European Infrastructure Finance Yearbook - Investing In Bonds ...

enhance the reliability of equipment that is now
approaching one-third or one-half of its overall
useful service life.
At present, the tunnel’s capacity does not
constrain the development of the different types
of traffic. In the medium or long term, capacity
could be improved by restricting access to slow
freight trains at peak times, and by scheduling
trains so that they run in batteries.
Medium-term capital expenditures are expected
to remain at about £30 million to £40 million per
year, and are related to maintenance and upgrade
programs. An increase in the existing shuttle fleet
does not form part of Eurotunnel’s current
strategy. Eurotunnel aims to take electric power
for the entire tunnel from the French national
grid, which distributes lower-priced energy than
the British grid; this requires limited investment to
help better control unhedged electricity costs.
At the end of July 2006, Eurotunnel and the
railways entered into an agreement, bringing an
end to a dispute that began in 2001 over the
calculation of the railways’ contribution to the
tunnel’s operating costs. This confirmed the
decisions made for the financial years before
2004, set out the agreement for 2005, and set the
contributions on a fixed-payment basis for the
Table 3 - Interest By Class Of Notes
Notes Interest
Class G1* Formula that accounts for relevant
index-linked UKTi and interest rate
of 3.487%
Class G2* Formula that accounts for relevant
index-linked UKTi and interest rate
of 3.487%
Class G3* Formula that accounts for relevant
index-linked UKTi and interest rate
of 3.487%
Class G4 Formula that accounts for relevant
index-linked OATi and interest rate
of 3.377%
Class G5 Formula that accounts for relevant
index-linked OATi and interest rate
of 3.377%
Class G6 Formula that accounts for relevant
index-linked OATi and interest rate
of 3.377%
Class A1 6.341%
Class A2 6.341%
Class A3 Six-month LIBOR plus 1.25%
Class A4 Six-month EURIBOR plus 1.25%
*The margin is 3.470% until June 30, 2009 and 2.887% thereafter.
STANDARD & POOR’S EUROPEAN INFRASTRUCTURE FINANCE YEARBOOK
TRANSPORTATION INFRASTRUCTURE
financial years 2006 to 2014 inclusive. A
consultation process was also established to
determine the railway operators’ contributions to
the renewal, and the related replacement costs.
Insurance coverage
Eurotunnel’s insurance program primarily
comprises policies covering material
damage/business interruption (including terrorism
risk) and third-party liability. The material
damage/business interruption policy covers for an
amount corresponding to the “maximum possible
loss”. The indemnification period for business
interruption is 24 months from the start of
the interruption.
The most notable incident was a major fire in
1996, which interrupted the business for several
months, but was covered by the insurance.
The Railways Usage Contract (RUC)
The railways’ use of the tunnel is governed by the
RUC, which runs until 2052. Under this
agreement, the railways must pay Eurotunnel a
fixed annual charge, and variable charges
determined by reference to the number of
passengers traveling on Eurostar and the freight
tonnage passing through the tunnel. The variable
charges are determined according to a toll
formula that takes into account inflation to a
certain extent and makes adjustments when
specified volume thresholds are exceeded. Any
change to the RUC requires the lenders’ approval.
Until the end of November 2006, the railways
had to make additional monthly payments to
bring Eurotunnel’s annual revenue up to the
guaranteed minimum usage charge (MUC).
In 2006, Eurotunnel received a total of
€350 million in payments: €255 million in
variable charges, fixed annual charges, and
contributions to operating costs, and €95 million
relating to the MUC.
Note Terms And Conditions
Interest
Interest is paid semiannually on payment dates
falling on June 28 and Dec. 28 of each year.
However, the note interest accrual dates are the
relevant loan interest payment dates, being June
20 and Dec. 20 of each year. The eight-day
difference between the payment dates under the
loans and the payment dates under the notes was
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