Channel tunnel has no firm opening date: Shares fall as Morton warns that cost of project could reach pounds 9.75bn, more than double original estimate

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The Independent Online
EUROTUNNEL yesterday admitted that it could no longer give a firm opening date for the Channel tunnel and warned that the cost of the project could reach pounds 9.75bn - more than twice the original estimate.

The twin blow to the project came as Eurotunnel disclosed that it was no nearer to a settlement of its pounds 1.45bn cost dispute with the contractors, Transmanche Link, and sent shares in the company tumbling 20p to close at 440p.

The tunnel had originally been due to open next month. But Eurotunnel indicated yesterday that the earliest opening date now was next February, and then only for freight traffic.

Passenger shuttle services are not expected to begin until next April at the earliest. The combined effect of the delays and cost overruns will be to force Eurotunnel to return to its shareholders and banks for up to pounds 850m in additional funds, and slash the tunnel's first-year revenues by almost half to pounds 260m.

The opening has been put back six times since the digging of the 50- kilometre link began in 1986. But this is the first time Eurotunnel has declined to give a target date.

Sir Alastair Morton, Eurotunnel's chief executive, laid most of the blame for the uncertainty at the doors of the 10 English and French contractors that make up TML.

But he also took a side-swipe at British Rail, its French equivalent SNCF and the governments of Britain and France for holding up the project with extra safety demands and failure to honour their pledges on through-rail services.

Clearly in defiant mood, Sir Alastair said: 'We are going to defend the rights of our 630,000 shareholders as long as we have breath left in our bodies.'

Those shareholders are to be called on for more funds before the end of 1995 as part of a further big refinancing of the project.

Investors will be asked to take up a bonus warrants issue this summer that could raise an extra pounds 200m for Eurotunnel. A further pounds 350m to pounds 400m would then be raised before the end of 1995, largely by way of a rights issue.

But Sir Alastair said Eurotunnel might need another pounds 200m- pounds 250m after 1995 to cover interest payments to its banks until the project reaches cash break-even.

Eurotunnel needs approval from its banking syndicate for the new fund- raising plans by this November or it could again be exposed to the threat of being wound up by creditors.

Sir Alastair, however, dismissed the idea that its banks would pull the plug on Eurotunnel at this late stage because of the 'blackmail' tactics he said TML was engaged in.

Despite Eurotunnel's inability to put an opening date on the tunnel, Sir Alastair insisted that the contractors were no longer the 'dominant and central uncertainty' they had been.

Characterising TML as 'like a little boy standing outside and refusing to come in', Sir Alastair said that its bargaining power was now blunted and that unless the cost dispute was settled it would face pounds 220m in liquidated damages starting this August.

His comments are thought to have infuriated Jack Lemley, TML's chief executive, and seem likely to set back even further any lingering hopes of a speedy settlement.

Joe Dwyer, chief executive of Wimpey, one of the five UK contractors, and joint chairman of the Transmanche Link Shareholders Assembly, described Sir Alastair's allegation as 'astounding nonsense. Work on site is proceeding quickly and effectively, Sir Alastair knows this. In the absence of a commercial agreement between both parties, TML will nevertheless proceed, within the terms of the contract, to achieve completion of the project at the earliest possible time.'

John Prescott, Labour's transport spokesman, said that if he were Secretary of State for Transport he would get the two sides in and 'bang a few heads together'.

(Photograph and graphic omitted)

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