Governor Schwarzenegger wants sufficient private
financing in place ($30 billion) before he will
support at $10 billion bond issue on the '08
ballot. A good object lesson is the
British/French "Chunnel." As you know, this
tunnel under the English Channel is around 30
miles long and is dedicated to railroad only. It
connects London, Brussels and Paris. Clearly it
is a prototype for our California high speed
train project, which is intended to connect LA to
SF.

A cost-benefit white paper abstract written
recently on the "Chunnel" (Jai Barath Manapati,
University of Lille, Paris Campus) states the
following:

Ten years after the opening of the tunnel, it is
clear that our structural problems, which are due
to the strictly
private-sector funding of the project, and
excessively high debt level and insufficient rail
traffic, cannot easily be
resolved without a comprehensive and innovative
approach to the problems faced by all the stake
holders of the
cross-channel rail industry.

The Chunnel suffered from major cost overruns,
and has been in financial difficulty for 10
years. Too expensive to build, too expensive to
operate and too few customers. They can't even
pay off their development debts. Can't the CHSRA
promoters learn something from this?

There are some other valuable insights in this
paper that should help us focus on the realities
of high speed rail. Here's another quotation:

"The Chief Executive highlighted these (fiscal
problems) as the lack of use of the
infrastructure, an inability to attract business
because of high access charges, too much debt
meaning its interest payment burden was too high,
a much lower volume of both passenger and rail
traffic than forecast (passenger use was forecast
at 16 million when it is actually 6 million). . .
"

"The history of large capital projects suggest
that almost invariably capital costs tend to be
underestimated (and revenue income
overestimated.)"

That, of course, is what we are seeing with the
California high speed train. Here is another
recent financial assessment of the Chunnel. Read
it and substitute Calfornia High Speed Rail for
the word "Chunnel" or "Eurotunnel." It reads
almost like a prediction of the future. You have
to ask, why after 10 years, does the Chunnel need
financial restructuring?

Martin
==============================
French court approves Eurotunnel restructuring
By Nicola Clark
Monday, January 15, 2007

PARIS: A French court on Monday approved a
multibillion-dollar restructuring plan for
Eurotunnel, making way for the debt-burdened
operator of the undersea rail link to emerge from
bankruptcy-law protection.

"This opens a new episode for the company," said
Judge Perrette Rey, president of the Paris
Commercial Court, who gave management three years
to implement a plan that aims to slash
Eurotunnel's £6.2 billion, or $12.1 billion, of
arrears by more than half.

The court's ruling caps nearly 20 years of
financial woes for the operator of the Channel
Tunnel linking France and Britain. The "Chunnel,"
as it has been known, has been unable to lure the
volumes of passenger and freight traffic
envisioned when digging began in 1987.

"Eurotunnel welcomes with great satisfaction this
immediately enforceable decision, which lifts the
shackles of its debt, preserves the integrity of
the concession and allows it to look to the
future with confidence," the company said after
the judge's ruling.

"This company has been saved" from liquidation,
said the Eurotunnel chairman and chief executive,
Jacques Gounon.
Under the plan, which was approved last month by
the main Eurotunnel creditors and a majority of
shareholders, outstanding debt would be cut to
£2.84 billion and the company would issue £1.28
billion in new bonds convertible into stock.
Holders of senior debt would be repaid in full,
while holders of subordinated bonds - the
lowest-priority creditors in case of a bankruptcy
- would receive £90 million in cash and £230
million in convertible bonds.

Holders of so-called Tier 3 debt, an intermediate
credit category, would get £150 million in cash
and £1 billion of convertible bonds. Eurotunnel's
700,000 shareholders, meanwhile, will own at
least 13 percent of a new French holding company,
Groupe Eurotunnel, down from 100 percent of the
existing company.

Originally heralded as one of the greatest
triumphs of modern engineering, the Eurotunnel
soon became almost as renowned for its massive
cost overruns. Under the 1986 Treaty of
Canterbury that paved the way for the tunnel's
construction, the British prime minister at the
time, Margaret Thatcher, and the French
president, François Mitterrand, agreed that
Eurotunnel would not benefit from subsidies or
other forms of state aid. Eurotunnel was
therefore obliged to seek financing from private
banks and to raise equity through a public share
sale.

But the cost of the project, originally budgeted
at about $10 billion, quickly mounted, ultimately
reaching $17.5 billion. That led Eurotunnel to
borrow more and to issue new shares in 1990 and
1994. Competition from discount airlines also has
taken a toll.
Richard Shirrefs, a former Eurotunnel chief
executive, once described the company as being in
"a stable equilibrium of failure."
The company's financial troubles have pummeled
its stock price, which fell from the equivalent
of ¤7.77, now $10, a share when the Channel
Tunnel opened in 1994 to about 44 cents last May
12, 2006, when the shares were suspended from
trading. Gounon said Monday that he expected
trading in the company's old shares to resume in
the second half of February and for an exchange
of those shares for new Groupe Eurotunnel stock
to take place at the end of February or early
March.

"The future of the company is now secure," said
Nicolas Miguet, a French Eurotunnel shareholder
and populist politician who led a revolt in 2004
that unseated the company's management. "But
shareholders are still waiting to see a return on
their investment. Creditors have received
billions in interest payments over the last 20
years, but we haven't seen anything."
Eurotunnel, which employs 2,300 people, has not
reported financial results since 2004. Auditors
refused to certify its 2005 earnings figures
because of uncertainty about whether the group
would continue as a going concern. Gounon said
Monday that the company would now seek
certification of its 2005 and 2006 earnings with
an eye to reporting both sets of figures in late
February.

-- 
**********************
Martin Engel
1621 Stone Pine Lane
Menlo Park, CA 94025
650:323-1670
martinengel@earthlink.net
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