7
with inflation and growth in business volume, it
might be considered reasonable to afford HKIA a rate
of return towards the upper end of the range shown in
Table 1. Nevertheless there is no firm argument
which would favour any particular one of the rates
tabulated and it might therefore be reasonable to
compromise on the mid-point of the range i.e. 16.5%.
HKG should not be seen to be trying to use the
analogy of public utility companies to maximise the
permitted return and a mid-point is a reasonably
defensible selection.
4.2
The Implications of the Brought Forward Accumulated Unapplied Cash Balance
4.2.1 There remains the matter of the accumulated cash
reflected in the balance sheet (approximately $1,718m
brought forward at 31.3.87). HMG offers advice in
regard to this surplus in Appendix 1:
4.2.2
(a) If there is no intention of constructing a
replacement airport the large unapplied
accumulated surplus reflected in HKIA accounts
should be drawn upon before there is any further
increase in user charges.
(b) If a decision on a replacement airport is likely
to be made before the end of this decade the
unapplied accumulated surplus may be retained as
a partial source of finance for a replacement
airport.
This advice seems to view the unapplied cash in the
balance sheet as entirely representing the result of
obtaining excessive rates of return in the past. The
WG feels that this cash balance could be considered
to have resulted from one of two situations: