CHANNEL TUNNEL AFTER 170 YEARS, TIME FOR DECISION SEEMS AT HAND

Press, Volume CXIII, Issue 33191, 3 April 1973, Page 14

CHANNEL TUNNEL AFTER 170 YEARS, TIME FOR DECISION SEEMS AT HAND

(By

RAY DAFTER

in the "Financial Times," London)

(Reprinted by arrangement)

The British Government emphasised last month that no decision had yet been taken on whether or not a Channel tunnel should be built. The decision, it said, would not be made until this summer, when more facts were known. Yet the Green Paper on the project just published disguises only very thinly the enthusiasm the Government feels for the scheme.

Numerous attempts at building the tunnel have been made in the past 170 years or so; some failed because they were found to be politically or strategically undesirable; others because technology was found to be wanting. With a new political climate of entente

Icordiale and less anxiety [about Britain’s defence against the invading French (and vice versa) the time is ! deemed right for a new i attempt. < The Green Paper says: “Britain is no longer economically or socially an island. Traffic to and from the Continent will continue to grow. The basic point we will have to decide is: can we best provide for it by continuing to rely solely on developing! existing forms of transport! or by supplementing and relieving them with a Channel Tunnel? We are not merely examining yet again an old idea; we are looking for the right answer to a very pressing modern problem.” Bridge dismissed The statement ignores one of the alternatives to .al tunnel: a road bridge. It is) only in the annexe of the Green Paper that proponents) of a bridge, or a combined! bridge and tunnel are: answered. There it is said) that there would be technical j and navigational difficulties. I International law would re-) quire the prior approval of the States principally concerned with navigation in the Channel. None of these seem over-riding difficulties—there are, after all, many other technical and legal problems) presented by the tunnel concept. But the most telling point against the bridge is its cost: at least twice as much as a bored rail tunnel. Assuming that an AngloFrench agreement is achieved this year and that construction proceeds as planned to give an opening date in 1980, the tunnel is expected to cost £366m at January, 1972 prices. Some £26om of this would go on the tunnel and terminals, while the rest would cover rolling stock, project management and development expenses and contingencies. The figure takes no account of the considerable interest charges, or of the special rail link between Cheriton and London which could cost over £6om. Inflation will, inevitably, take the cost of the scheme well beyound that £366m. Nevertheless the companies behind the project have told the British and French Governments that preliminary studies completed last year showed “that even on the most conservative assumption . . . the financial profitability of the tunnel is satisfactory in the sense that it is at least equal to that of other similar projects and significantly above prevailing interest rates.” Raising the cash It is important that these companies have confidence, for they will be responsible for raising the cash. Operating on either side of the channel under the umbrella names of British Channel Tunnel Company and the Societe Francaise du Tunnel sous la Manche, these comanies are in the main finance companies and banks. The main exceptions in Britain’s case are Rio TintoZinc, which is also United Kingdom project manager; British Rail; and that peculiar company called Channel Tunnel Investments. C.T.I. was formed under another name in 1881 and has still to declare a dividend. Led by one of the most fervent protunnellers, Mr Leo d’Erlanger, the company has been at the forefront of the tunnel campaign this century; its only hope in financial terms is that its shareholders will receive a share of the tunnel’s profits once the link is open. By the time the economic and feasibility studies have been completed this summer some £5.4m wil have been spent. Half of this is coming from the private groups in the form of risk capital, which will be repaid out of profits. The Government is guaranteeing the other 50 per cent, which is being raised by the companies through loans. This mix of private risk and Government-guaranteed capital forms the basis of the financing plan as a whole. The companies are expected to raise, either privately or through the Stock Exchange, at least 10 per cent of the total cost. The balance — including possibly over-run costs—would be met by funds raised by the companies in the form of loans or bonds guaranteed by the two Governments. This Govern-ment-backed capital would be paid off within 25 years of the tunnel’s opening. Investors would be rewarded for their risk capital through dividends out of the operating profit. Furthermore, those who have injected money in the study and the initial construction phases of the project will be entitled to receive additional shares or securities during the later stage of construction to compensate for the special nature and risk of their original investments. End of study period \ We are now coming to the ■ end of phase one—the studx ■ period. The next stage, begin- ! ning at the end of July anc , extending to February, 1975 : will cost about £2om anc j include the sinking of shaft: and the trial borings of aboul ■ two kilometres of service ' tunnel each side of the

