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Eurostar International Ltd. said plans to add trains from London to Amsterdam and Marseille over the next two years have boosted the Channel Tunnel express operator’s value as the U.K. seeks to sell a 40 percent holding.
The services spanning as much as 6 1/2 hours will provide a new avenue for growth should a stuttering European economy makes it tougher to compete for market share on Eurostar’s core routes from the British capital to Paris and Brussels, Chief Executive Officer Nicolas Petrovic said in an interview.
“I think the valuation of the business has increased over the past few years,” Petrovic said in London. “We have a strategy in place with new trains and new destinations which means that after 20 years we are becoming a true network.”
U.K. Chancellor of the Exchequer George Osborne said Oct. 13 that Britain would go ahead with plans to invite expressions of interest for its Eurostar stake as part of a drive to raise billions of pounds from asset disposals. Interested parties have until Oct. 31 to respond as the government targets a deal in the first quarter of 2015, with the rail holding expected to fetch a figure in the low hundred millions of pounds.
Petrovic said the shift in ownership — which could see an infrastructure, pension, insurance or sovereign wealth fund become involved in running Eurostar — is unlikely to mean a change of direction as the company prepares for a step-change in capacity with the introduction of 10 Siemens AG e320 high-speed trains costing 600 million pounds ($970 million).
“If the U.K. shareholder wants to sell that’s up to them and I’m sure the incoming shareholder will contribute something new,” he said. “But this is a long-term industry and we can’t turn through 90 degrees very quickly. I’m not worried.”
Societe Nationale des Chemins de Fer Francais will remain majority investor with a 55 percent stake and that should also mitigate against upheaval, though the French state rail company is unlikely to exercise a right to buy the U.K. holding at a 15 percent premium to the best bid, given the cost involved and the fact that it’s focused on paring debt, Petrovic said.
Britain’s opposition Labour Party has said a Eurostar sale should be frozen until receipt of results from a report into the management of U.K. privatizations after shares of Royal Mail Plc closed 38 percent higher on the first trading day. Eurostar isn’t listed and the disposal won’t include track assets or involve Channel Tunnel manager Groupe Eurotunnel SA.
Eurostar, where third-quarter passenger numbers grew 3 percent, will add its new Provence train in May, extending a service that ran to Avignon each summer into a year-round route to Marseille on the Mediterranean with a stop at Lyon, France’s second city, targeted by the company for years, he said.
The London-Amsterdam train, starting December 2016, aims to penetrate what is Europe’s busiest international airline market, the CEO said, aided by stops at the tourism and business center of Antwerp, the port city of Rotterdam and Schiphol airport.
Eurostar is also adding indirect routes in France via links to SNCF and in Germany with Deutsche Bahn AG, changing in Brussels, while a London-Geneva route where people transfer to Swiss Lyria trains in Lille goes year-round in January. Plans for direct German services to Cologne and even Frankfurt remain “over the horizon” for the moment, Petrovic said.
Eurostar e320 trains are continuing testing in France and Belgium and are due to commence trials in Britain before the end of next year, with two already stationed at a depot near London St. Pancras for maintenance training, Petrovic said. The units will join the fleet next December mainly on the Paris route.
Screening for Ebola is likely to begin at Eurostar’s continental stations by the weekend as Britain steps up efforts to stop the disease reaching its shores, Petrovic said.
–With assistance from Guy Johnson and Francine Lacqua in London.
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