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CTRL bail out too light on operator shareholders says report

TRANSPORT OFFICIALS should have made shareholders in Channel Tunnel Rail Link (CTRL) operator London & Continental Railways (LCR) put more of their own cash into the project, MPs said last week.

A report by the cross party Public Accounts Committee (PAC) says LCR shareholders Arup, Bechtel, Halcrow and Systra's 12% contribution to the first stage of financing did not reflect the risks of a complicated project.

However, the investment allowed the shareholders to award themselves £92M of design contracts.

The LCR shareholders invested £60M in the first stage of the project, with another £430M coming from banks.

The Government was forced to rescue the CTRL with a state guaranteed bond finance package in 1998 when it became clear that revenue from the Eurostar passenger service would fall short of forecasts, undermining the finance package.

The PAC report says that LCR's shareholders did not lose their investment in the project despite its near collapse. This was because the Department of the Environment, Transport and the Regions wanted to avoid delaying the project any further while the rescue was put together (NCE 5 February 1998).

'The department needed the cooperation of London & Continental's shareholders if the deal was to be renegotiated without further delay to the construction of the Link, ' says the PAC report.

'As a consequence the Department was not in a strong position to insist that the shareholders should bear full responsibility for the near collapse of the project.'

INFOPLUS The report is available at www. publications. parliament. uk

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