‘Chunnel’ board, officials ousted

From combined dispatches

VILLEPINTE, France — Angry shareholders sacked the entire board of the “Chunnel” between Britain and France yesterday, frustrated with the company’s huge debt and failure to attract more travelers.

Led by French investors, they also ousted Eurotunnel Group Chief Executive Richard Shirrefs and Chairman Charles Mackay, saying they were not doing enough to rein in the group’s $10.8 billion debt.

Passenger traffic through the English Channel tunnel hovers at about 15.6 million people a year, instead of the predicted 30 million.

A majority of 63.4 percent of the shareholders voted to oust the board after a tense annual general meeting just outside Paris, which lasted more than eight hours and was attended by about 2,000 people.

The shareholders promptly installed a new French chairman and other board members of the Eurotunnel Group. It was the first time in French history that individual investors have toppled the management of a major listed company.

Eurotunnel’s woes go back to the “Chunnel” project’s introduction in the late 1980s, when British Prime Minister Margaret Thatcher vowed that “not a public penny” would be spent on the project.

“There is too much debt,” Mr. Shirrefs told shareholders yesterday, once the jeering had died down. “There was too much debt from the start.”

At Eurotunnel’s start, the company promised investors annual passenger traffic of 30 million from the first year of service. Construction also was a problem, costing more than twice the amount expected.

The tunnel opened in 1994, but didn’t become fully operational until the next year. Since then, passenger traffic on high-speed Eurostar trains and vehicle-carrying shuttles has fallen short of the predictions, 15.6 million last year, according to the company’s figures.

“There were errors in the forecasts from the beginning,” Mr. Shirrefs acknowledged before the first vote.

The shareholders yesterday voted to put in place a new management team led by Jacques Maillot, former chairman of French tour operator Nouvelles Frontieres, and including Pierre Cardo, a lawmaker for the ruling right-wing Union for a Popular Movement (UMP) party.

The dissident shareholders had been rallied by French businessman and presidential candidate Nicolas Miguet, with the Adacte association of Eurotunnel investors.

“Today, in Villepinte, shareholder democracy has expressed itself fully. It’s a historic moment,” regional UMP deputy Richard Mallie said in a statement.

However, Mr. Maillot warned that the task ahead would be far from easy.

“We are convinced that the game has not been won, far from it, we must start to make numerous decisions with all the partners of Eurotunnel and follow the solutions that are offered to us,” he told shareholders.

“Without knowing the detail of the company’s situation, we can guarantee nothing, but our ultimate goal is to restore shareholder confidence in the company they believed in.”

Shareholders long have been unhappy with the company’s performance.

Dubbed the “construction project of the century” and financed entirely with private funds, the tunnel never would have existed without the financial contribution of individual and institutional investors who snapped up the company’s shares when they went on the market in 1987.

Less than a year after the undersea tunnel linked northern France and southern England in May 1994, French politicians were urging an inquiry into the role of banks and the information available to small shareholders.

By 1997, the company was threatened with bankruptcy and called on the British and French governments for help despite a 1986 agreement between the two countries that the tunnel would receive no public funds.

Bankruptcy was averted thanks to a rescue plan under which French authorities extended the tunnel concession until 2086 and creditor banks took stakes totaling 45.5 percent of the group’s capital.

Seven years later, history appeared to be repeating itself with the company struggling under $10.8 billion of debt that needs refinancing in two years.

The company posted a loss of $2.29 billion for 2003. It has announced plans to start a freight service to boost revenue and has called for government help with restructuring its massive debt.

Eurotunnel shares rallied yesterday ahead of the expected management ouster and closed 7.1 percent higher in Paris at 73 cents.