Eurotunnel and SNCF join up for Veolia bid

Eurotunnel and SNCF have teamed up to make an undisclosed bid for Veolia Cargo, the freight division of French rail operator Veolia Transport.

The Channel Tunnel operator said it wanted to split Veolia Cargo’s divisions, with it taking the domestic services of Veolia Cargo France, the short-line operator CFTA Cargo, the freight handling unit Socorail, and Veolia Cargo Link, which runs freight between France and Germany.

SNCF-Fret would acquire the German, Dutch and Italian subsidiaries of Veolia Cargo.

Gounon: A 'very exciting move'

Eurotunnel’s business has suffered from continuing depressed freight traffic volumes, and the tunnel fire in September 2008 left it running at a reduced capacity until 10 February.

Jacques Gounon, Eurotunnel CEO, told IFW that the deal would help expand the company, allowing it to develop its traction subsidiary Europorte 2 into a lowcost European shorthaul operator, and make cross-Channel rail freight a much more attractive proposition for shippers.

"Rail freight is one of the two core businesses of Eurotunnel.

"The real challenge of rail freight is not in finding the goods to move, but in achieving the right price, " he said.

"If we are successful in our bid, it would propel our Europorte 2 business plan ahead five years, " he added. "It’s a strategic move and a very exciting one for us."

Eurotunnel wants to extend Europorte 2 operations to run further into the UK and also connect it with the SNCF-Fret network.

The deal would be a real boost for Eurotunnel, which reported worsening halfyear results. Total group revenues (including passenger traffic) were at t266m (US$375m), down from t368m in the first half of 2008.

Traffic has continued to fall and it handled 354,484 truck shuttles compared with 757,423 in the same period last year, a fall of over 50%.

Rail freight traffic dropped to 1,143 trains from 1,488 in the first half of 2008.

Gounon added: "We believe that we can increase the rail freight going through the Tunnel, being our own operator, and in partnership with SNCF, be the low-cost operator of traction that is currently missing."

Veolia Transport, part of France’s Veolia Environment, operates both passenger and freight services in France, Germany, Italy and the Netherlands. It created the Veolia Cargo division in 2003, which bought Rail4chem in February 2008, and employs around 1,200 people and recorded a revenue of t188m in 2008.

Gounon said: "I considered that the Veolia Cargo activity, which operates in France, Germany and in the Netherlands, was perhaps a bit too large for us with our existing capacity, so I needed a partnership with an operator."

SNCF declined to comment on their bid until an official statement is made.

Veolia is also in discussions with French state-owned investment group Caisse des Dépôts, which has voiced an interest in the rail freight firm.

The unit was first put up for sale in April by its parent company as part of a programme to shed non-strategic assets running until 2011, and has an estimated global value of t3bn.