The news that a French engineering company, the Eiffage Group, has just bought another 1.76% of Channel Tunnel shares (=€143.5m) prompted me to ask, “How French is the Tunnel?” and search a bit more into the ownership of the Channel Tunnel in the reports of Getlink, the company that owns it.
This extra investment means that this French company now holds 20.76% of the total share company of Getlink and 20.72% of the voting rights.
In the beginning
Nearly four decades ago, the Tunnel’s construction was financed entirely by private capital, as governments held back from such a risky venture. Unfortunately, in just a decade, the 1990s, when the cross-channel transport through the tunnel became operational, the rise in low-cost air carriers (Ryanair, EasyJet) created unstoppable competition, so passenger numbers for the trains were lower than expected and the enterprise did not make money for the original investors.
In 2007, the debt was restructured on the French Stock Exchange into a long-term investment of 40 years (until 2047). Happily, since then the position for investors has improved. They are now getting dividends. Many also get privileges of a 30% reduction on tickets for Le Shuttle, in proportion to the size of their shareholding. These are mostly not stock market gamblers keen to buy and sell frequently. In fact, they get double privileges if they have held their shares for more than two years. These investors could come from anywhere in the world, but a proportion of them are likely to be those who bought shares in the first issue of the 1980s, in the flush of enthusiasm for this bi-national enterprise. They have held on to them all this time – patient capital indeed.
From debt to profit
Getlink is now turning a good profit as passenger numbers have returned to both Eurostar and Le Shuttle. Each of these has to pay a fee per train that passes through the tunnel (some €4,405 up to €4,806, depending on whether peak or off-peak) plus a fee per passenger of €17.93, included in the ticket price for passengers. As passenger numbers have now returned to pre-COVID and pre-Brexit levels, that income flow is satisfactory.
Freight trains also pay fees, depending on the tonnage they carry. Fret SNCF (freight on the French national railway) was “gobbling state aid” (the words in the Getlink report) and has now been trimmed, with “reduced scope by 20%”. However, the other Freight companies that use the tunnel, the alternative providers of DB Schenker, GB Railfreight and Europorte are praised for providing good alternatives and income flow.
The third, and more recent source of income for Getlink is the interconnector for electricity installed through the tunnel last year. This brings electricity generated in the French nuclear power stations into England. Some of these nuclear power stations were working below capacity a few months ago as they were undergoing maintenance. That is now complete. Getlink has negotiated a contract worth €250m for the use of the interconnector during 2024.
Factors that affect Getlink’s performance
Other factors of interest to investors that affect the forecast of Getlink’s performance are:
- Slower inflation which will increase the spending power of customers (that means more affluent customers paying for Eurostar tickets or taking family to France through the Shuttle on holiday).
- Their main competitors for the cross-channel routes are the two Dover ferries. As oil for these ships is likely to cost more this will result in more travellers using the tunnel.
- Stopping social dumping by foreign shipping companies which means they have to pay their crew more, rather than paying the lowest rates to non-unionised labour.
- EU regulations against anti-competitive secretive trade agreements bring down costs.
- The prospect of another rail company, Evolyn, using the tunnel which should bring more passengers and trains going through the tunnel.
So has my reading of the current Getlink report answered the question about how French it is? This is of vital importance to Kent customers of Eurostar who now find that, since the UK Government sold off the UK-owned shares in Eurostar in 2015, we really have no say in whether Eurostar stops at Kent stations. Eurostar did not get any assistance from the UK Government during the pandemic, reportedly their request was dismissed by the Johnson government on the grounds that it was French so must seek assistance from the French government. Of the freight trains that go through the tunnel, only GB freight seems to be financed from the UK, that is to say specifically that it is financed by Infracapital a global investment company with a management office in London. Europorte is a subsidiary of Getlink. DB (Deutsche Bahn) is German.
Do we care who owns our infrastructure?
How much should we, residents in England, be bothered by foreign ownership of infrastructure we need and use? Electricity, water, and rail companies in the UK are almost all operating with foreign investment. This is global Britain. Should we be happy that so many foreigners have entrusted their money to us? We are a good-paying investment.
The problem, as Kent residents are discovering in our campaign to get Eurostar to stop again at Kent stations, is that the foreign-owned company, Eurostar, will then make decisions on grounds of what is best for the return on investment of their shareholders (and elimination of debt) rather than what suits the users and payers of their services. Will Getlink do the same? Or does the presence of competitors (ferry companies and cheap airlines) help to curb any rise in prices?
The new investor, for a fifth of the ownership, is a French civil engineering company, which boasts,
“creator of resilient and sustainable cities and infrastructure, the Eiffage group places its environment strategy at the heart of everything it does.”
We need #TrainsNotPlanes
The trains going through the tunnel are the most environmental and carbon-neutral way of travelling between Great Britain and the mainland of Europe, moving as they do powered by French atomic energy. Let’s hope this company, in light of their declared environmental principles, is in favour of any proposal that promotes the tunnel-bound trains making use of the stranded asset at Ashford International Station again.