Morton plays hard ball on the tunnel he built

Comment

Ever since he first became co-chairman of Eurotunnel, Sir Alastair Morton always saw his purpose as exclusively that of getting the tunnel built, up and running. The means by which this was achieved were not necessarily important. The paramount thing was simply to get the tunnel in place. There is rarely room for self-doubt and truth in such single-minded pursuit of the grand design. Sir Alastair, it can fairly be said, ignored the underlying reality with impunity, such was his ambition and strength of purpose. From the start the reality was always that the tunnel might get built for the sums being talked of, it might even generate a return for investors and bankers, but most probably it wouldn't. You never heard that from Eurotunnel and its advisers. Their message was always one of unrelenting optimism and flamboyant self-assertion.

Well, now the tunnel is built, so Sir Alastair has achieved his great purpose. But with formal admission that debts can never be repaid, what a mess this experiment in private finance has left behind.

With the help of Sir Alastair and French law, which gives investors higher standing as creditors than the rock-bottom position they get in the Anglo- Saxon world, shareholders may salvage the odd plank or two from the wreckage - but only if bankers take pity on them.

Sir Alastair has got the tunnel built, certainly, but he has also demonstrated in the process that infrastructure projects of such complexity, size and cost cannot be privately financed. Bankers probably always recognised this, in confidence at least. Backing Eurotunnel was never a wholly commercial decision in their case. Even Japanese bankers, the group that complains most vocally these days about being misled, were reluctantly persuaded into it by their own ministry of finance as a way of shoring up Japan's wider commerical interest in Britain and the rest of Europe.

For them it was a kamikaze act of duty for the greater good of Japan. To a lesser extent the same was true of British and French banks, who were largely arm-twisted into the mire.

But none of them will easily forgive or forget. Eurotunnel is a one-off. Nothing quite like it will be attempted again. In future such projects will require genuine partnership between state and private sector with the state shouldering a high proportion of the risk, or, as in the case of the high-speed rail link, a big slug of public subsidy.

Hard to believe, but it was less than two years ago that Sir Alastair last persuaded bankers and shareholders to dip their hands into their pockets for Eurotunnel. On that occasion Sir Alastair bullied banks and shareholders into a pounds 1.5bn refinancing. Some of the claims he made when he was trying to pull them into line ought to make him blush now, but probably won't. Even now, Sir Alastair believes he will one day be vindicated - that the tunnel will eventually pay back every penny invested and some. The irony is that it won't be until long after his death that we will know for sure. For the time being the odds look heavily stacked against him.

Nevertheless, with his talent for bluster, bullying and - where necessary - prevarication, Sir Alastair was clearly the man of the moment.

How many others would have had the cheek to persuade so many people to empty so much money into a black hole? For the shareholders, angry as they have every right to be, he is still the right man to fight the banks over what is left.

Plainly, on any ordinary analysis, the banks ought to own Eurotunnel and the shares should be worth no more than the value of their travel concessions. But Sir Alastair is playing hard ball, and will probably succeed in keeping at least a small slice of the equity for shareholders.