Two key investors in Metronet, the cash-strapped tube maintenance contractor, yesterday highlighted the possibility that the company could go bust by writing down their stakes in the group.

WS Atkins, Britain’s largest engineering consultancy, said that it would attribute no value to its holding in the company because of uncertainties over the recovery of massive cost overruns.

The company said that it would book a total one-off charge of £121 million, pushing it to a full year pretax loss of nearly £40 million for the 12 months to March 31.

Atkins said that Metronet’s shareholders, including itself, would need to hold talks with Metronet’s banks to ensure that there is adequate funding to see the company through to the conclusion of a review process, through which it hopes to recover some of its costs.

Balfour Beatty, another key shareholder, said that it would write down the value of its stake in Metronet – which is charged with maintaining and upgrading two thirds of London Underground’s lines – by £100 million, also because of the cost uncertainties.

Metronet’s cost overruns on its 30-year Public Private Partnership (PPP) contract are running at £1.2 billion. It is unable to access further funds until an agreement is reached between the shareholding companies, which also include EDF Energy, Bombardier and Thames Water, and the banks.

Although Metronet concedes that it is in part responsible for the overruns, it wants London Underground to compensate it for necessary work that it has carried out that could not have been foreseen when the original contract was put together. The company invested in a huge refurbishment of the Central Line train fleet, for example, in the wake of a derailment at the Chancery Lane station.

Metronet last week called in Chris Bolt, arbiter for the PPP contract, to carry out an extraordinary review of the overruns. It is seeking at least £600 million for work already carried out over the past 4½ years.

The call for a review, which is expected to last up to nine months, came after Metronet failed to reach agreement with London Underground over a commercial settlement. Ken Livingstone, Mayor of London, has already said that he opposes handing more cash to the company.

WS Atkins said that it was committed to working with Metronet and its banks pending the conclusion of the review process. The consortium of banks is led by the European Investment Bank and Deutsche Bank.

Mr Bolt is expected to give an interim determination within a few weeks of receiving Metronet’s formal claim, which is expected in the next few days. That determination could force London Underground to increase payments to Metronet and its contractors, including Atkins, pending a final decision.

Atkins said its £121 million loss consisted of £70 million of equity investment and £21.3 million of written-off earlier-year profits. There was also a £30 million hit from losses related to station refurbishment in the Underground project.

The company had previously said in April it expected its full-year exceptional loss in respect of its 20 per cent holding in Metronet to be £36 million.

Balfour Beatty said its Metronet write-off would be offset by a gain of £50 million on the sale of its 24.5 per cent interest in Devonport Dockyard and a £40 million gain associated with tax losses in the US.

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