Eurotunnel leads biggest team in UK high-speed rail bids

Pension fund USS and CDC Infrastructure have joined Eurotunnel, Goldman Sachs and Infracapital Partners to submit an initial bid for the UK’s high-speed rail link to the Channel Tunnel. A Morgan Stanley/3i/ADIA consortium, a team comprising Borealis and OTPP and a fourth bidder led by Cheung Kong Infrastructure are also rumoured to have submitted offers.

Bidding for the high-speed rail line connecting London to the Channel Tunnel got off to a strong start yesterday with up to four consortia having submitted initial offers for the asset, known as High Speed 1 (HS1).

Eurotunnel, Goldman Sachs and M&G’s Infracapital Partners have been joined by UK pension Universities Superannuation Scheme (USS) and CDC Infrastructure, the infrastructure investment arm of French bank Caisse des Dépôts et Consignations, to form the biggest consortium to bid for the asset yesterday. It is also the only consortium whose existence was publicly confirmed by a spokesperson from the team.

A source familiar with the deal told Infrastructure Investor that up to three other consortia may have submitted initial bids for HS1. They could include a team comprising Morgan Stanley Infrastructure, 3i Infrastructure and Abu Dhabi Investment Authority as well as a Canadian consortium of Borealis – the investment arm of Ontario Employees Retirement System – together with Ontario Teachers’ Pension Plan.

But while the three above-mentioned consortia were already somewhat known, the source suggested there might be a fourth team in the running for HS1 led by Cheung Kong Infrastructure, the infrastructure vehicle of Asia’s wealthiest man, Li Ka-Shing, that recently bought EDF’s UK electricity network for £5.8 billion (€6.9 billion; $9 billion). However, it was unclear if a fourth consortium submitted a bid for HS1 yesterday.

HS1, which owns the railway stations and 110-kilometre track connecting London with the Channel Tunnel, is estimated to be worth between £1.5 billion and £2 billion. It holds a 30-year concession to operate the high-speed rail link with Reuters saying HS1 expects revenue of £263 million with earnings before interest, tax, depreciation and amortisation (EBITDA) of £135 million for the year through March 2011.

The source said a preferred bidder announcement should take place in the late fall with the government targeting an end of year completion date for the deal. Swiss bank UBS is running the sale for the government, which originally spent some £5.7 billion to build HS1.