High speed sale of £2bn Chunnel link

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The Independent Online

The Government is to kickstart the sale of assets with the £2bn auction of the 108km Channel Tunnel Rail Link from London St Pancras International station to the Kent coast.

The Department for Transport (DfT) and rail link owner London & Continental Railways (LCR) are aiming to distribute a sales document to potential bidders ahead of the emergency Budget on 22 June.

A rail industry source said that financial advisers Citi and UBS, acting for the DfT and LCR respectively, are finalising the information memorandum and talking to new ministers who have only been in post since last month's general election. The Government owns LCR, so the long-mooted sale would provide a much-needed boost to depleted Treasury coffers and mark one of the Lib-Con pact's first big attempts to tackle the UK's £167bn annual debt burden.

A major sticking point was resolved in the build-up to the election campaign. Network Rail has a long-term contract to maintain and operate the track, which links the UK with the Channel Tunnel. This has been reduced to a five-year term, meaning that any new owner of the track and stations could select a different, potentially cheaper, party by 2015.

Network Rail is considering whether or not to launch a bid of its own or as part of a consortium for the assets, also known as High Speed 1 (HS1). The group owns nearly all the substantial pieces of Britain's rail infrastructure and considers HS1, which include St Pancras, Ebbsfleet and Stratford International stations, a gap in its portfolio.

Network Rail announced its annual results last week, with falls in profits and revenue and a slight increase in net debt. The firm's chief executive, Iain Coucher, is under government pressure to reduce costs, but considers a bid for HS1 as a strong long-term investment, given that it is a hugely profitable asset.

A source close to LCR said that £2bn was at the top end of the company's estimates but achievable. A second industry insider added: "With the election occurring, it was quite important to wait for new ministers to settle into their jobs. This is reaching the final stages of the preparatory process."

Once HS1 is sold, LCR will be left with land holdings, mainly around Stratford in east London, and ownership of the UK arm of the Eurostar international train service.

Last year Groupe Eurotunnel, which runs the Channel Tunnel itself, said that it was eyeing a bid when HS1 eventually came up for sale. Jacques Gounon, chairman and chief executive, is expected to make good on that promise this summer.

HS1 opened in November 2007 and LCR immediately mooted a break-up. However, the then more complicated ownership structure and problems in the financial market have delayed the sale. Including the £800m St Pancras redevelopment, generally regarded as one of the UK's great architectural achievements of the past few years, HS1 cost around £5.8bn.

HS1 is one of a number of assets that Gordon Brown said he was preparing to sell for a combined £16bn if he won the election. Britain's biggest bookmaker, the Tote, was also on the list.

Holding an emergency Budget was one of the key promises the Tories made during the election. Chancellor George Osborne has already said that he plans to increase capital gains tax on non-business assets, such as shares.

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