Bankers deal blow to Eurotunnel freight plan
Eurotunnel, the operator of the Channel Tunnel which links France and the UK, has been refused credit by its banks to launch a European rail freight service, first announced back in February. The company had hoped to run a service between Milan and the East Midlands in the UK, hauling trains between Basle in Switzerland and Folkestone in the UK.
The plans to diversify had been driven by the need to increase utilization of the tunnel after freight and passenger forecasts had proved to be overly optimistic. At present revenues are protected under a minimum pricing agreement with the main users of the tunnel. However this will come to an end in 2006 and the company has been seeking other ways in which to increase its sources of revenue.
Eurotunnel became the first private company to be allowed to run freight trains in France under recent European legislation liberalizing the international rail industry. It planned to build a new freight terminal in Folkestone, costing £7m, to cope with the extra volumes which it was hoped would reach 1 million tonnes by 2008.
However despite the relatively small cost of the terminal, the company’s lenders, which include Credit Agricole, MBIA and Citigroup, refused to sanction the plan. Following the high profile change of management earlier in the year relations with its banks have been strained and some analysts see the refusal to extend credit more as a result of a negotiating position related to future re-structuring of the company’s debt, than on the merits of the plan itself.
