AS SOON as it became evident that LCR’s planned flotation in 1998 had little chance of success, discussions with Railtrack began last autumn in an effort to put a rescue package together. The original consortium members saw this as a way of preserving their interest in LCR.
On February 12, Railtrack’s board confirmed its willingness to consider proposals which ’could be sensibly financed’ and offered ’commercial terms to justify involvement in a project of this risk and scale’.
Negotiations in the run-up to the February 27 deadline were complicated by the fact that LCR’s concession agreement was not transferable. Termination would leave the government with no option but to invite bids for a new concession, or abandon the project.
The Act of Parliament authorising construction of CTRL specifically requires all of the 108 km line to be constructed. This is deemed impossible without public funds on a scale which the Treasury would certainly oppose, despite the all-party support which the line now enjoys.
Railtrack was therefore working towards a situation where it effectively took control of LCR, probably through a rights issue which would dilute the shareholdings of existing members of the consortium to nominal amounts. Provided the shell of LCR could be kept in being, delays inherent in re-bidding might thus be avoided. Virgin and National Express, both LCR members, submitted competing bids to Railtrack on February 13 for managing Eurostar (UK).
The route of CTRL cannot be altered, but it could be shortened or phased if the government was willing to play ball. Railtrack has therefore been lobbying for ’Phase 1’ to be built from the Channel Tunnel to the junction east of Ebbsfleet where a link to the existing main line between London and Margate is planned. By cutting 17min off current Eurostar schedules into Waterloo, this would yield about half the revenue benefits of the full link to St Pancras.
This is the easy part of the project in engineering terms, avoiding more than 20 km of tunnelling through difficult ground to get under the River Thames and the eastern suburbs of London. Construction cost would be cut to £1·3bn, which Railtrack could raise far more cheaply than LCR because the risk of a Eurotunnel style default would be lower.
The rationale of tunnelling to St Pancras was that the capacity of surface routes into London would be exhausted once Eurostar carryings reached 17 million a year; back in 1991, this was expected by 2000. Likewise, freight would exceed the capacity of existing lines when carryings reached 8 million tonnes around 1998; but the actual figure for 1997 was only 2·94 million.
With capacity now a distant issue, phasing CTRL becomes realistic. Powers would be retained to build Ebbsfleet as a ring motorway terminus, and then perhaps move on to Stratford and ultimately St Pancras as the case for doing so emerged.
This strategy is intimately tied up with two other big projects for regional services across London: Thameslink 2000 and Crossrail. The latter is simmering gently on a back burner, but consultants bidding to manage Thameslink were advised by Railtrack on February 10 that the award of this contract had been put on hold. LCR was supposed to provide £100m of the £580m total funding to pay for a new station under the St Pancras throat - which would be excessively distant from King’s Cross Underground if the CTRL never gets there.
Add in the fact that Railtrack is pitching to get control of London Underground’s infrastructure under plans for breaking up the capital’s metro which Prescott is expected to announce shortly, and the outlines of a package deal begin to emerge. o
Eurorail in the wings
Apart from Railtrack, the only group expressing serious interest in building the CTRL is Eurorail. Despite being outbid by LCR in 1996, the consortium still exists although its composition has changed: current members are Kvaerner, BICC, NatWest Bank and Seeboard.
Eurorail sought £600m more in public funding than LCR, having taken a more realistic view in 1996 of Eurostar’s medium term losses. A team of 15 is working under Chief Executive Keith Clarke, following an approach to government last November when it became obvious that LCR was in serious trouble.
Unlike Railtrack, Eurorail is not negotiating with LCR, but would seek to bid for a new concession if the existing one was terminated on February 27. It has indicated that CTRL construction would not start until Eurostar was profitable, setting back completion until 2007 at the earliest. o
