Eurotunnel asks investors for pounds 500m more: Cash-raising exercise will bring total funding to pounds 10bn Morton to resign as chief executive next year

EUROTUNNEL is to ask its shareholders for a further pounds 500m before the Channel tunnel opens officially next May, as part of a cash-raising exercise that will increase total funding for the project to pounds 10bn.

Confirmation of the planned rights issue to Eurotunnel's 630,000 shareholders came yesterday as the Anglo-French consortium lowered its revenue forecast for next year by pounds 44.5m and projected cash break-even for the project in 1998.

Sir Alastair Morton, who has steered Eurotunnel through the past six turbulent years, announced, meanwhile, that he is to resign as chief executive next year once additional funding is in place and services have begun, and will become part-time co-chairman. A successor is already being sought.

In total Eurotunnel says it needs to raise another pounds 1bn on top of the pounds 8.9bn already committed to meet increased interest costs and loss of revenue caused by the one-year delay in opening.

This will take total funding to just under pounds 10bn. However, the latest forecast from Eurotunnel's worldwide banking syndicate puts project costs at pounds 10.4bn. The rights issue is likely to take place in the first quarter of next year, depending on the state of the financial markets, and will take total equity in the project to more than pounds 2bn.

For the first time Eurotunnel has also published forecast dates for the commencement of phased passenger and freight services through the tunnel. Freight shuttle operations are due to begin on 7 March, with through-rail freight services introduced a week later. Passenger shuttle services from the Eurotunnel terminal just off the M20 near Folkestone, meanwhile, will be ready to begin on 5 May - the day before the state opening by the Queen and President Francois Mitterrand.

Eurostar through-rail services between London and Paris operated by British Rail and its French counterpart, SNCF, are not expected to begin until next July.

Doubts remain, however, over the extent of the shuttle service Eurotunnel will be capable of offering. The consortium building the passenger shuttle wagons, led by Bombardier of Canada, has submitted a Fr3.4bn (pounds 406m) compensation claim for delays and design modifications to the tunnel contractors, Transmanche Link, and is only guaranteeing to deliver five of the nine shuttle trains on time.

Commenting on the Bombardier claim, now the biggest obstacle to a smooth, phased opening, Sir Alastair said: 'It will not be settled by blackmailing us to concede everything.' Eurotunnel has included a small provision against the claim in its forecast project cost of pounds 10bn.

According to Eurotunnel's latest traffic forecasts, total revenues next year will be pounds 224m compared with the pounds 268m estimate it made in April, rising to pounds 585m in 1995 and just over pounds 700m a year later.

Christopher Garnett, commercial director, predicted that the tunnel would account for 40 per cent of the Dover-Calais car passenger market and 30 per cent of all freight on the route by next autumn and half the total cross-Channel passenger market by 1997.

Eurotunnel is also forecasting a savage cut in ferry capacity on the Dover-Calais route by next autumn, with ferries operated by P&O and Stena Sealink reduced by up to a half.

Fares for the 35-minute, 26-mile shuttle crossing will be broadly similar to ferry tariffs and will be announced next January as part of Eurotunnel's pounds 25m promotion of its Le Shuttle service.

In an up-beat presentation to the press and financial analysts, Sir Alastair said that the main uncertainty surrounding the project had been removed following July's agreement on costs and the opening timetable with TML. But Brian Wilson, Labour's transport spokesman, said: 'Anyone looking at developments on both sides of the Channel already regards the British effort as a national laughing stock. This news will not improve that reputation and it is further confirmation of the dangers of leaving great national projects to the private sector.'

View from City Road, page 35

(Photograph omitted)