Tunnel link bidders seek more from Treasury

BY CHRISTIAN WOLMAR

Transport Correspondent

The cost to the Treasury of the Channel Tunnel rail link is likely to exceed by far the original estimate of around half the £3bn construction bill for the line, according to sources close to the project.

The tenders for the biggest construction project since the building of the tunnel itself and the first new main railway line for a century are due in this morning. They are all likely to say that the project will need more government funding than previously anticipated.

Four consortia are bidding for the right to build the 70-mile line between St Pancras in north London to the mouth of the tunnel in Folkestone.

Originally, in an effort to limit the amount of subsidy, the Government said it would subsidise only the domestic aspects of the line, but last year it accepted that support would also be available for the international aspects.

However, Department of Transport sources are worried that the four bidders will all ask for much more than anticipated in a memo leaked last year, which suggested that the maximum available would be about £1.5bn.

The winning consortium, which will be the one requiring the least subsidy, will receive a package of benefits. These are the assets and income stream of European Passenger Services, which runs the Eurostar service that links London with Paris and Brussels, the expertise of Union Railways, which has prepared the groundwork for the link, land at Ashford, Kent, the 130-acre site at King's Cross, which will be ripe for development once the line is completed - but which has a present value of virtually nothing - and a pool of cash.

One factor likely to add to the call on the Treasury is the poor performance of Eurostar, which has been operating at loadings of less than 15 per cent on its run to Brussels and barely over 50 per cent on the Paris trains. This has considerably reduced the value of EPS as originally set out in the tender document to well below its asset value of £720m. Bidders consider it now to be worth only £200m-£300m.

The timetable for the link presents an added risk for which the bidders will seek compensation. The Bill enabling its construction is currently in Parliament and is expected to become law at the end of next year. However, there is still considerable opposition from many residents' groups in King's Cross, Barking and Kent and any concessions they win may push up the cost of the link.

While three of the consortia include contractors, the fourth, London & Continental, has attempted to sell itself as a transport company, more interested in the long-term prospect of running the line than in the construction project itself.

There is no precise timetable but the Government is expecting to select two bidders by the summer and announce the winner in the autumn. It will try to do so at the Conservative Party conference in October, but the sheer logistics of weighing up what are expected to be very different bids offering a variety of extra features will probably take it into 1996.

Union Railways expects that the tender documents from the four bidders will amount to 50 cubic metres of paper, showing the complexity of the assessment task.

The four bidders are:

Eurorail: Trafalgar House, Natwest, BICC, GEC, Hongkong and Shangai Banking Corporation, Seeboard;

Green Arrow: Hochtief, Costain and Siemens;

London & Continental: Arup, Bechtel, Virgin, Halcrow, National Express, SG Warburg;

Union Link: John Mowlem, Phillip Holzmann, Spie Batignolles, AEG, Setec and Kaiser Engineering and Construction.