KB is of the view that Government financial support amounting to about $1600 million (at 1990 prices) may be needed to eliminate the cashflow deficit in the first three years of operation and to improve the return on equity and cover for debt. KB indicates that there may be also a further requirement for direct Government investment in the project either to make up for the shortfall in the availability of finance for the project or to bolster market confidence.
40
For a project of this magnitude, the concessionaire may not be able to shoulder all the risks and Government may need to provide some assurances in particular with regard to the new airport opening, port, community and industrial developments on Lantau. There will be contingent liabilities on Government should such assurances be provided and real liabilities should they fail to be met.
Approval Dy Finance Committee will be required to provide funds for Government's financial support, and to accept contingent liabilities arising from any assurance provided by Government. The costs involved in contracting out the operation and management of the relevant part of Route 3 to the Concessionaire will also need approval by the Finance Committee.
46
Government Will need to maintain a team in Highways Department to oversee the BOT project and provide effective liaison between the Concessionaire and other Government departments along the same lines as the Eastern Harbour Crossing and the Tate's Cairn Tunnel.
ΠΟ satiszactory BOT bid is identified, or the benefits of privatisation are more than offset by the cost of Government financial support, liabilities arising from Government assurances and the toll revenue foregone during the franchise period, the project may proceed on a Design and Construct basis. The full capital cost of the project would then have to be met by Government, possibly offset at some future date by sale of a franchise to operate the LFC with the right to collect tolls. In the financial assessment by FINS, it was assumed that no Government contribution to the LFC would be necessary.
PUBLIC CONSULTATION
44
The Conforming
Scheme will be gazetted under the Roads (Works, Use and Compensation) Ordinance in December 1990, and the relevant district boards will be consulted.
CONFIDENTIAL