ABSTRACT
The work of the Franco-British Channel Link Financing Group received a mixed reception. Journalists were sceptical. When they met DTp officials for an off the record briefing on 22 May they expressed the view that the report did not take the link any further forward. Many felt, with the Financial Times and Le Figaro, that Ridley’s Commons statement had poured cold water on its conclusions and that the project was still at first base. 1 To be fair, the Channel Link was an entirely novel challenge from a banking perspective. As the report pointed out, its sheer size, the very long gestation period, the dependence for revenue on traffic growth, and the insistence that there should be no government aid ‘put it outside the common experience of the private markets’. On top of this, the Link would be the longest crossing under or over water in the world, and the asset would have ‘no intrinsic value except to the project’. 2 Beneath the almost impenetrable layers of detailed analysis, the banks presented revised traffic forecasts and costings, building upon the estimates provided for the Anglo/French Report (AF82) of 1982. A more conservative view was taken of contractors’ estimates by adding 10 per cent to capital costs and assuming an eight-year construction period, with up to two years overrun. The cost of their favoured option, a dual-bore rail tunnel with a shuttle for road vehicles, was put at £2.0 billion in 1983 prices, and the maximum level of indebtedness was estimated to be £7.5 billion, £2.4 billion in 1983 prices. The real rate of return was given as 8.3 per cent, higher than that for the alternative tunnel options, and attractive when compared with the much higher capital cost and indebtedness for a bridge or composite scheme (Table 9.1). The impasse was created in the critical area of financing, where the bankers ignored the British Government’s determination that there should be no government guarantees. Two financing plans were presented, both involving a mix of investment capital, bond issues (indexed or revenue) and loan facilities, and both assuming a measure of government support, including protection against political risks, and government and/or EEC financing of a two-year development stage costing £18 million [in 1983 prices]. In the first proposal, put up by the Evaluation of Channel Link options by Banking Report, 1984
|
Option |
Capital cost (excluding rolling stock) £bn 1983 prices |
Maximum debt money terms £bn |
1983 prices £bn |
Real rate of return % |
|---|---|---|---|---|
|
Favoured |
||||
|
Bored dual bored tunnel with shuttle – unphased |
2.0 |
7.5 |
2.4 |
8.3 |
|
Other bored tunnels |
||||
|
Single no shuttle |
1.1 |
7.4 |
1.3 |
5.4 |
|
Single with shuttle |
1.6 |
12.2 |
1.9 |
4.8 |
|
Dual phased |
2.1 |
10.7 |
2.2 |
7.9 |
|
Others |
||||
|
Road bridge |
3.1 |
13.6 |
3.6 |
8.5 |
|
Composite (viaduct/immersed tube) |
6.1 |
54.0 |
7.2 |
5.1 |
