LCR set to award contracts for rail link tunnels

The construction of the high-speed Channel Tunnel rail link is set to take an important step forward with the award of contracts worth pounds 550m for the tunnels which will carry the line into London's St Pancras station.

London & Continental Railways, the consortium selected to build the pounds 5.4bn link, is expected to place the contracts early this month, laying to rest worries about whether the project would go ahead.

LCR had intended to award the tunnelling contracts before Christmas and the delay renewed fears that the financing of the project might be in difficulty. In November, the consortium quashed speculation that the 68- mile link might be built only as far as Stratford, east London, or Ebbsfleet in Kent as a cost-saving measure.

However, LCR is in talks with up to six other parties, including Railtrack, about alternative ways of financing or building the link.

The intention is to raise funding in the middle of this year through the flotation of LCR and a debt issue. The share offer will raise pounds 1bn- pounds 1.5bn.

But it emerged yesterday that a number of the contractors bidding for work on the project might also be interested in taking small equity stakes in LCR. Tarmac and Balfour Beatty are thought to have been sounded out although it is not thought that either company would be prepared to put up a large sum of money.

The two contractors are in rival consortia bidding for the biggest single tunnelling contract - a pounds 300m deal to dig 12 kilometres of tunnelling and a massive station box at Stratford, which will be one of the intermediate stations on the line.

According to some reports, the front-runner is a joint venture between Balfour Beatty and Amec, although other industry sources insist that the Tarmac consortium is still in the running.

- Michael Harrison