Fire could land Eurotunnel with pounds 165m bill

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The Independent Online
Eurotunnel could face a bill of up to pounds 165m if, as senior executives now fear, last week's fire in the Channel Tunnel prevents it from resuming a full service for at least three months.

This figure does not include the cost of repairing the damage caused by the inferno on board a freight shuttle a week ago which should be fully covered by Eurotunnel's insurance.

But nor does it include the long-term costs and loss of revenue which the company could suffer if it is forced into extensive modifications to the design of the freight shuttles and the tunnel's safety systems.

Shares in Eurotunnel have slumped by 10 per cent since the fire last Monday night. Yesterday they fell 5p to 81p as the extent of the impact on the company's revenues began to sink in and the French and Belgian railways disclosed they were considering suing Eurotunnel for loss of revenue.

The near-total closure of the tunnel is presently costing Eurotunnel about pounds 1.5m a day in lost revenues. In addition to its lost revenue, Eurotunnel's wages bill is running at about pounds 1.8m a week.

Under the terms of its railway usage contract with Eurostar, SNCF of France and the Belgian state railway SNCB, Eurotunnel is liable to pay penalties of pounds 457,000 a week for the first 16 weeks that the tunnel is not in operation. That figure rises to pounds 914,000 a week for the following 16 weeks and to pounds 1.37m a week after that.

If the tunnel were out of action to a substantial degree for three months, it would lose up to pounds 135m in revenue and pounds 7.3m in penalty payments while its wages bill would run to pounds 22m. Eurotunnel says that it is insured against loss of revenue resulting from the fire but it is unable to say how much lost income it would recover. About pounds 600,000 of its daily revenues come from a minimum useage charge paid by the railways but this is not thought to be covered by insurance.

Jeff Summers, a Eurotunnel analyst with the debt trading specialists Klesh and Co, reckons that the fire could result in the loss of around pounds 65m in revenues between now and the end of the year on top of the pounds 711m the tunnel was already forecast to lose. Assuming that insurance covers half the revenue lost since services were suspended then Eurotunnel is looking at additional losses this year of about pounds 30m.

But Mr Summers says it is almost impossible to quantify the long-term impact on the tunnel's finances. "It is a totally imperfect science. Nobody knows the answer including Eurotunnel but what is becoming increasingly evident is that the attitude of the Channel Tunnel Safety Authority is unclear. We just don't know whether they will enforce any design changes on Eurotunnel.

"If it did require major design modifications then insurance is unlikely to cover the cost and if those changes have an impact on the way the system operates then Eurotunnel has a very big problem."

Before the fire Eurostar had been selling some 19,000 tickets a day and operating 24 return services between London, Paris and Brussels. SNCF and SNCB said yesterday they were considering suing Eurotunnel for damages. A spokesman for SNCF would not quantify the size of any claim against Eurotunnel but said that lost revenues were running into "several million francs a day".

Eurotunnel said that it was close to putting a proposal to the Safety Authority setting out how it planned to restart services and what level of service it would operate.

"We are hopeful it will only be a matter of days before some services resume," a spokeswoman said.

The only commercial services that are running are through freight trains. Eurostar is running empty trains through in readiness for start-up and Le Shuttle tourist trains are being used to transport staff between Folkestone and Calais.

How the losses stack up

Lost revenue per day pounds 1.5m

Penalty payments per week pounds 457,000

Cost of fire damage pounds 20m-plus

Cost of design modifications Not quantifiable

Staff bill per week pounds 1.8m

Cost of three month shutdown pounds 165m