Kier Share News (KIE)

LONDON, June 25 (Reuters) - Britain's state-backed railinfrastructure operator Network Rail plans to delay or cut backon modernisation work because rising costs and missed targetshave made its 38.5 billion-pound ($60.5 billion) investmentplans untenable, the government said.

A statement from transport minister Patrick McLoughlin onThursday said the number of delays to projects and escalatingcosts should have been foreseen by Network Rail and that heplanned to get the five-year project back on track.

Network Rail CEO Mark Carne said the firm had beenover-optimistic about its capacity and supplier base, andfollowing a review project costs had been higher than assumed.

"As a result, the total enhancement programme cost nowexceeds the available five-year budget. Some projects are alsodelayed beyond the original dates," he said in a statement.

The government set out plans to upgrade Britain's sprawlingrailway system in 2012, describing it as the most ambitiousprogramme since the Victorian era.

Network Rail, which controls 2,500 stations as well astracks, tunnels and level crossings, said it now faced delays tothe electrification of two of its lines, the Midland Main Lineand the Trans-Pennine route between Leeds and Manchester.

It gave no details of the size of the funding shortfall.

McLoughlin said a review of the investment programme wouldbe published in the autumn, which could affect companies such asCarillion, Kier and Balfour Beatty,all of which have contracts to upgrade and maintain parts of therail network.

($1 = 0.6360 pounds) (Reporting by Li-mei Hoang; editing by Andrew Roche)