty if it fails to meet its contractual duties to deliver the light rail service. Photo: PA
Luas operator Transdev is obliged to pay the state a €10m penalty if it fails to meet its contractual duties to deliver the light rail service. Photo: PA

Luas operator Transdev is obliged to pay the state a €10m penalty if it fails to meet its contractual duties to deliver the light rail service, the Sunday Independent has learned.

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As part of the €150m contract to operate the Luas signed in 2014 by Transdev and the Railway Procurement Agency, now the National Transport Authority, Transdev maintains a €10m performance bond with its bankers which is payable "in circumstances where the company does not meet its obligations under the operating contract".

An industrial relations dispute between Transdev and Luas drivers has brought the service to halt for several days in recent months.

However the National Transport Authority (NTA) does not intend to seek payment even if the stoppages gets worse, a spokeswoman for the NTA said.

The €10m penalty payment will only be required in more extreme circumstances, a spokeswoman for the NTA said, declining to give further details of what would trigger the payment.

Instead the organisation will continue to withhold a daily payment of €100,000 from French-owned Transdev on strike days, the spokeswoman said.

The net cost of strike days to Transdev is less than €100,000 because the company does not have to pay staff wages or other running cost on those days.

But the cost of the current industrial dispute to Transdev now exceeds €500,000, according to sources close to the company.

Transdev reported a loss of around €700,000 in its last fiscal year.

Losses for this year are likely to be "signficantly higher" in light of strike action, one person familiar with the difficulties said.

The contract to operate the Luas "is, purely fiscally, not worth hanging onto" for Transdev, the person said.

Transdev's UK and Ireland chief executive Nigel Stevens maintained last week that the company is "100pc committed to the fulfilment of the current contract up to 2019 and hopes that its role in the Irish market can extend long beyond this."

The Department of Transport, meanwhile, is defending suggestions that it facilitate higher wages for Luas drivers by paying Transdev more to operate the service.

The current five-year contract to operate the Luas, awarded in 2014, went through a public tender process.

If altered now, the Department of Transport could be sued by the companies who bid but did not win the contract, a person with knowledge of the Department said.

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