Eurotunnel fire still a blight on operators two years on

Published on Monday 19 July 2010 16:07

DELAYED insurance payouts from a major blaze in the Channel Tunnel two years ago could keep the company that runs shuttle trains though it in the red this year.

Eurotunnel issued the warning as it posted a net loss of €45 million (38m) for the six months to the end of June. The figure compares with a shortfall of just €5m a year earlier.

The company, which operates the tunnel and vehicle shuttle service, but not the Eurostar high-speed passenger trains, emerged from years of financial uncertainty with a restructuring deal in 2007.

However, a fire in September 2008 nearly wiped out profits in 2009. Part of the tunnel was closed after the blaze aboard one of the trains that scoot back and forth through the 30-mile link between Britain and France.

With revenues up 22 per cent to €331m in the first half of this year, Eurotunnel said the earnings outcome would have been better had €48m of indemnities for losses resulting from the fire not been blocked since May 2009.

The log-jam has been caused by legal claims brought jointly by Eurostar and SNCF against Eurotunnel's insurers.

Eurotunnel has so far received €157m from its insurers following the fire, which led to one section of the twin-track tunnel being unavailable between September 2008 and February 2009.

Chairman and chief executive Jacques Gounon said: "I am pleased that traffic and revenues have both increased in the current economic crisis.

"However, if our insurance payments remain blocked, we shall be unable to declare a profit this year."

The group generates revenues by charging other freight and passenger services such as Eurostar to use the tunnel.

Disruption to European air traffic due to ash from the Iceland volcano boosted the cross-Channel market in the half year, leading to an 11 per cent rise in Eurotunnel's traffic revenues on a constant currency basis.

Truck shuttle traffic rose 41 per cent in the six months, despite continued pressure on the cross-Channel market due to the recession.

Car volumes increased by 17 per cent against the same period a year earlier, while coach business was up by 8 per cent.

Eurotunnel and Gounon are no strangers to legal challenges and disputes that have been dogging the firm almost since construction of the tunnel began in 1988.

Gounon negotiated the life-saving debt restructuring that won final court approval in January 2007. Goldman Sachs is currently the biggest shareholder in the group with a stake of 17 per cent, while Franklin Mutual and M & G Investment, part of Prudential, have holdings of less than 5 per cent.

A spokeswoman for Eurotunnel said the main lead insurer was XL Group while Scor and Axa were also in a consortium. "It is clear that today the insurance firms, which have very well supported the company in 2008-2009, are now in a waiting attitude," Gounon added, calling upon Eurostar to drop the legal challenge.

In 2009, Eurotunnel booked a slender profit of €1.4m, despite a "poor economic environment" and the knock-on impact of the September 2008 fire. The result was also affected by snow at the tail end of 2009, which caused major cancellations at Eurostar.

At the time of the full-year figures, in March, Gounon said: "The results for the year 2009 are proof of Eurotunnel's resilience in the face of difficulties."

The separate Eurostar business is controlled by the French and Belgian railways and Britain's London & Continental Railways.