1 Delivering the line and sale of
HS1 Limited
1. In 1996, the Department for Transport (the Department)
awarded a contract to London & Continental Railways Limited
(LCR) to build a high speed railway linking London to the Channel
Tunnel (High Speed 1), and to run the British arm of the Eurostar
international train service (Eurostar UK). Construction of the
line was to be funded partly by government grants (£3.2 billion)
and partly by LCR borrowing money, secured on future revenue from
Eurostar UK. Very shortly afterwards, by the end of 1997, Eurostar
UK revenues were only a half of LCR's forecasts. Consequently,
in 1998, the Department and LCR had to restructure the deal and
the Department agreed to guarantee most of the money LCR would
borrow to fund construction. When it offered the guarantees the
Department did not expect they would be called on. This is our
third report on High Speed 1.[2]
2. The Department did well to oversee the construction
of High Speed 1 within the revised funding and timescale that
it had set in 1998.[3]
This was a far better performance than some of the other rail
projects that this Committee has looked at in the past, such as
the West Coast Main Line upgrade.[4]
The Department achieved this despite the fact that the project
had successive restructurings and was complex. The line has performed
to a high standard since it fully opened in November 2007.[5]
3. However, in June 2009 the Department took LCR
and Eurostar into public ownership, and took on the £4.8
billion project debt which it had guaranteed. Revenues from Eurostar
were insufficient to service this debt as passenger numbers since
the line opened in 2007 have only been two-thirds of the level
the Department had forecast in 1998. In 2010, the Department sold
HS1 Limited, with a concession to operate the line for 30 years,
to the private sector. The Department handled the sale of HS1
Limited well and the proceeds from the sale were, at just over
£2 billion, higher than expected. The sale limits the future
liabilities arising from operational risks to taxpayers.[6]
2 Committee of Public Accounts, 22nd Report of Session
2001-02, The Channel Tunnel Rail Link, HC 630; Committee
of Public Accounts, 38th Report of Session 2005-06, Channel
Tunnel Rail Link, HC 727; C&AG's Report, The completion
and sale of High Speed 1, Session 2010-12, HC 1834, para 1.3 Back
3
Qq 24, 91, 100, 108 Back
4
Committee of Public Accounts, Thirtieth Report of Session 2006-07,
The Modernisation of the West Coast Main Line, HC 189 Back
5
Qq 108; C&AG's Report, para 1.6 Back
6
Q 24; C&AG's Report, paras 2.9-2.11 Back
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