Risk assessment of Euro Tunnel
executive summary
The Channel Tunnel linking England with France is a superb technical and engineering achievement. However, as a business project it has undoubtedly been a failure. Shareholders in the company operating the concession for the tunnel have witnessed significant loss of value in their equity stake in the company. In 1967 proposals were invited for private financing and construction of the tunnel, with 70 - 90 % of the loans guaranteed by the British and French governments; once operational the facility was to be government owned.
In June 1982 the governments accepted an offer by an Anglo-French financing group to study the feasibility of privately financing the fixed link. This reported in May 1984, concluding that the bored tunnel option was best. Since there was no natural owner for the project, the banks felt that the chance of getting a significant portion of equity into the scheme was slim. Some level of EEC or government support would be necessary, they believed, given the size and novelty of the project, but some form of risk sharing between the private and public sectors might also be possible. On 30 November 1984, Mrs. Thatcher and President Mitterrand announced their enthusiasm for a fixed link between their two countries, provided it was financed, built and operated by the private sector. The timetable set by the two governments was tight. French parliamentary elections were scheduled for March 1986 and the French presidential election for 1988, which was also the latest year for a general election in the UK.
Under-staffing was an immediate and serious problem with eventual approval. Since the project was contractor-originated, the question immediately arose (as it always does on BOO(T) projects) of how to set up a strong owner organization independent of the sponsoring contractors that could give direction, manage the contractors and
The Channel Tunnel linking England with France is a superb technical and engineering achievement. However, as a business project it has undoubtedly been a failure. Shareholders in the company operating the concession for the tunnel have witnessed significant loss of value in their equity stake in the company. In 1967 proposals were invited for private financing and construction of the tunnel, with 70 - 90 % of the loans guaranteed by the British and French governments; once operational the facility was to be government owned.
In June 1982 the governments accepted an offer by an Anglo-French financing group to study the feasibility of privately financing the fixed link. This reported in May 1984, concluding that the bored tunnel option was best. Since there was no natural owner for the project, the banks felt that the chance of getting a significant portion of equity into the scheme was slim. Some level of EEC or government support would be necessary, they believed, given the size and novelty of the project, but some form of risk sharing between the private and public sectors might also be possible. On 30 November 1984, Mrs. Thatcher and President Mitterrand announced their enthusiasm for a fixed link between their two countries, provided it was financed, built and operated by the private sector. The timetable set by the two governments was tight. French parliamentary elections were scheduled for March 1986 and the French presidential election for 1988, which was also the latest year for a general election in the UK.
Under-staffing was an immediate and serious problem with eventual approval. Since the project was contractor-originated, the question immediately arose (as it always does on BOO(T) projects) of how to set up a strong owner organization independent of the sponsoring contractors that could give direction, manage the contractors and
References: Genus, A. 1997. Managing large-scale technology and inter-organizational relations: the case of the Channel Tunnel. Research Policy 26, 169-189. Taken from the Management of Projects by Peter W G Morris published by Thomas Telford, London, in 1994 The Euro-star and The Channel Tunnel; Patrick Hereford http://ocw.mit.edu/NR/rdonlyres/Civil-and-Environmental-Engineering/ 1-011Spring-2005/debassay_paper.pdf UMIST, MEng.450 Case Study”, The Channel Fixed Link:, Graham M. Winch. http://www.google.co.uk/search?hl=en&sa=X&oi=spell&resnum=0&ct=result&cd=1&q=stakeholders+of+project+channel+tunnel&spell=1 http://www.arup.com/tunnels/skill.cfm?pageid=2715 Grant, M., 1997. Financing Eurotunnel. Japan Railways & Transport Review April, 46-52. Lemley, J., 1995. Managing the Channel Tunnel – Lessons learned. Tunnelling and Underground Space Technology 10 (1), 9-11. Kirkland, C., 1995. The Channel Tunnel – Lessons Learned. Tunnelling and Underground Space Technology 10 (1), 5-6. Winch, G., 1998. The Channel fixed link: le projet du siècle. Unpublished case study. Manchester University.