The company building the second phase of the Channel Tunnel Rail Link (CTRL) has posted a £585m loss after admitting the project has gone over budget.
London & Continental Railways (LCR), whose largest shareholder is the US construction giant Bechtel, has admitted that an "unforeseen explosion in rail industry cost-inflation" has bust its budget on the £3.3bn project.
The warning is contained in LCR's latest accounts filed at Companies House. LCR refused to reveal the size of the overrun, but its accounts concede that the spiralling costs have "exhausted the project's cost contingency" budget.
"Once the effects of cost-inflation are stripped out, we expect Section 2 to be delivered within a few percentage points of the target," LCR states.
Mark Bayley, finance director of LCR, said: "We have experienced inflation at twice the rate of what was projected. Inflation has been particularly severe for railway works, such as the cost of steel." LCR also blames a restriction on 24-hour tunnelling though central London for the overrun.
The second phase of the rail link will connect London's St Pancras with north Kent and is due to be opened in 2007. It will cut journey times on Eurostar from London to Paris to two hours and 15 minutes.
LCR's accounts also show that the company's losses increased to £585m in 2004 , from £315m in 2003.
The losses are due to the cost of servicing the debts it has amassed to pay for the CTRL. The company has £3.75bn worth of government-guaranteed bonds, £1.25bn of bonds secured against assets, and £1.2bn of bank debt. On top of this, the Treasury will hand out £1.1bn in grants to LCR this year.
Mr Bayley said: "The loss is expected. Payback will be in 50, 60 and 70 years."
LCR owns the UK arm of Eurostar, the 11-year-old group that is edging towards profit. LCR also owns 67 acres of land behind King's Cross station on which there are plans for a £2.5bn mixed-use development.Reuse content