Reproduced from Sunday Telegraph 9 April, 1995

From behind the large rubber dinosaur on his desk, the man who masterminded the rise of Jason Donovan and Kylie Minogue was issuing orders. He wanted an article about him which had appeared in that day's London Evening Standard faxed to various outposts of his empire. The piece concerned Waterman's acquisition of the department of British Rail once called Special Trains. I had read the article, and failed to understand it. I also failed to understand the impassioned critique of the article which Waterman now delivered in his trundling Midlands accent.

There were detailed references to fleet-maintenance agreements ... interfacing with Railtrack ... franchises, subsidies and other nightmarish arcana of rail privatisation. The general point seemed to be that Waterman was getting a raw deal from other parts of the network. "I tell you," he said, almost knocking over his Thomas The Tank Engine pen-holder as he gesticulated, "in the music business they stab you in the back, but in the railways, they stab you in the front and smile while they're doing it!' He fished out a calculator to prove conclusively whatever point he was making. "See?" he said triumphantly. "Four pounds sixty a mile!" I nodded vacantly, and reflected that this was good going from a man who insists that he only learnt to read and write 10 years ago and still can't do joined-up writing.

With his buttoned-down plaid shirt, floppy blond fringe and round glasses, Pete Waterman looks like a 48-year-old version of the Milky Bar kid. He's a self-confessed workaholic and this has cost him two marriages (he's now on his third). He's a straight talker - a sort of Brian Clough of the music business, although without Cloughie's darker overtones. Like Clough, he has a gift for tabloid philosophising: "Music isn't art"; "If Shakespeare were alive today, he'd be doing exactly what I'm doing"; and "Popular culture is about light relief", etc. He certainly puts people's backs up, but those who work with him like him, and nobody questions his business acumen.

Waterman is worth ... well, possibly as much as £60 million, having written and produced many hit records with his two junior partners, Mike Stock and Matt Aitken. They have supplied a whole series of toothsome young proteges of whom a duo called 2Unlimited are the latest, and Minogue, Donovan and Rick Astley - all now gone on to lesser things - are the most famous. The team combined catchy tunes with a dance beat at a time when the competition was providing either one or the other, but not both. Waterman has "18 or 19" companies in the music business (he can't remember exactly), and the flagship is called PWL, Paul McCartney having broken it to him that Pete Waterman Limited smacked of egotism. PWL's headquarters are tucked away in a south London alleyway; on an outside wall is some unusually meek graffiti - "Jason is great" and so on - which one suspects is an inside job. The offices are bedecked with gold and si1ver discs, and staffed largely with working-class youngsters, whom Waterman regards as more deserving than university types.

The hits keep coming, but Waterman has recently been concentrating on his railway interests. Special Trains, of which he took control this week in one of the first stages of the rolling privatisation, is the fun part of BR. It facilitates the running of charter trains, football specials and nostalgic steam runs. Waterman's acquisition - for "a substantial amount of money" but not the £10m which has been mentioned - represents the consummation of a life-long love of rail.

Waterman was born next to a railway line in Coventry in 1947, "and I became a trainspotter in 1953", he says proudly. In 1962 he left school and went to work as a boilersmith at the Stafford Road British Railways works in Wolverhampton. He was in his element. "I wanted to be any sort of railwayman ... I'd sleep in the corner of the shed rather than go home."

The railways, he says, gave him discipline, and he must be one of the few people in the rock business for whom that is a watchword. "Before you started work on the boilers - and it was filthy work - the driver would check your fingernails, the back of your neck and your shoes. If they weren't spotless you were sent home to clean them. And if you stepped out of line, he'd thump you." He respected the drivers' monomania. "You aim to get the train in on time over and over again, and it's exactly the same thing with making hit records. You're either good and you carry on, or you have one hit and disappear."

But shortly after he joined the railways, the abolition of steam began. Dismayed at the prospect of "diesel training at Swindon", he quit, and got an engineering job at GEC in Coventry. He stayed for 10 years, becoming the youngest-ever senior shop steward in the Transport and General Workers' Union. I raised an eyebrow at this, and Waterman explained that he was "the sort of trade unionist who believes that there's got to be a capitalist making the money".

