Four bidders to take on £600m South Wales Metro

How the South Wales Metro could look

Four foreign-owned firms are competing to run train services in Wales and create the £600m South Wales Metro.

Bids have been submitted by Abellio, Arriva, KeolisAmey and MTR for the next Wales and Borders franchise.

The successful bidder will have to make a slice of its profits available to be reinvested in the railway.

They will also be responsible for delivering a major upgrade to the rail network in and around Cardiff as part of the Metro scheme.

A contract will be awarded in early 2018.

The four bids are being assessed by Transport for Wales (TfW), a Welsh government-owned company, as part of what ministers said would be an "ambitious and creative not for profit model".

Officials said the four preferred bidders were the only four to come forward for the contract.

The Welsh government has set out its ambitions for the Metro but it will be up to the bidders to propose how it will operate, as well as drawing up plans to build a new rail or tram system.

Analysis by Sarah Dickins, BBC Wales economics correspondent

This is the first time that the Welsh Government has awarded a rail franchise. It did not have the power to do so when the all-Wales franchise was awarded to Arriva.

The model this time will focus on what level and quality of service the various bidders can offer. They will be asked to outline what they will do to drive up the numbers of passengers taking trains and buses across Wales.

While the Metro for south Wales will be part of the bid, the company's proposals will also be scrutinised in terms of how they will affect all geographical locations.

Whichever company wins will have a cap set on how much profit they can make. We do not yet know at what level that will be set but once that is passed remaining profit will go to the body responsible - Transport for Wales - to be reinvested in public transport in Wales. That cap will be for negotiation.

• Abellio operates buses in London and ScotRail services, as well as buses, trains and trams in Holland and Germany.

• KeolisAmey runs the Docklands Light Railway and London and Nottingham's trams. It claims to be the world's largest tram operator and its major shareholder is the French state-owned railway company SNCF.

• MTR operates the Hong Kong metro, the Crossrail/Elizabeth Line concession and is currently running Transport for London rail services.

• Arriva is part of German-owned Deutsche Bahn (DB). It was awarded the all-Wales rail franchise in 2003.

Each company is expected to put together its own particular mix of heavy rail, bus and possibly light rail. The preferred contractor is expected to be known by early 2018.

Negotiations are underway with Network Rail about handing over responsibility for the track on the core Valleys lines to the franchise holder.

The current franchise is run by Arriva Trains Wales which gets a subsidy from the Welsh Government of between £150m and £180m a year.

Rail privatisation laws stop the Welsh Government giving the contract to public sector bodies.

The Welsh Government has lobbied for more powers, but said its requests have been turned down in Westminster.

Officials said in time TfW may evolve to take on more responsibilities, similar to Transport for London.

Economy Secretary Ken Skates said new trains, quicker journeys and modernised technology were priorities for the franchise.

"We now have four highly skilled, experienced companies entering the next, competitive phase and I am keen to hear more from them about what they can offer Wales and how they can deliver on our plans for integrated public transport," he said.

"Over the next 10 years I envisage significant strides in the delivery of our public transport network including the electrification of the Swansea, Valleys and north Wales lines, a South and North Wales Metro and widespread structural improvements that are already in the pipeline."