TENs back on the rails

Date: 12/03/1998

JUST when you thought it was safe to go back into the water, they are back. Trans-European Networks, that least understood of all recent EU initiatives, are capturing headlines once again two years after the Florence summit refused to allocate 1 billion ecu in unspent agricultural subsidies to help fund key projects.

Chronic losses at cross-channel rail operator Eurostar and consequent demands on the British government to come up with extra subsidies for the builder-managers have highlighted yet again the exact nature of the TENs financing problem. By their very nature, these are gigantic projects demanding an unusual level of trust from those who finance them, given that the revenue flows which will eventually accrue to the contractors from such projects once they are up and running are often decades away.

For example, London & Continental Railways (LCR), the company which won the concession to build and operate the high-speed rail link between the Channel Tunnel and London, originally asked for a mere 2.7-billion-ecu subsidy from the government because it stuck its finger in the air and forecast a heavy flow of passenger traffic on Eurostar. The moment it became obvious that this was an impossible target to meet - a fact that had long been obvious to everyone except LCR - the company came back to the government for more subsidy. The rival bidder had always asked for more cash upfront, which was the reason it was rejected by the government.

It was such a clear-cut example of the TENs problem that it always seemed strange that an experienced political operator like Transport Commissioner Neil Kinnock was not capitalising on the opportunity to ram the point home. We were not to be disappointed. And, unlike Commission President Jacques Santer's previous fund-raising effort, which made TENs look like a Roosevelt-style make-work scheme, Kinnock is seeking money for a specific purpose.

Contrary to oft-stated myth, the TENs are not still on the drawing board and starved of capital. Most, except for the incredibly expensive Brenner link between Germany and Italy via Austria, are well under way. They are also benefiting greatly from EU largesse, but it just happens to be in the form of a cool 38 billion ecu from the too-invisible European Investment Bank.

What many of the schemes do need, and Kinnock's new proposals would provide, is 'seed' capital - the money to finance feasibility studies to check whether tunnelling is worthwhile and soften the pain of interest repayments and guarantees for loans made by someone else.

It is a long-overdue example of doing less better.