Eurotunnel diversifies into freight market
Eurotunnel, the operator of the Channel Tunnel link between France and the UK, has become the first private company to be allowed to run freight trains in France. The operator expects to run a service between Milan and the East Midlands in the UK, and will be responsible for hauling trains between Basle in Switzerland and Folkestone in the UK.
The move comes as Eurotunnel is increasingly looking for ways in which to diversity its revenues. At present the majority of these come from the rail companies which provide existing passenger and freight services through the tunnel. Eurotunnel is paid a guaranteed minimum income, independent of the numbers of passengers or freight volumes. However this arrangement will end in November 2006 and revenues are set to fall substantially.
The reason for this is that forecasts made by the rail operating companies at the outset have proved to be overly optimistic. In 1997 Eurostar anticipated that it would carry 10 million passengers a year and UK rail freight company EWS 5 million tonnes of goods. However in 2002 only 6.6 million passengers used Eurostar and EWS carried just 1.78 million tonnes through the tunnel.
The expiry of the minimum revenue agreement and a coinciding increase in repayments on its €6.4bn debt have prompted management to attempt to re-structure its debt whilst at the same time developing alternative revenue streams. The rail freight service is expected to achieve €13m of sales in its first year and has been enabled by European legislation liberalising international rail services.
