Channel tunnel owner slashes rates

Eurotunnel, the struggling Channel tunnel owner, today announced plans to slash access rates for train operators in a bid to boost traffic and reverse heavy losses.

Eurotunnel said the cuts would allow the high-speed train operator Eurostar to increase traffic to Paris and Brussels and potentially to launch new destinations such as Amsterdam.

Freight operators such as EWS would enjoy the biggest rate reductions - up to 75% - potentially increasing Eurotunnel's share of the cross-Channel freight market.

The radical proposal would require agreement from creditors on a big financial restructuring of the company. Eurotunnel announced its proposals as it reported a loss of €1.9bn (?1.3bn) for 2003 following a "very tough year" that saw heavy competition and the Iraq war.

Today's proposed restructuring would depend upon a reduction in the amount of Eurotunnel debt and interest payments. Richard Shirrefs, the chief executive, said the high tunnel access charges were "strangling" traffic growth.

He said: "Taxpayers are not getting the benefit they should for their money and Eurotunnel shareholders have seen a substantial loss on their investment."

Eurotunnel is seeking to reach an agreement in principle this year and aims to implement the plans in 2005. It said it expects constructive engagement with its industrial and financial partners. Eurotunnel, which nearly went bankrupt in 1998, is weighed down with &euro:9bn of debt left over from its costly construction and delayed opening.

Mr Shirrefs, under siege from rebel shareholders seeking to oust the company's management, billed the proposal as a make-or-break deal that could "sort out its financial problems once and for all".

However, Britain ruled out using taxpayers' money to help bail out the company, whose debt burden will get much heavier in 2006 when a deal guaranteeing minimum revenues expires. Joseph Gouranton, the shareholder activist who is leading a battle to topple the company's management, welcomed the plan as a step in the right direction but said it could still spell bad news for stockholders.

"Shirrefs is finally starting to realise what we've been saying all along: that we need to do something drastic to cut debt," he told Reuters. "However, it is not clear what the plan would involve and it could mean further dilution for investors."

A Paris court ruled in December that Eurotunnel, which has never paid a dividend, must give investors the chance to vote its management out of office at its next shareholders meeting in April.

Retail investors own more than 40% of Eurotunnel's share capital, currently valued at about €1.4bn. Eurotunnel has lambasted those leading the assault on management, arguing that their pledges to cut debt and boost revenues are fanciful and carry serious risks.