London and Continental Railways
London and Continental Railways (LCR) is a company that was involved in the construction of High Speed 1 (HS1) in the United Kingdom. Originally established in 1994 as a private consortium to build HS1 under a contract agreed with the UK Government, it subsequently ran into financial difficulties and has been owned by the Department for Transport since 2009.
- 1 History
- 2 Current operations
- 3 See also
- 4 References
- 5 External links
LCR was established in 1994 during the privatisation of British Rail. LCR bid for and won the contract from the UK government in 1996 to build and operate High Speed 1 (known then as the Channel Tunnel Rail Link) between London and the Channel Tunnel, under the terms of the Channel Tunnel Rail Link Act 1996. As part of this deal European Passenger Services (EPS) and Union Railways, companies owned by British Rail, were transferred to LCR ownership, as well as key pieces of railway infrastructure including St Pancras railway station.
EPS was the British arm of the joint Eurostar operation, along with SNCF in France and SNCB in Belgium. LCR renamed EPS as Eurostar (UK) Ltd (EUKL). Union Railways had been developing plans for HS1 since before the opening of the Channel Tunnel and became the construction company of HS1 under the ownership of LCR.
The original shareholders of LCR were Bechtel (19%), Warburg (19%), Virgin (18%), National Express (17.5%), SNCF (8.5%), London Electricity (8.5%), Arup (3.5%), Halcrow (3%) and Systra (3%). As part of the 1996 contract, LCR was to finance and construct HS1 itself, funding the project from income received from the Eurostar operation. LCR also planned to raise additional capital from a partial stock market flotation once the project was underway.
In January 1998 LCR ran into major financial difficulties after finding that income from its share of the Eurostar operation was not at the level it expected. It blamed the lower level of passenger growth on disruption caused by a fire in the Channel Tunnel in November 1996 and the growth of competing low cost airlines. LCR's planned flotation, which had already been delayed, was aborted. With the entire HS1 project in doubt, LCR appealed to the government for help.
To enable the project to continue, LCR was allowed to issue £3.7bn of private bonds, which the government pledged to guarantee. In return the government gained a percentage of future profits from the operation of HS1 once completed, as well as a golden share in LCR. As part of the deal LCR was forced to appoint a management contract for EUKL. This was won by Inter-Capital and Regional Rail (ICRR), a consortium of National Express (40%), SNCF (35%), SNCB (15%) and British Airways (10%). The contract was to run from 1998 until 2010.
Following the access to finance, LCR was able to begin the HS1 project. Rail Link Engineering (RLE) was appointed to design and engineer HS1. RLE was a group made up of the four engineering companies involved in LCR; Bechtel (50%), Arup (19%), Halcrow (17%) and Systra (14%). In addition, Railtrack was brought into the project by the government and agreed to purchase HS1 from LCR once complete.
To reduce the risks surrounding the project, the construction was split into two phases. Section 1, from the Channel Tunnel to Fawkham Junction in Kent, was to be managed by Union Railways (South) under the control of Railtrack, who committed to purchase Section 1 from LCR once complete for the cost of its construction. The more complex part, Section 2 from Fawkham Junction to London St Pancras was to be managed by Union Railways (North). Railtrack also purchased an option, to be exercised by 2003, to control Union Railways (North) during construction and acquire Section 2 once complete. With the completed HS1 in Railtrack's ownership, EUKL would then pay track access charges to use the line.
Following a series of rail accidents and a subsequent share price collapse, Railtrack announced in April 2001 that it would not take up its option to project manage and then purchase Section 2. Instead, Section 2 would be owned on completion by LCR, with Railtrack owning Section 1 as well as being responsible for operating both sections.
In October 2001, Railtrack was placed into administration with debts of £7.1bn and in October 2002 its assets were transferred to the newly created 'not for profit' company, Network Rail, whose debts were guaranteed by the government. LCR purchased Railtrack's interest in Section 1 for £295m, meaning that both sections would once again be in LCR's ownership. Network Rail agreed to pay LCR £80m for the right to operate and maintain HS1 on LCR's behalf once complete.
