About 300 feet below the choppy surface of the English Channel, two giant drilling machines are slowly chewing their way towards each other through a mixture of chalk and clay. At an average speed of seven feet an hour, they are scheduled to meet up in December, 1990—and turn the 200year-old dream of a 30-mile tunnel linking Britain and France into reality. It is one of the most ambitious civil-engineering projects of the century. But it now faces major problems. After overcoming many of the technical obstacles that seriously slowed construction last year, organizers of the Channel Tunnel are
encountering financial hurdles that are proving just as difficult. Soaring costs have added about $1.9 billion to the cost of the tunnel itself, and, to make matters worse, the estimated cost of a planned high-speed rail link between London and the tunnel’s English terminal near Folkestone has more than doubled.
Those rising costs and the uncertainty surrounding the so-called Chunnel project have driven down the share values of the AngloFrench company that is building it, Eurotunnel PLC. From a high of $22 on June 5, the stock slumped all summer and last week traded in London at about $13. In an attempt to stop the slide, Eurotunnel is soon expected to announce exactly how much its costs have risen and how it intends to finance the overruns.
In 1987, before work began, it put the total tunnel cost at $9.1 billion. That was raised to
$10.2 billion last fall, and analysts now say that the final bill will be higher by about $1.9 billion. The major reason for the increase is a dramatic jump in the cost of the special Chunnel shuttle trains to be built by an international consortium that includes Bombardier Inc., the Montrealbased transportation and manufacturing conglomerate. Largely because of exacting safety standards, the cost of the trains climbed in late July to $1.1 billion from $427 million.
Those rising costs have forced Eurotunnel executives to hold talks with the international syndicate of 217 banks, including the Canadian Imperial Bank of Commerce and the Bank of
Nova Scotia, that has pledged $9.5 billion to finance the Chunnel. Although Eurotunnel has raised an additional $1.9 billion on the stock market since 1987, rising costs still plague the project. Some financial analysts say that the banks are putting pressure on Eurotunnel to issue new stock before they pledge new loan guarantees. Added Stephen Clapham of the London stockbroking firm Hoare Govett Ltd.: “The banks won’t commit more money unless shareholders themselves commit more money.” Eurotunnel, however, may not want to go into the market in such an uncertain climate.
The problems have raised new doubts about a planned high-speed rail link between London and the Chunnel’s Folkestone terminal. The link, although a separate project from the Chunnel, is considered essential to making the Chunnel economically viable. When the link
was announced, towns along its projected route through the rural county of Kent protested that the 160-km/h trains would disrupt life in their tranquil communities.
As a result, British Rail altered its plans and now claims that it will put two-thirds of the 110-km line underground or in deep trenches to minimize noise and vibration. But that will raise the cost of building the high-speed line to more than $5.7 billion from an original estimate of $2.3 billion. These soaring costs and continuing political opposition, particularly at the local level, have prompted many observers to predict that the link will not be completed— if at all—until at least 1999, six years after the Chunnel link is finished and in full operation.
A further hurdle has been erected by Britain’s Conservative government, which is refusing to help fund the new line. If that delays construction, it would further cloud Eurotunnel’s prospects by undercutting its main selling point—high-speed direct rail travel that would whisk passengers and goods between London and Paris in three hours, compared with the seven hours it now takes by rail and sea. Said Eurotunnel spokesman Annabel Salmon last week: “The rail link is vital. British Rail has got to get its act together as soon as possible.”
Eurotunnel has also faced problems with Transmanche Link (TML), the consortium of 10 British and French construction companies that it hired to build the Chunnel. Laçt fall, Eurotunnel co-chairman Alastair Morton publicly rebuked TML for falling behind schedule, but, after months of tough bargaining, the two sides reached a new scheduling agreement last April. In it, Eurotunnel agreed to delay the opening of the Chunnel by a month, until June 15, 1993. And it agreed on a new package of incentives for the construction companies that could lead to bonuses of as much as $150 million for meeting the deadline.
But while squabbles over financing continue aboveground, crews continue to work aroundthe-clock. They are drilling two parallel railway tunnels, as well as a smaller service tunnel running between them. Work on the service tunnel is furthest advanced. Last week, it extended 7V2 miles out to sea from the English side and three miles from the French side, where more difficult geological conditions have slowed tunnelling.
In all, the workers involved in the project have completed about 22 miles out of a planned total of 93 miles of tunnels, putting them just slightly behind schedule. Plans call for the service tunnel to be completed by the end of December, 1990, and the main rail tunnels to be finished one year after that. However, terminals, trains and tracks must then be installed, so the Chunnel is projected not to be in full operation until 1993. And, despite its current problems, Eurotunnel insists that its first paying customers will speed between Britain and France at up to 160 km/h by the middle of June, 1993.
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