Eurotunnel resolves row with TML: March opening date set as Bank of England secretly brokers pounds 235m deal

THE FINANCIAL row that has dogged and, at times, almost derailed the Channel tunnel project was finally resolved yesterday after Eurotunnel and Transmanche Link agreed an opening date of next March and a part-settlement of the contractors' pounds 1.4bn claim.

Under the agreement secretly brokered by the Bank of England, Eurotunnel will pay TML an extra pounds 235m provided control of the project is handed to Eurotunnel in December and freight services begin in the first half of March 1994 followed by passenger shuttle services in late April or early May.

This will save both sides the deep embarrassment and financial pain of there not being any trains running through the tunnel when the Queen and President Francois Mitterrand preside over the grand official opening on 6 May next year.

The extra pounds 235m being paid to the contractors means Eurotunnel will need to arrange a standby facility of pounds 120m with its banks, putting the tunnel on target to cost about pounds 10bn, compared with an original forecast of pounds 4.8bn.

In a joint statement issued yesterday evening, Sir Alastair Morton, Eurotunnel's chief executive, and Neville Simms, chairman of Tarmac and lead negotiator on behalf of TML, said the agreement brought to an end a period of conflict and restored 'total co-operation between client and contractor'.

Sir Alastair added that the dispute, which began two years ago and has brought the project to the brink of collapse several times, had ended in a 'win-win' agreement. Mr Simms added: 'It sets a genuine co-operative environment for the last months of this great project.' The deal also left TML's members with a great deal more cash to fund completion of the project than had been on offer before.

Last night neither Eurotunnel nor TML was prepared to comment publicly on the financial gap still separating the two sides in respect of the contract for fitting out the 30-mile tunnel.

But TML appears to have got between pounds 1.05bn and pounds 1.1bn in cash, at 1985 prices, compared with an original costing of pounds 620m, its subsequent claim of pounds 1.45bn and Eurotunnel's counter-offer of pounds 930m in cash and pounds 270m in shares and other paper.

Eurotunnel says it still expects to recoup some of the extra pounds 235m being paid to the contractors on the grounds that they will not be able to substantiate all their claims. The contractors believe they will be able to substantiate more than the pounds 235m.

The fresh round of talks that led to yesterday's settlement began in May when Mr Simms took over as chief negotiator for the 10 British and French contractors in TML.

He and Sir Alastair sketched out a settlement based on an upfront cash payment which separated out the funding of the project up to its opening and the contractors' need for cash and the wider global claim submitted by TML and the continuing claims against Eurotunnel.

In mid-June he and Sir Alastair secretly approached Eurotunnel's four agent banks in Britain and France and Pen Kent, associate director at the Bank of England, who brokered the eventual deal. Since then there have been five meetings in Mr Kent's office culminating in a lengthy set of negotiations yesterday morning that resulted in a 20-page agreement.

Both sides paid tribute to the role played by the Bank, saying that because Mr Kent was 'holding the ring' it speeded up agreement by months rather than weeks.

Notwithstanding the agreement Eurotunnel will still have to raise an extra pounds 1bn from its banks and shareholders, probably starting with a rights issue in the middle of next year to coincide with the build-up of services through the summer months. Eurotunnel expects to raise more than half the additional funding in 1994-95.

Although freight and passenger shuttles will be operating by the official opening, the timing of through- train services depends on British Rail and its French counterpart, SNCF. The earliest likely date for anything like a full through service between London and Paris and Brussels is the third quarter of next year.

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