Waterman had always got the same visceral feeling from pop music as he had from trains, and from 1964 he had supplemented his income by moonlighting as a DJ in Mecca ballrooms across the north of England. A lot of work came his way from a club manager called Jimmy Savile, who has some claim to being the inventor of the disco. Waterman - who rarely drinks and is fiercely anti-drugs - is a great admirer of Savile. "He had the common touch and, again, he's a disciplinarian. If you had alcohol on your breath, you couldn't come into Jimmy's clubs. There must have been so many peppermints sold in Leeds and Manchester at that time."

In 1974 he joined Magnet Records as assistant head of A & R, which means Artists & Repertoire, although Waterman didn't know that at the time. "In my first week I signed Donna Summer, so I got off to a flying start. But then I fell out with the record business." Reading between the lines, his mouth was too big: "If you'd made a crap record, I told you it was a crap record." Also, he couldn't schmooze; even now he never "does lunch", and frequently denounces the complacency and self-satisfaction of a business which he thinks is run by middle-class placemen. For the next three years he subsisted on odd jobs in recording studios, sleeping rough on Euston Station for much of the time. In 1977, ashamed of his hustling existence, he resolved to "punish" himself with physical labour. "I decided the best way to do that was to become a coal-miner in Coventry. But I was only down the pit a couple of days when they gave me a job that was even harder. I became a concreter for the coal board - making 110 tons of concrete a day and wheeling it up slopes.

The work caused his weight to fall from 18 stones to 10, and he was saved from wasting away entirely by a record producer friend called Peter Collins, who paid for him to go to a pop-music festival in the south of France. None of his cosseted old cronies recognised the new, depleted Waterman, but he met John Travolta's manager, and became an assistant to the star during the making of Grease and Saturday Night Fever. Later, in California, he formed a production company with Collins, "and the hits started coming". In 1983 he moved back to England, and met Stock and Aitken. They shuffled their names endlessly, searching for the euphony of the great Motown writing team Holland Dozier Holland. In fact, Stock, Aitken, Waterman sounds more like a firm of solicitors, but the three combined winningly.

On the back of the success with Donovan and Minogue, Waterman was buying trains, accumulating what he likes to call "the biggest train set in the world". It comprises 70 carriages and 25 diesel engines (now that they are passe, he is a convert) along with the Flying Scotsman, which he co-owns with Sir William McAlpine. To these he can now add the 200 carriages and six locos of Special Trains.

Waterman Railways, as Special Trains will be known, will lease out its own rolling stock and facilitate the running of other people's. The task in hand is simply to preserve the service, and any plans for expansion - Waterman entertains the mind-boggling scheme of taking football specials upmarket - are on hold. Waterman speaks in melodramatically lugubrious tones about his purchase. He feels he is being required to run the business on unfavourable terms, and that this is not being understood. The Standard article which so incensed him had included an interview with a train charterer who implied that Waterman had dramatically increased prices for profiteering motives.

Waterman's defence - regarded sympathetically by most observers - is that prices have gone up because he is being required to pay out so much to the other profit-seeking parts of the re-organised network. "I'm charging 70 per cent more, because I'm being charged 70 per cent more," he fumed. There are other teething troubles, and long, hard negotiations are in prospect. A befuddled Sun reporter, having read the Standard article, called Waterman and said "What's going on Pete? One minute you're the hero, now you're the villain."

One sympathised with the poor chap. Despite his ambivalent politics, Waterman was a Thatcherite paradigm, and the tabloids spent years lovingly chronicling his acquisition of fast cars and prize Koi carp, which he keeps in a 12,000-gallon pool at his sizeable, although not monstrously big farmhouse home in Cheshire. ("Rick Astley introduced me to these giant goldfish, and I've become totally hooked," he once gushed; he is well-known in Japan as a champion Koi-breeder.)

But now the populist genius is embroiled in the fraught minutiae of rail privatisation. It does not make for good copy, and Waterman is exasperated that he cannot explain his railway difficulties in language that a Sun reader - or, indeed, a Sunday Telegraph interviewer - can understand. He must content himself with quotable generalisations. "I'm six months further down the privatisation road than anyone else," he says, "and it's a cold and lonely place."

But not quite as cold and lonely, one suspects, as those long nights on Euston Station.