One of the main benefits of direct Government financing is that it removes the need to provide assurances to bidders in view of the uncertainties in the project. These benefits will be lost if equity participation is involved; and
as explained in paragraph 5, the Lantau Fixed Crossing project will be split into five separate contracts in order to encourage the most competitive bids. The timetable for and financing requirement of each contract vary according to their size and complexity. Hence, there may be practical difficulties in setting up a single entity with the right financing structure to own, finance and manage the different contracts.
In view of the above, and having
having regard to the critical time-table of the project, we consider it inadvisable to invite equity participation at this stage. However, this should not preclude the options of either privatising the operation and management of the project or setting up an entity to take up the debt financing at a later stage. These options will be carefully examined in future.
FINANCIAL AND STAFFING IMPLICATIONS
19
The total
capital cost of the Lantau Fixed Crossing, including the provision of rail structure, is estimated to be _$10 billion, to be charged to the Capital Works Reserve Fund.
Subject to Finance
Finance Committee's approval, part of the project will be directly upgraded into Category A of the Public Works Programme in January 1991 before the invitation of Contracts 1 and 2.
20
Financing options may be offered by the tenderers to meet all or part of the contract payments. The options, if accepted, will in effect defer the contract payments and hence reduce Government's cash outflow during the construction period.
21
In order to implement this project involving such magnitude and complexity, it is proposed to employ consultants to undertake the design and supervision of the works. There will be a need for additional Government staff to manage and coordinate the consultants' activities and to carry out the project management functions.
CONFIDENTIAL