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CENTR AL RA ILWAY

CENTR AL RA ILWAY A Commercial Opportunity Big share of fast growing UK/Continent HGV market can be captured by the fastest, most reliable lowest cost provider Robust cost estimates given straightforward construction case, low risk engineering and standard technology

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CENTR AL RA ILWAY

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  1. CENTRAL RAILWAY

  2. A Commercial Opportunity • Big share of fast growing UK/Continent HGV market can be captured by the fastest, most reliable lowest cost provider • Robust cost estimates given straightforward construction case, low risk engineering and standard technology • Viability indicated by projected Base Banking Case Project IRR of around 15%, itself robust to changing assumptions • Driven by focused management team with a network of professional supporters, including US firm Parsons • However the company needs the UK Government to allow legislation into Parliament to approve Central Railway

  3. Contents • A System that Works • Compelling Commercial Case • Attractions to Stakeholders • The Solution to Eurotunnel

  4. A System That Works

  5. The Project • 430 mile freight railway between the UK and mainland Europe • Core business will be frequent point to point unaccompanied lorries on trains services • Standard North American type of rail operation and techniques • Single freight priority line with 60 mph average journey speed • Accessed from terminals at strategic points on motorway networks • Services will be frequent, faster and more reliable than road • Priced at around 20% below road and ferry alternatives’ costs

  6. Central Railway Route

  7. Compelling Commercial Case

  8. The Problem

  9. The Solution

  10. Attractive Core Lorry Market • Huge, rapidly growing, existing freight in lorry market • Substantial market share can be captured by most reliable, lowest cost alternative • Compulsory mode transfer for international traffic – there is no road across the Channel • Limited scope for competitive reaction from ferries

  11. UK – Continent Road Freight Market is a Lorry Market % 100 Central Railway Market LORRIES 50 15 Conventional Rail Freight Market CONTAINERS 0

  12. The CR service will be delivered at a superior quality level to existing rail freight services and a matching or better quality to road operations Superior Quality Service to Existing Rail Freight Services Comparison of road and rail freight options quality Central Railway Road/ ferry service Conventional Rail Quality factor Average Speed 65 mph 40 mph 15 mph Road network - congestion dependent Poor - marshalled rail versus CR point to point Reliability Better than road Range of ferry departure intervals Trains every 1-2 hours 1-3 trains daily Frequency Standard semi-trailers and lorries Standard semi-trailers and lorries Maritime containers and specialised rail equipment Equipment

  13. Financial Viability • £8bn construction financing requirement • Annual revenues around £1.7bn in 2015 • Gross operating margins of 50% - 60% • Project internal rate of return (IRR) of 15% - before allowing for likely introduction of road pricing in UK • Construction and traffic build-up phase returns to investors of 30% p.a. • Comfortable debt coverage

  14. Costing Construction of Central Railway • Route designed to avoid expensive engineering • Mostly refurbishes existing, or dismantled, railways • New build primarily in southern England alongside existing railways or motorways • New build unit costs comparable to experience on Channel Tunnel Rail Link (CTRL)1 • Input on operating and construction costs from Parsons, SYSTRA and UK engineering firms • Base construction costs fed into comprehensive project operations and financial model

  15. Attractions to Stakeholders

  16. Policy Objectives Satisfied • Enhances economies of northern England and northern France and preserves environment in southern England • £8bn of inward investment • Creates some 50,000 jobs • Cuts transport costs on 20% of total UK trade by 10-20% • Removal of 10,000 lorries per day from motorway system • Greenhouse Gas reductions …All at no cost to the taxpayer

  17. Feasible Construction Financing • March 2003: Alistair Darling, UK Secretary of State for Transport requested evidence of financing feasibility • Financial institutions considered these questions: • Operational and technical feasibility • Commercial viability • Financiability • Investment banks, insurance firms and other financial institutions submitted support letters from Government, on the basis that public subsidy would not be available, covering each type of debt or equity financing

  18. Property Protection Scheme • Generous compensation for adversely affected property owners • Option agreements protect homeowners on and next to the proposed railway • Scheme commended by DfT and recognised by the Council of Mortgage Lenders • Enables homeowners to avoid blight and trade in their properties

  19. The Solution for Eurotunnel

  20. (%) = Regional share of total British Isles - Continent road freight market CR = Four New Channel Tunnel Lorry Shuttle Routes

  21. Benefits for Eurotunnel • Central Railway is the long term solution to Eurotunnel’s viability and a customer for 6 paths per hour each way • Gross CR payments to Eurotunnel of some £300m p.a. • CR would enable Continental Standards freight trains, to run through the Channel Tunnel for the first time • Present Value of CR’s future payments to Eurotunnel (allowing for overlap with Eurotunnel’s lorry shuttle) could represent a £2bn increase in Eurotunnel’s Enterprise Value, arising when CR’s construction finance is raised

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