…to its investors? The project (as far as I know) was very successful, anfd the tunnel carries a vast amount of freight. Travel time and expense from the continent to the UK are much cheaper with the tunnel. So, did the investors win big?
No, it was a disastrous investment. Eurotunnel shares are worth about a tenth of their launch price twenty years ago. Cost overruns leading to enormous debt, and lower than expected passenger numbers.
That may be, but the chunnel has just posted its first annual operating profit; i.e. it took in more than it spent during 2007. I’m sure there were some accounting tricks involved, and it’ll be many years before any so-called profits make up for the huge cost of building the tunnel.
As mentionned, Eurotunnel turned a (symbolical) profit for the first time this year after having been an unmitigated disaster for investors. It must be said that meanwhile, the value of the stocks had completely collapsed, their value further vastly diluted by capital raises (mostly creditors banks accepted capital in exchange for uncoreverable debt) and creditors ate up a significant part of the money they were owned IIRC.
In other words, if you invested in Eurotunnel when the company was created, your investment has evaporated.
On the other hand, I expect you could make a case that it has made a profit for Britain (in terms of additional economic activity) if not for the investors.
The moment they decided that all road vehicles would have to travel by train was the moment that the investment became non-viable, and to any observer at that time, this was blindingly obvious - I certainly saw it coming. I guess the folks with the money were blinded by the glamour of a huge engineering project and the romance of a direct connection to the Continent.
When 4 various schemes were originally proposed, there were 3 roadway proposals that were deemed viable and only one all rail. I think maybe the French wanted the rail option the most and were prepared to use state funding from their end to achive it, but it was still a stupid decision.
The reason the rail option was disastrous was that trying to make rail even slightly viable depended upon huge investment in the UK rail network. This was before full privatisation of the railways, but during the period it was being talked about - this period of talking took the best part of 10 years, implementation was a disaster, and the Channel Tunnel rail links got delayed and delayed, first by this railway sell off, and then through public enquiries.
It meant that investor confidence in the overland railway link was low, which in turn lead to huge delays in getting the rail link planned, financed, and let’s face it, it is only last year the project was actually completed which includes the full overland rail link, along with the supporting railway terminals.
Delays were exarcerbated by political interferance from the previous administration who changed the route several times, this led to ever more public inquiries and complaints of land value blights due to the uncertainty.
Now that the link is finally in place, a good 24 or more years after serious planning and consultation began, and a full 14 years after the tunnel itself opened, finally this is beginning to turn a profit, though this is on the back of a huge share value writedown, several writedowns in fact.
Now, had the planners gone for a motorway road link, there would have been no requirement for all the railway shenanigans, the road link would have been far easier to plan and build as it would not have needed to come directly into London at all, the thing could have been fully operational getting toward 20 years ago, because the tunnel construction, signalling and integration into 2 completely differant systems would have been easier, the project would have cost a huge amount less.
There would also have been much less opportunity for disruption with French industrial action.
Its a fantastic engineering project, but it need not have been anything like as costly, or late, or simply inconvenient its a great example of dreams overcoming common sense.
The ferry companies were originally very worried about the impact on the Channel Tunnel to their business, and if a sensible scheme had been selected they would have been right to worry. As a measure of how bad this scheme actually is, you only need look at the cross channel ferry business - because a good scheme would have shut them down, but they are actually increasing their profits.
So why were the roadway proposals shot down? Driving 30 miles through a tunnel could be problematic but was it cost-prohibitive or physically impossible?
I was a shareholder. It will turn out to be a very good investment for the banks.
There are motorways both ends of the Channel Tunnel. The Tunnel failed for a number of reasons, mainly bad management and interest rates.
The bad management is not limited to:
There should have been much more private capital raised - resulting in less borrowing.
The management should have started running freight trains ASAP, instead of waiting as they did, even at the cost of delaying passenger openning.
The control points at each end are unable to cope with peak traffic, resulting in huge queues while reducing the actual traffic.
At the French end there are big security problems with people trying to get to Britain illegally.
They failed to realise that the ferries would drop their rates to compete and thus budget for the competition.
And much more.
And the length of the concession was far too short.
Would a straight motorway have worked out better? I know the ventilation issues would be problematic…
To actually return the total investment though, don’t most projects of this nature require decades?