CONFDENTIAL
XCC(92)57
22.
On each occasion that the AA seeks to draw down this support, it will need to report fully to the Government's satisfaction the circumstances which have led to the event and satisfy Government that all reasonable measures will be taken to reduce to a minimum any further call on the facility.
23. Prior to completion, the funds drawn down will be treated as a loan subordinate to all Project Debt. For this reason, the agreement also refers to the callable equity provision in terms of a "standby facility". On completion, a reconciliation will be made in which the total amount of funds already drawn down from the standby facility under this arrangement will be offset by any specified 'upside' circumstances which may have occurred in the project cashflows (any reduction in overall project cost or increase in pre-completion revenues) and the net funds remaining after any repayment has been made to Government will then be converted into equity.
Other Forms of Government Support
24.
In addition to making available paid-up and callable equity, we have agreed that the Government should also support the funding of the airport project in the ways described below.
Kai Tak Surplus
25.
The agreement provides that in the event of project delay the surplus generated by Kai Tak will go to the Authority. This provides considerable protection against project delay risks. Since, in the "expected case", the SAR Government would not, in any event, receive the Kai Tak Surplus, this has not been considered as a contingent liability falling to the SAR Government.
Passenger Terminal Charge
26. The agreement provides that the Government will introduce a PTC at Kai Tak no later than the target date for opening the new airport (June 1997). Revenues from such a PTC would then form part of the Kai Tak surplus flowing to the AA in the event of a project delay. In order to facilitate this, it will be necessary to reduce the level of Airport Departure Tax from its current level of $150 to no more than $50 in March 1991
Executive Council