TML breakeven elusive

Despite huge cost escalations on the Channel tunnel it seems the 10 contractors in TML will make a loss on the œ10 billion project.

As Eurotunnel launched an œ858 million cash call to cover the cost of late opening, sources in the contractor camp revealed the 10 were unlikely to recover all of the œ200 million provisions they had been forced to take in recent years.

The likely loss was broadly hinted at during Taylor Woodrow's AGM last week. Following the peace deal with Eurotunnel chairman Colin Parsons said it was 'too early to judge whether the settlement could have any beneficial effect on the provisions we have previously established.'

He added ominously: 'Clearly it was not a good contract for the builders.'

According to one TML source it is likely that the contractors will write back some of the œ20 million provisions they have each taken. This figure will probably enough to give a welcome boost to this year's profits, but not enough to achieve break even.

Last December Neville Simms, chief executive of Tarmac and one of the leading negotiators for TML, told Contract Journal that the project could not be considered a success unless the contractors made money.

He also said it had not advanced the cause of private finance.

Eurotunnel will raise œ816 million from the three-for-five rights issue announced last week. A further œ40 million will go on fees. The offer, fully underwritten, was pitched 25% below last Wednesday's closing price of 355p. Shares fell 7p on the announcement.