CONFIDENTIAL
XCX(92)1
Because the ability to raise borrowings is constrained by the ability of the AA's revenues to service debt, the most likely way in which the financing plan could be adjusted to cope with such a payment would be to increase Government's equity contribution by an amount of the order of $8.2 billion.
13
In less adverse cases, the additional equity requirement from Government would be reduced, e.g. -
14
(a) if premium was made payable only on the disposal of the sites rather than in one up-front lump sum payment in 1992 upon execution of the land grant; or
(b) if the AA decided that it would be commercially more prudent not to take up the airport related land at all.
Government is the AA's sole-shareholder; it makes no sense for Government to make it difficult for the AA to construct a workable financing plan by drawing premium payments from them in the early years of the project when the financing plan shows the project to be at its most vulnerable in project financing terms. The projected long term profitability of the AA is attractive; the financing plan's base case shows a good return on equity for the shareholder. Dividends to the shareholder are projected to commence in 2002. The Government of the Special Administrative Region will benefit greatly from those dividends over time as long as the project is given assistance in its early life to meet its debt service requirements by permitting it to benefit as early as possible from revenues derived from the disposal of land for airport support and airport-related uses.
Land Commission Implications
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Given the size of the proposed land grant (1,248 ha), which is 25 times the annual limit on land disposal in Annex III of the Joint Declaration, the agreement of the Land Commission would have to be sought before it can take place.
16 aspects
It is likely that the Chinese side's concern would focus on two
Executive Council