Long beset by financial problems, the rail company Eurotunnel has registered its first ever profit. Chairman Jacques Gounon has announced he will pay a first dividend to shareholders in 2009. Economics journalist Reuben Easey analyses.
It was with great satisfaction that Jacques Gounon, Eurotunnel’s CEO, announced Tuesday’s figures. He says the ‘new’ Eurotunnel is nothing like the one of old, which struggled almost from the moment it left the station.
Construction costs for the tunnel were around 16 billion euros, more than double the initial estimates – and at the insistence of the then British Prime Minister Margaret Thatcher, ‘not a penny’ of public money was used to finance it.
Consequently, the company has been forever burdened by enormous debts to the banks which put up the cash.
Moreover, estimates of passenger numbers proved to be hugely over-optimistic. But the major factor which has allowed it to finally start turning a profit is the enormous restructuring of its debt which took place in 2006.
Eurotunnel was able to wipe out its debts by repaying the banks in the form of shares. This has placed Eurotunnel on a far more even footing. The upturn in fortunes is also thanks to increased traffic through the tunnel, both on its freight service, and the passenger trains which connect London’s Saint Pancras to Paris’ Gare du Nord.
Those who have suffered most have been the firm’s small shareholders, the vast majority of them French. Having seen the value of their investments dwindle to virtually nothing, this is at last something for them to cheer about.
Date created : 2008-04-08