* Govia, JV between Go-Ahead and Keolis, wins Thameslink
* Award is blow for FirstGroup, which currently operates
part of line
* Shares in Go-Ahead rise 8 pct
* Go-Ahead finance chief says to review dividend policy
(Adds finance director comments, background)
By Sarah Young
LONDON, May 23 Britain awarded an 8.9 billion
pound ($15 billion) contract to run the expanded Thameslink rail
network in London to an operator majority owned by Go-Ahead
, ousting rival FirstGroup.
The new seven-year Thameslink contract is part of Britain's
6.5 billion pound upgrade to improve services on major commuter
routes across the capital.
Govia, which is 65 percent owned by Go-Ahead, beat four
shortlisted bidders in the first competition for a rail
franchise since 2012, when the government was forced to pull a
contract after flaws were found in the way it handled bids.
The Thameslink contract covers rail connections between
London and towns in southern England including Brighton,
Portsmouth and Cambridge, plus Gatwick and Luton airports.
It brings together two previous rail franchises, one of
which had been operated by Govia and the other by First Group.
Analysts said the contract win was a coup for Go-Ahead,
giving it certainty over rail earnings. Shares in the company
opened 11 percent higher, hitting an all-time high in early
trading on Friday, and were up 8 percent at 0945 GMT.
Shares in FirstGroup traded down 1.9 percent, paring earlier
losses of as much as 5 percent.
The contract, from which Govia will receive about 8.9
billion pounds in franchise payments, will boost Go-Ahead's
profits by about 150 million to 200 million pounds over the
contract's seven-year period, Go-Ahead finance director Keith
"This should generate cash for us and therefore we should be
in a position to review our dividend policy in due course," Down
said in an interview with Reuters, without giving further
It paid out 81 pence per share for the 12 months ended June
Govia, 35 percent owned by France's Keolis which is 70
percent owned by French national rail company SNCF, estimated
franchise payments at 1.1 billion pounds in the first full year
of operation, and is targeting a profit margin of about 3
percent over the life of the contract.
Together the Thameslink routes will carry more passengers
than any other franchise in Britain. Passengers will travel in
1,140 new carriages being built by Germany's Siemens,
due to be delivered between 2016 and 2018.
Govia beat bidders Abellio, FirstGroup, MTR and Stagecoach
to win the contract which will run for seven years from
In the two years since the bungled rail award, the
government has avoided full competitive processes across the
country's privatised rail industry and instead negotiated direct
But the Thameslink process marks the start of a new round of
competitions, with the award of the East Coast line due this
FirstGroup is under pressure after it deferred the restart
of dividend payments and said it had to focus on rebuilding its
finances on Wednesday.
It is among the bidders for the East Coast line, along with
a joint bid from Keolis and Eurostar, and InterCity Railways, a
joint venture between Stagecoach and Virgin Holdings.
It said was disappointed not to be awarded Thameslink but
was on course to meet its stated medium-term targets.
($1 = 0.5931 British Pounds)
(Editing by Erica Billingham and Pravin Char)