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(c)
(d)
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XCS(73)8
Revised (and generally higher) estimates have been made in respect of the Corporation's own costs, which include such items as consultants' fees, land acquisition, site investigations, site supervision and other over- heads.
Government's equity contribution to the capital of the MTR Corporation has been assumed to be $800 million for the first four stages.
Further details of the assumptions and adjustments made by the Steering Group are set out in the explanatory notes accompanying the cash-flow tables at Annexes B - E.
Assessment of the Viability of the Single-contract Approach as Indicated in the Cash Flow Tables
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The financial viability of each consortium's proposals for the first four stages can be gauged from the last column of the relevant cash-flow table, which shows the system's cumulative debt from year to year. It will be observed that, in each case, the system would still be in debt in the year 2000 (i. e. roughly 25 years after commencement of construction and 20 years after completion), to an extent ranging from $946.4 million (Annex C) to $10, 316.1 million (Annex E). These reults suggest that the system would not be financially viable, bearing in mind:
(a)
(b)
that the system's debt should be liquidated within 20 years of commencing operation, after which major capital expenditure is likely to be required for replacement of equipment (and possibly the expansion of the capacity of the Full System);
the inability of the system to yield any dividends on equity after 20 years of operation; and, above all,
(c) the decision in principle, which has already been
publicly confirmed, to proceed with the construction of the Full System (i.e. all nine stages).
However, Honourable Members will have noted that each cash-flow table has been drawn up in relation to an 'assumed contract price' which can reasonably (and in one case definitely) be regarded as being the maximum price payable to the consortium for the complete construction and equipment of the first four stages. Because of the heavy interest burden, the system's financial viability is very sensitive to changes in the contract price,, and each $100 million's difference in the price would result in increasing or decreasing the cumulative debt by the year 2000 by nearly $770 million. Given that the 'assumed contract price' incorporated in each cash-flow table might be an over-assessment of the final contract price, the cumulative debt on the system is likely to have been over-stated (but see further paragraph 14 below).
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