Trams bill up by £30m

TRANSPORT chiefs are facing a £30 million black hole in their efforts to extend Edinburgh's tram line.

Tram firm TIE is in the throes of tying up deals with German and Spanish firms to supply the trams, tracks and other infrastructure needed for the £498m project.

But record low exchange rates for the number of euros to the pound in recent months means they are set to be forced into the scheme's £96m "contingency" reserves to cover this.

The £30m loss will not affect building work on the Newhaven to Airport 1A route. But it is likely to impact on the 1b spur, from Roseburn to Granton, which is relying on the contingency funds being left over. It is understood the relatively smooth running of utility diversion work so far has meant the contingency fund was unscathed until the exchange rate started to falter.

A spokesman for TIE insisted plans for the spur line were still in place. He said: "The business case for Line 1b is robust and we remain committed to delivering this next component of Edinburgh's integrated public transport network."

Both tram and council chiefs are currently investigating ways of paying for line 1b, which was always expected to have some shortfall in funding.

Among the options being considered for any funding gap are selling off council assets, pressing for more developer contributions and borrowing from either public or private sources.

The contract to build the tram line had been put at around £300m, while the cost of building and maintaining the tram cars will be around £50m.

But the pound has fallen from nearly euro 1.50 (or 67p to the euro) last summer to its current level of euro 1.24 (or 80p to the euro). Sources close to the project confirmed the £30m shortfall, but the city's finance leader Gordon Mackenzie said he was surprised at this. He said: "The movement in exchange rates will always have a bearing, but TIE has taken steps to guard against this."

The 1b link was originally put on hold when the tram scheme was scaled back in 2006.

However, TIE has secured a fixed price of £87m to build the line – if it can commit to the project before next spring.

The Roseburn to Granton spur has been a controversial part of the proposed tram network, not least because it would run along the Roseburn Urban Wildlife Corridor. A German consortium involving Bilfinger Berger and Siemens is the preferred bidder for building the tram lines.

The group will be responsible for building more than 11 miles of track, 22 stops and a depot at Gogar. Spanish firm CAF had been chosen as the preferred bidder to build and maintain the city's trams. Both of these deals are expected to be tied up over the next week.