Jeremy Warner's Outlook: Gounon holds few cards at Eurotunnel, yet he might as well play the ones he has

Browne's amazing cash machine - Freeview's threat to BSkyB

Chief executives come and go, the creative destruction of capitalism wreaks its merry havoc, but throughout it all there's one reassuringly reliable constant - that every couple of years Eurotunnel will sink beneath the waves of financial crisis.

Chief executives come and go, the creative destruction of capitalism wreaks its merry havoc, but throughout it all there's one reassuringly reliable constant - that every couple of years Eurotunnel will sink beneath the waves of financial crisis.

Ever since winning the franchise nearly 20 years ago, Eurotunnel has limped from one financial meltdown to the next. Predictably, the Channel tunnel came in well above budget and miles behind schedule. Nor has it ever achieved the revenue forecasts that were made for it. Even at the time, these seemed like numbers just plucked from the air to satisfy the project's insatiable appetite for capital, and so it has proved. They were always hopelessly optimistic.

With the benefit of hindsight, it's a miracle bankers and investors were ever persuaded to put up the money, but then the man largely responsible, the late Sir Alastair Morton, was a mighty persuasive and energetic chap. He saw it as his primary function just to get the tunnel built. Servicing investors and bankers were for him always a secondary consideration. Since Margaret Thatcher had made it abundantly clear there would never be a penny of Government support for the enterprise, that meant cajoling the City into providing the capital instead.

The amount spent far outstripped any likely return. With so much capital uneconomically sunk for ever beneath the channel, the only argument now is who should take the greatest degree of pain - equity or debt holders.

You don't have to feel too sorry for either. Most of the original holders of both classes of capital took the hit and sold out long ago. Today's ers are largely vulture capital funds who bought in at distress rates, picking up the debt for a small fraction of its face value. Likewise, few equity holders still exist from the original flotation. Many of today's shareholders are speculative new recruits, brought in at rock bottom prices to support Nicolas Miguet's campaign to reclaim the tunnel for France.

So, in a sense, much of the pain has already been taken. Yet the fact remains that Eurotunnel still has €9bn of debt to repay. The latest chairman, Jacques Gounon, says that's nearly €6bn more than the tunnel can afford to service from operating profits. His proposed solution is so crude it's almost comical. Just write it off, he tells debt holders, and then finally the tunnel could be run as a going concern on behalf of shareholders. There might even be enough money for dividends.

M. Gounon was elected to represent equity holders, so his position is not quite as silly as it seems. After all, there are only two other alternatives. Either the company could be put into administration, in which case equity holders would lose everything, or a debt-for-equity swap could be agreed, which in practice would amount to much the same thing.

And though the proposal looks a hopeless endeavour, M. Gounon does hold at least one card. Under the Channel Tunnel Treaty, debt holders must ask the permission of the British and French governments to wipe out the equity holders and put in new management.

The French government in particular might be swayed by the argument that as nasty little Anglo-Saxon hedge funds, the debt holders deserve no mercy and certainly cannot be judged fit and proper to run the main artery between France and Britain. This is especially the case as more than 70 per cent of the equity is owned by French nationals.

Whatever the answer, decision time looms. The arrangement under which interest on the debt is paid in "stabilisation notes" convertible into equity comes to an end shortly, as does the minimum usage agreement with the railway companies. Then at the start of 2007 Eurotunnel has to start making repayment of principal. Thankfully, the one thing we don't have to worry about is the only one that really matters - whether the Channel Tunnel will continue to operate. It will, for as I say, the capital has already been sunk and the tunnel is built. All the rest is just argument over scraps. If he's watching, it will bring a smile to Sir Alastair's lips.

Browne's amazing cash machine

Lord Browne's amazing cash machine shows no sign of faltering. To the contrary, his company, BP, is churning the stuff out faster than ever. In the first three months of this year, replacement cost net profit (the standard industry measure) rose 29 per cent to an astonishing $5.5bn. Out of this, the company was able to spend $2bn on buy-backs and the same again on dividends.

Round at the Treasury, Lord Browne's namesake, well nearly anyway, can only look on and weep. As he surveys his empty coffers, the bumper profits enjoyed by the oil majors will look a tempting target, yet beyond a timing adjustment to the payment of corporation tax, he's already promised he won't try to tax the excess.

BP is in the happy position of enjoying the fruits of past investment at a time of record oil prices. Yet even BP, which is better placed on this front than most, isn't replacing its oil reserves as fast as it is expending them, and that's with production largely flat. Eventually, even BP is going to have to bite the bullet and raise the benchmark set for new investment. This still stands at a recession fixed $20 a barrel, which looks far too low for a world with oil at more than $50.

Lord Browne, the chief executive, insists he has quite enough investment opportunities at $20 a barrel to see him through to retirement, and in any case, he's learned from experience that it rarely pays to raise the benchmark to accommodate a possibly short term spike in the price.

In the past, oil has conformed to a well worn pattern. As the world economy booms, the oil price rises, encouraging oil producers to throw caution to the winds and invest heavily in new development. This can take anything up to five years to bear fruit. When finally it does, as likely as not the economic boom will be over and the oil price in retreat. The excess of capacity created during the boom will further depress the oil price, making the new development look even more uneconomic than it did before.

All the oil majors say they are determined not to repeat that mistake again. It will be interesting to see how long they manage to hold the line, for it may indeed be possible that the world has changed. New demand from Asia coincides with a time when the world's productive capacity could be starting to peak. Lord Browne for one does not hold this view. He thinks the world is still a long way from peak production. Yet the truth is that no-one really knows, and the more oil that is burned in the meantime, the more quickly that point is reached. Eventually new development at even $50 a barrel will look parsimonious. It may be nearer than we think.

Freeview's threat to BSkyB

The ambition of all businesses is to run their rivals so hard that they eventually go to the wall. Yet it's not always such a great idea. That's what BSkyB did to ITV Digital. When the doomed pay TV broadcaster finally went under, Sky was offered the opportunity to turn it into a Sky Lite product, but turned it down.

Freeview was spawned instead and with the infant now grown to full bodied adolescence, Sky must be starting to wonder why it ever allowed the service to be born at all. Yesterday, Channel 4 announced that it is making one of its digital channels, E4, free to air on Freeserve, further bolstering the attractions of a service which for many is a perfectly acceptable alternative to paid for multi-channel TV. The more Freeview prospers, the harder it gets for BSkyB to meet its target of 10 million subscribers by 2010.

James Murdoch, the chief executive, is confident he can do it, and to be fair, he's certainly on target. Yet like rolling a ball up hill, the higher he gets, the tougher it becomes.