LONDON (Reuters) – Britain's government announced a multi-billion pound investment in a London commuter railway yesterday, but delayed a decision on another rail project while it studies whether to combine electric and diesel trains.

Transport Secretary Philip Hammond said £6 billion ($9.5 billion) would be spent on the overhaul of the Thameslink railway that runs through London from the south coast of England to towns just to the north of the capital.

The Department for Transport (DfT) said it was considering bids from two consortia led by Siemens and Bombardier Transportation to provide around 1,200 new electric vehicles for the Thameslink programme. It will announce its preferred bidder in the spring.

However, the DfT deferred until next year a decision on replacing ageing Intercity express trains, a project analysts believe will cost around £7.5 billion, while it considers the possibility of using a fleet of electric trains together with diesel locomotives.

Agility Trains, a consortium consisting of Japanese industrial conglomerate Hitachi and British infrastructure project manager John Laing are the preferred bidders on the contract.

Analysts had expected the DfT to award the deal to Agility Trains but the department said it was now considering an alternative for a fleet of electric trains "which could be coupled to new diesel locomotives where the overhead electric wires end."

It also said it was considering a revised bid from Agility.

"The government will continue to assess the two remaining alternatives, alongside a consideration of the extent of electrification on the Great Western route, and will make a further statement in the new year," the DfT said in a statement.

Hitachi was still optimistic of clinching a deal.

"The situation is unchanged for us. We will continue to negotiate with the UK transport authorities to reach a conclusion of the deal," said Hitachi spokesman Tadashi Hisanaga.

Britain's coalition government last month announced plans to cut £81 billion from government spending to try to drive down its deficit, currently running at around 11 percent of national output.

Hammond told BBC Radio 4 the cash for the Thameslink project, which will flow over four years from 2015, would be spent on station improvements, new track and train carriages.

Existing electric trains from Thameslink could also be deployed elsewhere on Britain's electrified rail network, he said.

Separately, Network Rail, which runs and maintains Britain's railway tracks, said on Thursday its pretax profit had doubled in the first half.