LO
5
I
Estimates of likely revenues from these sources were prepared by the Master Plan consultants in close consultation with the Government's Civil Aviation Department.
16.
Revenues from Real Estate Development - subject to the agreement of the Sino-British Land Commission, it is proposed that the AA should pay only nominal premium to Government for the grant of the 1248 hectare airport site in view of the high land production cost involved in forming it which should be offset, in accordance with existing land policy, against the premium assessed on the basis of the value of the site. It is proposed that 99 hectares of the site will be developed for airport-related uses, primarily for cargo village (commercial developments for air freight forwarders and related business), hotels and offices. The AA will dispose of some of these sites before the completion of the airport in return for premium payments. The approximately $1.3 billion of revenues (at March 1991 prices) expected from this source before completion of the airport assists in reducing the level of equity and contingent liabilities required to support the project.
17.
Analysis conducted by Wardleys indicated that any payment by the AA of land premium to Government would require a dollar for dollar increase in the level of Government paid-up equity required to fund the airport. That is to say the Government would have to pay the AA equity to cover in full the AA's payment of premia to the Government and the SAR Government Land Fund.
"Base Case"
18.
In the light of their financial analysis, based on the above inputs, Wardley advised that they considered that viable and robust "base case" for the funding of the airport could be developed as follows :
Government Equity (paid-up)
Initial Debt
Pre-completion land
revenues
Debt Equity
Return on Equity
Final Maturity of Debt
Minimum Debt Service Cover Ratio
March 1991 prices
Money of the day
$13,600m
$23,300m
$ 1,290m
$16,600m
$37,000m
$ 1,795m
2.2 : 1
14.66%
11.5 years
1.37