Chunnel wallows in a private hole: William Kay rues the lot of investors in a project left by the state to sink or swim

QUESTION: what do Morgan Grenfell, Swiss Bank Corporation, Robert Fleming, Salomon Brothers International, SG Warburg and the cream of French banking have in common?

Answer: they underwrote the latest slap in the face for Eurotunnel's much-martyred investors, a three-for-five rights issue at 265p per unit last May. They are now priced at 245p, a sliver above their low for the year and well under half their 593p peak. The only consolation is that, without the pounds 816m raised, lending banks would have withdrawn funds and the Channel tunnel would have been sealed.

Or would it? There are those who believe it is high time the British and French governments' bluff was called on Eurotunnel, and that their arms should be twisted to make them release some cash for what could be one of the big vote-winners at the turn of the century.

But alas, while the lenders might escape from such blackmail unscathed, investors would certainly be crushed out of existence, losing their niggardly perks created at the time of the original flotation in 1987. These consisted of rights to free trips through the tunnel, geared to how many units investors subscribed for at 350p a time - a mere 105p more than the current price.

As there have been no dividends so far, because the company has only just started generating revenue, the truly masochistic investor would have to add to that 105p the interest forgone on leaving the money in the dullest building society. Another 300p or so would take care of that.

The equity has been humbled by another succession of disappointments in the past few months and is cringing at the prospect of interim results tomorrow.

Leaks (of the watery sort), delays to the Eurostar train service and a boycott by a potentially important haulage customer are just some of the minor setbacks of recent weeks. Not even the threat of modifications to cross-Channel ferries in the wake of the Estonia disaster has cheered the price of shares in the one organisation to benefit financially from such an edict.

Inevitably, this has given rise to dire predictions of yet another rights issue.

Meanwhile, stockbrokers' analysts have been reaching for their calculators to adjust income projections. Dan White, the veteran transport watcher at NatWest Securities, bravely rates Eurotunnel a hold and hopes for news of train operations so far.

'The two freight-related services, through rail and freight shuttles, have now been running some while,' he observes, 'and news can be expected on how successful or otherwise the build-up phase has been to date.'

When it comes to this corporate circus, back the 'otherwise' against the 'successful' every time.

More to the point, the date of the first dividend, last predicted less than five months ago to arrive in 2004, is already being pushed out yet again.

It would be bad enough if this were a one-off exercise. But there is a strong possibility that Eurotunnel may attempt to go through it all over again in the next 20 years.

The reason? The company has the right to build a second tunnel, provided it does so before the year 2020.

That would signal the first tunnel's success. But so great is the debt hanging around Eurotunnel's neck that it will surely have to come back to shareholders yet again to launch a Mark II version. And it is not inconceivable that other tunnels could be planned as the next century unfolds.

The two governments and their financial communities should make use of the intervening years to learn the lessons of a planned pounds 4.7bn venture that is now reckoned to have cost well over pounds 10bn.

Sir Alastair Morton, Eurotunnel's abrasive British chairman, and his construction industry counterparts have complained vociferously about the construction contract, which seems to have been designed to create maximum misery and delay.

But, above all, the exercise has cast grave doubts on Baroness Thatcher's Holy Grail, that Eurotunnel should be privately funded throughout. The British Government has already given ground on the rail link from London to the coast. Eurotunnel might do better next time round to concede the construction to public finance and tender its services as an operator only.

(Photograph omitted)