Eurotunnel lines up move to connect with London City Airport bid
Eurotunnel, the group that operates the channel tunnel rail link between France and the UK, is planning a spate of deals in the coming months that could see it take a stake in London’s City Airport.
The company, which suffered this summer as thousands of Calais migrants repeatedly stormed the tunnel entrance, is planning to join a consortium bidding for the airport, which has been put up for sale this year.
“We are in the process of joining up with one of the consortiums,” said Jacques Gounon, chief executive, in an interview with the Financial Times, declining to say which one.
“We can help to convince [the government] that the reasonable and cautious extension of London City Airport is good for the City, good for Canary Wharf and is good for London,” he said.
One of the bids for the £2bn asset comes from Canadian investment giant, Ontario Teachers’ Pension Plan, which has partnered with the sovereign wealth fund of Kuwait and Hermes.
Another is from Allianz and Borealis Infrastructure, the Canadian pension fund, which already owns the line from the Channel tunnel to London St Pancras.
Canada Pension Plan Investment Board and PSP, another Canadian pension fund have also submitted a bid, while Australia’s Macquarie is also thought to be considering an offer.
The interest from Eurotunnel is part of the company’s wider strategy to move beyond operating the concession on the Channel tunnel — which it has until 2086 — and run a greater range of cross-border infrastructure projects.
Mr Gounon said the company was also considering buying the 51 per cent stake it does not already own in Eleclink, a joint venture started in 2011 with Star Capital to develop an electricity interconnector between France and the UK.
“I have in mind to buy back Star’s shares,” he said, adding that he may bring in other partners at a later date. “I do think that it’s better to have a co-investor in order to manage the project and limit the risk.”
Mr Gounon said he also planned to refinance about €1bn of the company’s €4bn debt, locking into low interest rates before the Federal Reserve raises rates.
He said the company could get a “better rate than when the debt was taken out all those years ago because we now have the record and we have the profitability”, he said.
Eurotunnel was founded in 1986 to build the Channel tunnel, a project that was vastly over budget, saddling the company with £8bn worth of debt.
It was forced into one debt restructuring in 1997 and another in 2005. The company in 2011 reported its first ever profit and has been in the black ever since, reporting a net income of €57m in 2014.