UK's FirstGroup to cut fuel costs with hybrid bus order

LONDON, Jan 17 (Reuters) - British transport company FirstGroup (LSE: FGP.L - news) has ordered a fleet of hybrid fuel-efficient buses that will help the company cut costs and recover from a difficult year where it had to raise cash and scrap its final dividend.

FirstGroup, the leading public transport operator in Britain and North America, said the 70 million pound ($114.41 million) order for 425 buses included 274 fuel-efficient models that use 10 percent less fuel.

The company, which operates services in 40 towns and cities across Britain, said the order was the biggest by a company for buses outside London.

"These vehicles last for 15 years," Giles Fearnley, Managing director of the company's British bus division, told Reuters.

"So you are looking at phenomenal fuel consumption over that time so you're saving several tens of thousands of pounds over the whole life of the vehicle."

FirstGroup, which also runs train services in Britain, was hit in 2012 when it lost a lucrative deal to run the West Coast Main Line railway.

U.S. activist investor Sandell Asset Management on Wednesday reiterated a call first made in December for FirstGroup to spin off and list the U.S. business, which owns yellow school buses that operate across the country, on the stock market.

The company, which was forced to raise 615 million pounds in May to avoid its credit rating being cut to "junk", said some 15,000 buses were now equipped with wireless internet which had proved popular with customers.

FirstGroup is due to give a trading update on Friday and Fearnley said this would show a strong rise in customer demand at the transport group as innovations such as wireless internet enticed customers. "You'll see really strong growth coming through and we see that continuing as the bus product becomes ever more attractive."

Fearnley said British buses were core to the FirstGroup (Dusseldorf: FGR.DU - news) business.

The new buses, which are also quieter than the older models, will take the company's total investment to 2,000 new vehicles over four years. Northern Irish-based firm Wrightbus will construct the bulk of the new models, including the hybrid buses, with only six vehicles out of the total 425 to be built abroad.