FirstGroup is set to run the Great Western rail franchise in England until at least March 2019 after an extension was signalled by the Government today.
The Aberdeen-based group is to enter talks with the Department of Transport (DfT) about the award of a three-and-a-half-year contract, with the possibility of an extra 12 months at the Government's discretion.
The decision comes in the week that FirstGroup lost its ScotRail service to Dutch rival Abellio - a franchise it has operated since 2004.
FirstGroup, which was the only bidder for the Great Western extension, will now begin negotiations with the DfT over the precise financial and management terms of the franchise it has run since 2006. Shares, which fell after the ScotRail announcement, rose more than 3% today.
The DfT was reportedly keen to hang on to FirstGroup's management as the franchise is undergoing a £7.5 billion investment programme that includes network electrification and a new multi-billion pound fleet of intercity trains built by Japanese firm Hitachi.
The First Great Western route runs from London Paddington to South Wales and the South West and covers key commuter routes into the capital from Oxford, Newbury and Reading. The current franchise was due to run out in September.
The franchise is a key asset for the firm accounting for around a third of the rail division's £2.9 billion revenues, or 15% of total annual group sales.
FirstGroup chief executive Tim O'Toole said he was pleased with the deal.
He said: "This offers good value and better services for First Great Western passengers and in particular, will provide stability and allow the planned major projects and new trains to be delivered."
In recent months FirstGroup has lost its Caledonian Sleeper franchise to Serco, failed in its bid to win the Essex Thameside - retained by National Express and seen its Capital Connect contract in London become swallowed up as part of the larger Thameslink franchise, which was awarded to Govia.
Its next large contract bid is for the key East Coast service, which is due to be awarded next month.
Analysts at HSBC recently underlined the importance of winning bids for FirstGroup because paying off its debts, which stood at £1.3 billion in May, "will be painfully slow unless the group can win rail franchises."
In September the DfT published a report citing First Great Western's 0700 Oxford to Paddington service, the 0744 Henley-on-Thames to Paddington and its 0721 Oxford to Paddington as the third, fourth and fifth most overcrowded services in England and Wales last spring. However, in each case the report recognised that the firm has since acted to add to capacity.
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