Eurotunnel challenges pounds 40m rates bill
Tuesday 01 November 1994
City analysts fear the company, which has lurched from one crisis to another ever since it was launched, may not have fully provided for such a large rates burden in its forward projections of costs.
Eurotunnel dismissed concern that the rates bill could plunge the company into a fresh financial crisis, claiming that it had ``provided for'' rates in figures given to bankers and investors. However, the company refused to be drawn on precise sums. Investors did not anticipate a rates bill of pounds 40m or anything like it.
Sir Alastair Morton, Eurotunnel's co-chairman, is believed to have appealed to the Department of Environment to use discretionary powers to help cut the rates bill. He is said to have been stunned when told of the likely figure.
The local valuation officer for Folkestone, where Eurotunnel built its terminal, has estimated that the company's total rateable value is around pounds 100m. As a business ratepayer Eurotunnel would pay 42p in the pound - pounds 42m.
Talks are being held between the company's advisers and the valuation officer about reducing the rates burden, and also about when Eurotunnel should start paying.
The Department of the Environment said Eurotunnel would be rated from April this year, though other observers argue that it could start from 6 May, when the Queen opened the Channel tunnel. The company does not want to start paying until the project is fully operational.
Talks have become bogged down in such matters as whether the sea bed has a rateable value. ``Sir Alastair argues that as ferry companies don't pay rates on the sea they use, why should Eurotunnel pay rates on the sea bed,'' said one source.
Eurotunnel said it had covered the rates bill in its operating costs, which are estimated at pounds 114m in 1994 and pounds 115m in 1995. But a pounds 40m-plus rates bill would take a large chunk out of these costs, which also include expenses for transport operation, marketing, financial fees, and start-up costs. ``This figure is not a surprise, but until our rates have been formally assessed we are not prepared to comment,'' a spokeswoman said.
Since its launch Eurotunnel has soaked up more than pounds 11bn of investment, about pounds 9bn of which is bank debt. It is not expected to make profits until at least 2003. By next spring it will have used up the pounds 850m it received from a rights issue, and will have to draw down a further pounds 700m in bank loans.
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