Points to make
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There will be economic disbenefits if the AR is not ready in time for the opening of the Airport.
a
The MTRC has a strong, existing operation and asset base.
It is also well-respected international borrower. It therefore does not need additional capital of more than $3.7 BN (MOD). Additional paid-up equity would not
effective.
be cost
Government must demonstrate to potential lenders that it will continue to support the MTRC in adverse conditions. Therefore the callable equity is needed. $12.5 BN is judged to be the amount necessary to cover the six identified risk categories.
Not all of the $12.5 BN would fall to the SARG. Even if all the risks eventuate, the SARG would not be liable for more than $7.3 BN.
The base case is designed not to require any callable equity at all.
Callable equity is a commercial investment risk
not a burden. The alternatives (construction by the Government or a full government guarantee of MTRC loans) would be lèss cost-effective.
The SARG will gain some $22 BN (1991) from land
premia, as well as a huge asset in the form of the AR. It is reasonable for the SARG to accept some of the investment risk.
Airport Rail: p. 2 of 2