Richard Shirrefs, chief of Eurotunnel: An Entente that is not very Cordiale

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The Independent Online

In the grand tradition of diplomatic anniversaries, the Queen will be in France next week to celebrate the 100 years of Entente Cordiale - the treaty signed with France in 1904 to usher in an era of co-operation between the two nations. Ten years ago, another project, originally conceived by Margaret Thatcher and Francois Mitterand - the Channel Tunnel - opened for business.

Yet those fixing the Queen's tour to celebrate the Entente are likely to find it easier to gloss over some of the less cordial aspects of Anglo-French relations in the past century than the task facing Richard Shirrefs, chief executive of the troubled Eurotunnel.

Mr Shirrefs will next Wednesday face thousands of shareholders - many of them angry - at Eurotunnel's annual general meeting at a mammoth conference centre outside Charles de Gaulle airport. On the agenda is a set of resolutions tabled by a French rebel shareholder, Nicolas Miguet, to sack the entire board and replace it with a new team to rescue the debt-burdened business.

According to Mr Shirrefs, who is battling to persuade shareholders to back his scheme to pull the company out of difficulty, the alternatives are quite simple. "It is a choice between cloud cuckoo land and the real world. The world is a complex place, and perhaps not as we would like it. On the other hand, there are a bunch of people who have got together to project some illusions," he said.

Despite being a Brit who has spent two decades of his career in France with a variety of oil and retail companies, and one who can speak French fluently, Mr Shirrefs has been widely vilified in the French media.

In the view of the rebels, Mr Shirrefs has failed to improve the lot of the army of ordinary French - 1.1 million people - who own Eurotunnel shares. As this group accounts for 60 per cent of the total shareholder base, with British private investors accounting for just 5 per cent, and financial institutions controlling the rest, Wednesday could possibly be Mr Shirrefs' Waterloo.

The row has already descended into a bitter and personal battle. M. Miguet has declared Mr Shirrefs, a Leicester-born accountant, to be "a yob, riff-raff and a swine". Even though he was forced to pay nearly £7,000 by a French courts for libelling the UK businessman, M. Miguet has still managed to get "false information circulating in France", according to Mr Shirrefs.

As a result, he believes, "quite a lot of French people think I am dishonest. If you sling enough mud, it sticks, which is disgraceful."

In return, Mr Shirrefs says of M. Miguet: "He has an extensive criminal record for fraud and theft and has been in prison. In another age, he would have been called a scoundrel."

While the looming showdown at the AGM will be unpleasant, Mr Shirrefs hopes it will at least provide an opportunity to defend his own plan, called Project Galaxie, to tackle Eurotunnel's unmanageable debt mountain of £6.4bn. The company has been unable to pay off that debt because, as fares for customer have remained high, Eurotunnel has seen only half of the 16 million annual passengers and seven million tons of freight pencilled in to the business plan when it was on the drawing board.

"We believe several thousand people will come to the AGM on Wednesday. It will be an opportunity for them to ask questions and it will be a chance for them to see that they have not been told the entire truth. There has been a lot of lying to shareholders," Mr Shirrefs said.

Part of the challenge facing Mr Shirrefs, who has been in the Eurotunnel driver's seat for two years, having previously been its finance director, is that M. Miguet's plan looks simple and appealing compared to his own.

M. Miguet argues that the French and British governments could be forced to hand over a subsidy to Eurotunnel, while the banks could be made to write off much of the outstanding debt. Finally the rail companies - including France's SNCF and Eurostar - could have their charges for using the tunnel hiked up.

While all of these initiatives would indeed help the beleaguered business, they have been dismissed as a "dream world" by Mr Shirrefs, and by many external experts. The Treaty of Canterbury, which set out the terms for the tunnel in the late 1980s, barred government subsidies, the 200 banks who own the debt are unlikely to want to take swingeing losses on it, and the rail companies' current charges are protected by contracts.

"The governments have made it crystal clear they are not going to step in. Galaxie deals with the reality of the situation, which is by starting to do things which make sense, rather than sitting there with £25bn of rail infrastructure with no traffic on it," Mr Shirrefs said.

Under Galaxie, rail operators would see the charges they pay cut by up to 70 per cent to stimulate more traffic coming through the tunnel, in return for helping to cut its mountain of debt, perhaps by the train operators taking an equity stake in Eurotunnel. The hope is that the banks would agree to this, possibly by allowing the company to pay its debt off over a longer period and also by writing off some of the total amount, because it could lead to profitability in the not too distant future.

But there are plenty who are sceptical about Mr Shirrefs' sophisticated plan. Critics warn that one of the main stumbling blocks may be that allowing the rail operators to take a stake in Eurotunnel could be viewed by European regulators to be government subsidisation because they are effectively state owned.

Proxy votes on next week's AGM resolutions - including those proposed by M.Miguet - have already started to come in and Mr Shirrefs admits he has an idea of which way the vote will go, though he will not give a hint of whether he expects to still have a job on Thursday.

But with a few days left for remaining shareholders to cast their votes ahead of the meeting, Mr Shirrefs is keen to lay the matter on the line, especially for British investors who might not be travelling to France for the live battle. "It really is now or never. If shareholders abstain, and then they wake up on Thursday morning and find a bunch of people running the company who do not know what they are doing, they shouldn't complain," he said.