High Speed 1 completion
Section 1 of HS1 was completed in September 2003 and handed over from Union Railways (South) to LCR.
In March 2006 LCR shareholders rejected a takeover bid led by Sir Adrian Montague. Shortly afterwards the Office for National Statistics reclassified LCR as a public corporation due to LCR's reliance on government funding and the resulting high levels of influence the government enjoyed over the company.
HS1 was finally finished in November 2007, when Section 2 was completed and handed over by Union Railways (North) to LCR.
Following the Channel Tunnel Rail Link (Supplementary Provisions) Act 2008, the Department for Transport took direct ownership of LCR in June 2009 for a nominal price. This was possible due to the company's dependence on £5.1bn of government-guaranteed debt, and the government's special share in LCR giving it a wide range of control over the business.
The government stated it planned to sell off LCR's assets, such as EUKL and HS1, as individual companies to recoup some of the large amounts of government money paid to LCR since 1998.
On 31 December 2009, EUKL was renamed Eurostar International Limited (EIL). On 1 September 2010, the three national Eurostar operators merged into a single company with a single management structure. Following this change, the ICRR management contract for the UK business was terminated. All Eurostar assets were transferred to EIL, with LCR's holding in the new company becoming 40%. The remaining shares were held by SNCF (55%) and SNCB (5%).
High Speed 1 sale
BRB (Residuary) assets
Following the abolition of BRB (Residuary) Limited (BRBR) on 30 September 2013, LCR took ownership of a number of former British Rail offices in Croydon, Derby, Manchester and Birmingham, as well as sites in Oxford and Leeds. It also took over the management of the closed Waterloo International railway station and North Pole depot, on behalf of the Secretary of State for Transport. The remaining BRBR assets and responsibilities were split between the Highways Agency, Network Rail and the Rail Safety and Standards Board.
On 4 December 2013, the government announced that it intended to sell LCR's 40% stake in EIL. In June 2014, the shareholding was transferred from LCR to HM Treasury and the sale process was subsequently launched on 13 October 2014. The sale was completed in March 2015, raising a grand total of £760 Million.
LCR is now a state-owned railway property development company. It is involved in a number of regeneration projects on former railway land, including King's Cross Central, Stratford City and Manchester Mayfield. It also manages the closed Waterloo International railway station and North Pole depot, as well as providing property advice to HS2 Limited.
- "Stakeholders London and Continental Railways". OMEGA Centre.
- "LCR set to award contracts for rail link tunnels". The Independent. 3 January 1998.
- "Shooting Star". Marketing Week. 5 March 1998.
- "Memorandum by Inter-Capital and Regional Rail Ltd (RES 4)" (Press release). Parliament.uk. 20 November 1998.
- "United Kingdom High Speed 1" (PDF). Systra.
- "Railtrack share collapse continues". BBC News. 4 April 2001.
- "Railtrack". The Guardian. 27 June 2002.
- "Debt-laden Channel tunnel rail link is 'nationalised'". The Guardian. 21 February 2006.
- "£19bn plan for high speed rail link". This is Money. 6 August 2006.
- "London and Continental Railways Limited (Oral statement)" (Press release). Department for Transport. 8 June 2009.
- "Eurostar restructure sees UK expand rail stake". AllRailJobs.co.uk.
- "Eurostar Ownership & Structure". Eurostar.
- "£2.1bn HS1 sale lifts privatisation prospects". The Financial Times. 5 November 2010.
- "LCR takes on BRBR properties". LCR. 30 September 2013.
- "UK government revives infrastructure drive". The Financial Times. 4 December 2013.
- "House of Commons Hansard Ministerial Statements for 19 June 2014 (pt 0001)". UK Parliament. House of Commons. Retrieved 3 October 2014.
- "Eurostar rail stake touted for sale by UK government". BBC News. 13 October 2014.