It will spend £1.5bn on the first phase up to north Kent and £2.5bn on the second phase into St Pancras station in London.

The company announced its plans as it revealed a 12% increase in profits to £388m in the year to March 31.

The figure was at the top end of analysts' expectations which ranged from £311m to £400m.

The dividend for the year has been raised 8.6% from 22.1p to 24p.

Earlier, Deputy Prime Minister John Prescott confirmed that the rail link would go ahead as he had signed an agreement with London and Continental Railways and Railtrack to enable the project to continue.

The new line will cut journey times by up to 35 minutes

Railtrack is to manage the construction for the railway up to north Kent and commit to buy it on completion. It will also have the option to build and buy the rest of the link in 2006 for £1.8bn.

LCR has agreed to award a contract to be a partner in operating Eurostar to a consortium which includes British Airways, National Express and the national railways of France and Belgium. A bid from Virgin was unsuccessful.

The government's grant will remains £1.8bn, with no extra government support before 2010. LCR asked for an extra £1.2bn ealier this year. The government has agreed to back a £3.7bn bond issue by LCR.

After what were described as "intensive negotiations", the government agreed to an extra contribution of £140m, much lower than the £700m predicted.

Railtrack has agreed to carry the full cost of any overruns in construction costs.

The link will carry trains at 300 km an hour (186mph) through southeast England, reducing the journey time between London and the Continent by up to 35 minutes.

Railtrack shares closed 41p higher at £13.10 after the company brought forward the release of its profits statement because of the announcement about its involvement in the rail link.

The shares had been as much as 63p higher at £13.31 earlier in the day.