without any significant extra funding from the taxpayer, deputy prime
minister John Prescott has announced.
Key elements of the new, innovative deal with a re-structured London
- a contractual requirement to build the link in its entirety from
Folkestone to St Pancras;
- only£140m of extra taxpayers' money needed - down from£1.2bn - to be paid in year 2010;
- a Public Stakeholder share to give the taxpayer a significant new
dividend with the government getting about 35% of LCR's pre-tax
surplus after 2020 as well as not less than 35% of the proceeds of
any LCR sale and a veto on any sale of LCR before 2011;
- it guards against excessive windfall profits;
- a huge reduction in the length of the LCR concession from 999 years
to only 90 after which the railway will revert to the Government; and
- the whole railway including Eurostar will revert to public
ownership in 2086, the same time as the Channel Tunnel Concession
Welcoming the deal with LCR, Mr Prescott said:
'We have delivered an exciting and imaginative package that is
good news for people travelling to and from mainland Europe; puts us
on a level footing with French and Belgian railways who already have
high-speed links; brings certainty to those areas along the route
affected by blight; and regeneration benefits for the Thames Gateway.
Above all this is a good deal for the taxpayer.'
The rail link will be built as planned from the Channel Tunnel to St
Pancras. Railtrack will commit to acquire the section from the
Channel Tunnel to Fawkham Junction in north west Kent, which is due
to be completed by 2003. They will also have an option to buy the
section from north Kent to St Pancras, due to be completed by 2007.
If the option is not exercised, LCR will be contractually obliged to
complete the link to St Pancras.
The management contract for the operation of Eurostar (UK) Ltd will
be awarded by LCR to a consortium comprising National Express,
British Airways and the national railways of France and Belgium and
the UK Government share.
LCR will raise the capital they require through a combination of
commercial debt and bonds. These bonds, through a one-off arrangement
with HM treasury, will be government-backed to reduce the overall
cost of financing.
As part of the deal, the government will be entitled to share in any
savings resulting from the construction of the link, rather than
these being passed on purely for the benefit of the private sector.
Mr Prescott added:
'We have spent the last four months building a public private
partnership to construct the Channel Tunnel Rail Link at the earliest
opportunity. The agreement I am announcing today will deliver the
economic, regeneration, transport and environmental benefits of a
link on a basis which will be durable and which provides a fair deal
1. The government and LCR signed the Development Agreement which
underpins the design, construction, finance and operation of the CTRL
on 28 February 1996. The Agreement obliges LCR to build the CTRL
according to the scheduled works authorised under the Channel Tunnel
Rail Link Act 1996.
2. LCR informed the government on 28 January 1998 that it was unable
to fulfil its Agreement obligations. In accordance with the
Agreement, the deputy prime minister provided LCR with a cure period
in which to produce revised proposals acceptable to the government.
That deadline was subsequently extended twice with LCR's latest
revised proposals being received by the government on 15 May 1998.
These proposals have provided the basis for the creation of a
Statement of Principles which underpins the deal and which will
provide the framework for a Supplemental Agreement to the Development