Eurorail in pounds 2.3bn offer to rescue Channel link

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Eurorail, the consortium which lost the contest to build the Channel Tunnel Rail Link, last night offered to take over the project but indicated it would be delayed for four years and require pounds 2.3bn in public subsidies.

The consortium also announced that HSBC, the owner of Midland Bank, had dropped out, agreeing to sell its 20 per cent stake to the other four shareholders. These are Kvaerner, BICC, NatWest and Seeboard.

Keith Clarke, Eurorail's chief executive, said that if chosen to rescue the project, the 68-mile link would end at a new terminus at St Pancras. But he indicated it would be unlikely to be complete before 2007 - compared with the planned opening date of 2003.

The future of the rail link was thrown into disarray two weeks ago when London & Continental Railways said it could not complete the project without an extra pounds 1.2bn in subsidies.

LCR's winning bid in 1996 involved pounds 1.4bn in subsidies and assumed that the Eurostar service would be carrying 10 million passengers by this year. Eurorail asked for pounds 2.1bn in subsidies at February, 1996 prices, but its Eurostar traffic forecasts were much more conservative.

Mr Clarke said: "This project is too important to fail at this stage. It has major implications for London, the UK and for the rest of Europe." But he added that the Government would have to commit funding early in the construction to encourage private sector funds into the project.

Eurorail would not start building the link or seek to raise private finance until Eurostar was firmly in the black. Eurostar's losses are currently running at pounds 180m and it carried 6 million passengers last year.

The consortium's original bid put the total financing costs at just over pounds 5bn and assumed that the funding, minus the Government subsidy, would be 80 per cent debt and 20 per cent equity.

Mr Clarke said Eurorail had no interest in teaming up with any of LCR's shareholders, which include Virgin, Bechtel, National Express, SBC Warburg and the French railway SNCF.

Eurorail has a team of about 15 working on the project but will not submit formal proposals until LCR's 30-day deadline to come up with new funding arrangements expires on 27 February.