UK's FirstGroup wins $4 billion London Overground rail contract

Dec ‌10 (Reuters) - British transport operator FirstGroup said on Wednesday ‍it had ‌been named the preferred operator for London's Overground suburban ⁠rail network in a ‌contract worth around 3 billion pounds ($3.99 billion) over an initial eight-year term.

First Rail London, the company's subsidiary, will take over ⁠operations in May 2026 from Aviva Rail London, which has managed ​the network since 2016.

Launched in 2007, the ‌London Overground links areas outside ⁠central London. The network spans 100 miles and 113 stations, and serves over 4 million passengers weekly.

The ​contract significantly expands FirstGroup's London portfolio, where it already operates buses, trams and the London Cable Car for Transport for London (TfL), as the company grows its ​rail ‍operations.

FirstGroup will run train ​services, stations and customer service under the contract, backed by a 30 million pound performance bond and an 80 million pound parent company guarantee.

The agreement includes options for a two-year extension and requires the operator to ⁠increase services on the Mildmay line, the oldest part of TfL’s rail network, as ​well as the Windrush line.

Analysts at RBC Capital Markets said the contract was low-risk since TfL retains all revenue and passenger risk, with ‌a potential for a profit boost for FirstGroup.

($1 = 0.7513 pounds)

(Reporting by Yamini Kalia in Bengaluru; Editing by Nivedita Bhattacharjee)