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More Cost Overruns Surface for Underwater Eurotunnel

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From Associated Press

As the undersea tunnel linking England and France nears its opening, its costs are rising, but revenue projections for the next few years are shrinking.

Eurotunnel operators said Monday that they will ask shareholders for at least $767.8 million to avoid running out of cash next spring.

The 31-mile Channel Tunnel between Folkestone in southern England and Calais in the north of France is an ambitious work of engineering that may revolutionize travel between Britain and continental Europe.

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But since work began in 1987, the project, dubbed the “chunnel,” has been plagued by delays, cost overruns and bickering between the operators and their building contractors and railroads.

On Monday, Eurotunnel’s British and French chairmen, Sir Alastair Morton and Andre Benard, said they are on track for putting the tunnel into operation next spring, although it will take time to build up capacity and they will need more money from investors and banks.

Eurotunnel executives believe they will need another $1.54 billion to keep the tunnel in business until it reaches a break-even point in 1998. Bankers estimate another $2.15 billion will be needed.

Eurotunnel says its bankers are insisting that half the money come from shareholders before any new loans are arranged. The new money will be used mostly for interest payments.

The chunnel is scheduled to open for freight business in March and passenger business in May. Initially, the tunnel will have less capacity for passengers than planned.

One problem has been getting the train cars for carrying private automobiles through the tunnel.

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At first, passengers will be carried in trains departing twice hourly in each direction before the tunnel reaches its peak capacity of four trains an hour later in the summer.

Eurotunnel has also decided to delay until September the introduction of tour bus travel on the tunnel trains “in order to concentrate on auto traffic, for which system capacity will be reinforced during the summer.”

Morton told a news conference that the tunnel will run out of money in May unless shareholders come to the rescue. Without that help, the tunnel will “run out of cash about three or four weeks after the queen opens the tunnel,” Morton said.

Even as the price tag for the tunnel grows, to an estimated $15.35 billion with the anticipated new funding, its projections for revenue for the first few years of operation are being cut back.

When the tunnel plans were being made in 1986-87, various estimates put the cost at about $9.21 billion.

Eurotunnel cut its forecast for revenue during 1994-96 by $144.9 million, to $2.26 billion.

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