• Channel. (This service tunnel will run between the twin ! rail tunnels.) It will not be I until 1975 that phase three 'will start and construction I could be said to be truly . under way. ' On completion the tunnel • would be handed over by the ’companies to the Governjments, and they would continue the pass-the-parci 1 game by handing on the 35jmile link to an operating ) authority. This body, as the I Green Paper says, "would )manage the tunnel as a commercial enterprise in competition with other means of cross-channel transport with a view to securing the best possible earnings on capital employed in the enterprise, without discrimination between road and rail-borne traffic.” The adoption of special rates for certain goods and off-peak concessions are not precluded. Under the terms laid down, however, the operating authority wil] not be able to give special incentives to rail customers. This is at least some consolation to the road haulage industry, which Would much prefer to see a bridge or a road tunnel between England and France. Investors will be entitled to dividends for a 50-year period; after that all profiis will go to the Government The two State rail undertakings, British Rail and S.N.C.F., of France, while deeply involved with the planning and operation of the tunnel, will not be directly represented on the operating authority. They will, however, have a say through the British and French groups, of which they are members. Railways happy

The railway undertakings are naturally rubbing their hands at the prospect of a tunnel with trains as the only means of getting through it. Cars and lorries will be driven on to wagons at terminals near the tunnel entrances. British Rail will be in the real long-haul business at last. The Government says it recognises that at the moment distances in this country are generally too short for the lower trunk costs by rail to outweigh the costs of collection and delivery. Long-haul freight accounts for about one-fifth of the tonnage carried on British Rail, for instance, compared with two-fifths of the total on German railways and three-fifths of the French total. A number of schemes for improving the rail link between the Kent coast and London are being examined; these are likely to come down to two main alternatives—the improvement of the existing boat-train route via Sevenoaks (although the necessary enlargement of four major rail tunnels to take Continental gauge stock would make this extremely costly) or the provision of a new route via Ashford, Tonbridge, Oxted and South Croydon, capable of taking the high-speed train at above-average speeds. Overall, the Green Paper, while giving a clear indication of the Government’s confidence in the tunnel, begs the basic question whether a new link is really necessary. Well over £loom has been spent on ships, roads, port facilities and aircraft to cater for crosschannel traffic in recent years. Another £som. worth of shipping is coming into service. Shipping opposed Alan Cornish, chairman of the anti-tunnel organisation, the Cross Channel Transport Improvement Council, was quick to proclaim yesterday that new ships "should easily cater for all conceivable increases in traffic.” They would also not incur the “enormous risk” from sabo- ; tage, accident or industrial dispute of a fixed link. The two shipping services i which would be most affected are European Ferries and : Sealink. The former has alI ways said it was unperturbed ; by the competition; it would, however, have liked the 1 tunnel to go ahead on a ■ strictly commercial basis , without so much Governi ment involvement. Sealink • has been less forthcoming: • it is, after all, nart of the ; British and French railway i systems. But it points out ; that the new ships on order i are deliberately versatile, • suitable for routes other ' than the short channel ’ crossings. The arguments for and ■ against the tunnel will I intensify now that the Paper i is published. It is a pity • therefore that it concentrates I so much on opinions and • generalities, rather than on : hard facts on which argu- • ments can be based. Mr ’ Peyton, Transport Minister, ’ said yesterday it was too • early to publish detailed • forecasts; these were being 1 gathered together now and would be published in a White Paper this summer. The Government seems . committed to making a ; decision on the project by ' July 31, partly, one gathers, ; because the French are also 1 anxious to get ahead with it. ; As the detailed report of the ’ studies is not likely to be • with the Government until , May or June there is clearly ; going to be little chance for " extended public discussion.