|The Texas TGV|
The Texas TGV project, cancelled in August of 1994, was to connect the "Texas Triangle" (Dallas - Houston - San Antonio) with a privately financed high speed train system.
The Texas High Speed Rail Authority awared a fifty-year high speed rail franchise to the Texas TGV Corporation on 28 May 1991. Texas TGV was a consortium made up of Morrison Knudsen (USA), Bombardier (Canada), GEC-Alsthom (France/UK, builder of the TGV) and a group of financial institutions comprising Crédit Lyonnais, Banque IndoSuez, Merril Lynch, and others. Texas TGV won the franchise after over two years of litigation opposing it to a rival consortium backing German ICE technology. The franchise covered the design, construction, ownership and operation of the high speed rail system.
Texas TGV agreed to secure funding for the project entirely from private sources, since the state of Texas did not allow the use of state money. The project, with an original estimated cost of 5.6 billion dollars, got off to a rocky start. The first job was to conduct an environmental impact study, for the sum of 170 million dollars. The money proved difficult to assemble, and Texas TGV was granted a one-year extension by the Texas High Speed Rail Authority. This extension expired on 31 December 1993, and in the last few weeks leading up to it there was a mad scramble to secure the money.
At this time, the Warburg bank of London was able to issue 200 million dollars in bonds to finance the project. These bonds were purchased by European investors with the understanding that after two years they would either be payed back by Morrison Knudsen (in charge of the civil engineering for the project, including the environmental impact study) or converted into shares of the Texas TGV Corporation. Two days before the evaluation meeting of the Texas High Speed Rail Authority, Morrison Knudsen's Bill Agee made it known that his company would not guarantee the bonds. The financing fell through, and the project sailed past the deadline without any money in sight.
In the meantime, the project's overall estimated cost soared to 6.8 billion dollars. Southwest Airlines, a low-cost airline serving the short haul market in the Texas Triangle, lobbied hard against the Texas TGV project, since it was clear that Southwest's business in the area would be drastically impacted. Southwest was started on the Texas Triangle in 1971.
In August of 1994, the state of Texas decided that the Texas TGV Corporation had failed to live up to its promises, and withdrew the 50-year franchise for high speed rail development. By this time, the consortium had invested about 40 million dollars.