British government to sell off Eurostar stake

4th December 2013, Comments 0 comments

Britain said Wednesday it intends to sell off its 40-percent stake in Eurostar, the high-speed rail service connecting London with Paris and Brussels, as part of a £20-billion privatisation drive.

The move is part of a new national infrastructure plan, which sets out how the British government intends to privatise the equivalent of $32 billion or 24.1 billion euros of financial and corporate assets by 2020.

The Conservative-Liberal Democrat coalition government expects to reap hundreds of millions of pounds from selling its stake in the cross-channel rail operator.

Treasury Chief Secretary Danny Alexander said the plan was "great news" because "after years of neglect, the UK's energy, road, rail, flood defence, communications and water infrastructure needs renewal".

Alexander, a Liberal Democrat, added that no final decisions had been made over any of the privatisations plans but that Eurostar "is very much on our list for consideration".

He told Sky News: "If there is assets that the government doesn't need to own and we can release vital resources that could go to improving infrastructure elsewhere in the country, then that is a good decision to make."

If Britain does dispose of its Eurostar holding, it could come at a crucial time in the cross-Channel service's development as it prepares to face up to increased competition within a few years.

Ministers in the coalition had in the past maintained that the Eurostar stake would be retained.

The train service is currently 55-percent owned by French rail operator SNCF with the British government holding 40 percent and Belgian train operator SNCB the remaining five percent.

Marc Fressoz, a French author who specialises in transport, said it was a "good time" to sell.

"Eurostar has reached maturity on the market. It has seen off air travel on the Paris-London and Brussels-London routes," he told AFP.

He predicted that SNCF or SNCB could be tempted to increase their share.

But if a pension fund or another private investor comes in, Eurostar could face demands to increase its short-term profitability in a way that state investors do not, Fressoz said.

Eurostar is in rude health, having recorded operating profits of 91 million pounds last year -- boosted by the London Olympics -- compared with 20.8 million in 2011, and it saw passenger numbers rise two percent to 9.9 million in the same period.

The stronger performance continued in the first quarter of this year with a 10-percent rise in revenues on the back of passenger numbers which climbed five percent.

But competition beckons. Germany's Deutsche Bahn got the green light in June to run trains through the Channel Tunnel and is expected to start offering services linking London to Frankfurt, Cologne, Amsterdam and Rotterdam in 2016.

Eurostar services started in November 1994, six months after British prime minister Margaret Thatcher and French president Francois Mitterrand inaugurated the Channel Tunnel.

© 2013 AFP

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