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Grim prospects for LCR

LCR'S CHANCES of holding on to the CTRL and the Eurostar service looked slim as NCE went to press.

LCR had already failed to produce a credible plan for making Eurostar profitable before meeting the Deputy Prime Minister last week, and that was after months of agonising over its financial problems.

LCR has also ruled out getting a rich investor to fill its £1.2bn funding gap. 'Finding a private sector shareholder is not the solution,' said chief executive Adam Mills.

Merchant bankers also doubted that the project could be made to work by skewing debt and bond repayments until much later in the operation phase because of the size of the hole in LCR's financing plan.

City sources agreed that Railtrack was the most obvious candidate to rescue the project, assuming the government takes back Eurostar.

But if Eurostar was taken out of the equation other candidates could emerge to fight for the project, forcing a retender.

Eurorail, the consortium of Kvaerner and BICC backed by NatWest and HSBC banks which lost out to LCR in the original CTRL competition, recently expressed interest in taking a stake in the project.

One of Eurorail's weaknesses during the initial tender was a lack of operating expertise needed to run Eurostar. But with Eurostar out of the equation, Eurorail could bid on the strength of its construction expertise.

It is also possible that LCR could bid for a rail only project if Eurostar were taken out of the equation. As with its first bid, it could emphasise its strength as a construction client having brought the procurement of CTRL close to the start of construction within tight budgets.

To do so would almost certainly require a management shake up for the City's benefit. Virgin and National Express would also probably be replaced, as their input so far has been on the passenger services side.

The project could still be scrapped, although political and economic pressure may be too much to allow this.

Renationalising the CTRL and building it with taxpayers' money looks extremely unlikely however, as it would add £5.4bn to the public sector borrowing requirement.

Andrew Bolton

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