Government
must demonstrate to potential
lenders that it will continue to support
the
PAA/AA
in adverse conditions. Therefore the callable equity is needed. $8.5 BN (MOD) is judged to be the amount necessary to cover the identified risk categories (cost over-runs, delay, lower property development revenues, traffic growth.)
lower
Callable equity is a commercial investment risk
not a burden. The alternatives (construction of the airport by the Government or a full government guarantee would be less
of
РАА/АА cost-effective.
We
loans)
propose to grant the whole airport island site to the PAA in one go, for development management
better
land
co-ordination and control.
If the airport opens on time in June 1997 the contingent liability represented by callable equity will fall away completely.
in the event of a delay in completion the Kai Tak surplus is expected to be adequate to meet all the AA's debt service and other obligations.
exploitable
The AA will meet the cost of forming all of its land from existing sea bed. The value of any commercially parts of the land will result of the total development. The amounts
only arise as a airport island that could be
obtained from the PAA in premium for the commercially exploitable
whole.
parts is less
than the costs the PAA will incur in forming the
The Government therefore proposes to charge the PAA a nominal premium for the whole site. This is within existing land administration policy.
Independent advisers have estimated that the SARG can expect to receive about $56 BN (MOD) in dividends by 2010.
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Airport Finance: p.2 of 2