Four on South Central franchise shortlist

National Express and Stagecoach are among four rail companies that have made the shortlist to run the lucrative South Central rail franchise, which could be worth about £600m a year to the winning bidder.

The shortlist, published by the Department for Transport on Wednesday, slightly earlier than expected, also included the incumbent, GoVia – a venture between Britain’s Go-Ahead and Keolis, France’s largest private sector transport company – and NedRailways, wholly owned by Dutch Railways.

GoVia carried about 120m passengers on Southern last year on 200 trains. It also operates the Southeastern and London Midland franchises.

The new South Central franchise will build on the existing Southern service by adding some services to Kent and Hampshire from London. The existing service includes lines between London and the south-east coast, East Sussex and West Sussex, and part of Kent and Hampshire. From June, Southern also began operating the Gatwick Express.

The winner will be required to help the DfT extend the East London Line and play a role in the £5.5bn Thameslink programme. Other proposals include introducing smartcards, later-running services, improved reliability and better environmental performance.

Tom Harris, rail minister, said it was vital for the winner “to facilitate major projects that will substantially increase capacity on some of the busiest parts of the rail network”.

Keith Ludeman, chief executive of Go-Ahead, which is defending the revenue stream from Southern, said he planned to submit a robust bid. In the 2007 financial year, revenues from Southern were £518.6m.

The length of the South Central franchise is shorter than the typical seven to 10 years of rail concessions to ensure the timing dovetails with the Thameslink programme.

The short franchise period may have put some rail companies off. Germany’s Deutsche Bahn had been widely expected to add its name to the list of interested parties.

The franchise will be awarded in early summer in 2009 and start operating from September 20 that year. The exact value to the winning bidder is difficult to calculate owing to the level of subsidies that will be paid by DfT, which on Wednesday declined to put a figure on the contract because it is part of commercial negotiations with the bidders. Transport analysts said it would generate £600m a year in revenue.