UK High-Speed Rail Auction Goes To Third Round - Sources

The auction for a high-speed rail link that connects London with the Channel Tunnel has been extended, with bidders competing in an unexpected, truncated third round, people familiar with the matter said Wednesday.

These people said that the consortia bidding had been asked to submit final offers by lunchtime Wednesday, with the expectation that a winner could be announced by the Department for Transport as early as Thursday, just days after the auction officially closed.

The asset is expected to fetch between GBP1.5 billion and GBP2 billion.

The rail network, called High Speed 1, is considered attractive to companies and infrastructure funds because it provides a 30-year concession to run an all-important stretch of railway. It is one of a patchwork of assets the U.K. government is selling to try to plug a budget deficit of more than GBP150 billion.

At least three consortia submitted offers Friday, Oct. 29, people familiar with the matter say.

One consortium consists of Eurotunnel PLC (GET.FR) and two of its shareholders, Infracapital and Goldman Sachs Group Inc. (GS). Also part of the group is the University Superannuation Scheme, the U.K.'s second-largest pension fund, and CDC Infrastructure, owned by France's Caisse des Depots et Consignations.

A second bidding group includes Morgan Stanley's (MS) infrastructure fund, 3i Group PLC's (III.LN) infrastructure fund and the Abu Dhabi Investment Authority.

A third consortium comprises two Canadian pension funds, people familiar with the matter say--Borealis, the infrastructure investment arm of Ontario Municipal Employees Retirement System, and the Ontario Teachers Pension Plan. Neither Borealis nor the Ontario Teachers Pension Plan returned calls seeking comment.

According to press reports, German insurance giant Allianz SE (ALV.XE) also submitted an offer. The reports suggest that Allianz has joined forces with BT PLC's (BT.A.LN) pension fund, the U.K.'s largest private sector pension fund, and Canada's Public Sector Pension Investment Board, which manages civil service pensions. Hermes, which manages the BT pension fund, declined comment. Allianz and the Public Sector Pension Investment Board couldn't be reached immediately.

Cheung Kong Infrastructure Holdings Ltd. (1038.HK), controlled by Hong Kong billionaire Li Ka-shing, isn't believed to have bid in the auction, despite having earlier expressed an interest, according to press reports. A spokesman for Cheung Kong didn't respond to requests for comment.

U.K. press reports Wednesday said that the Eurotunnel-led consortium, which had been tipped in the media to win the auction, had been outbid by at least one competitor.

-By Jessica Hodgson, Dow Jones Newswires; [phone]; [e-mail]

(Marietta Cauchi in London contributed to this article.)