WEDNESDAY, AUGUST 10, 1977
HE CONCLUDED BY SUGGESTING THAT THOSE OF HIS COLLEAGUES WHO SUPPORTED THE MOTION MIGHT CONSIDER IT WISE TO ASK THE GOVERNMENT TO WITHDRAW IT UNTIL THE GOVERNMENT HAD EXPLAINED HOW IT INTENDED TO INCREASE ITS RESERVES TO COVER THE CONTINGENT LIABILITIES INVOLVED IN GUARANTEEING THE MTR'S ADDITIONAL BORROWINGS.
DR. THE HON. S.Y. CHUNG SUPPORTED THE MOTION WITH CAUTION, COMMENTING ON THREE ASPECTS OF THE TSUEN WAN EXTENSION - ITS ECONOMIC VIABILITY, FINANCING AND GOVERNMENT GUARANTEES, AND TIMING.
+AS A PROJECT, THE TSUEN WAN EXTENSION SEEMS TO BE ECONOMICALLY VIABLE, HE SAID.
DR. CHUNG CALCULATED THAT THE NET PROFIT OF THE TSUEN WAN EXTENSION FOR THE FIRST TEN YEARS AFTER DEPRECIATION WOULD BE $8,178 MILLION, AND AFTER PROFITS TAX $6,746 MILLION.
WITH THE TOTAL FIXED ASSETS FOR THE MTR AMOUNTING TO $4,255 MILLION, THE AVERAGE RETURN ON FIXED ASSETS OVER THE FIRST TEN YEARS WOULD BE ABOUT 16 PER CENT PER ANNUM WHICH WAS QUITE ATTRACTIVE.
+ IF THE FARE INCOME WERE REDUCED BY 25 PER CENT, AS A RESULT OF EITHER LESS PASSENGERS OR A FARE REDUCTION OR A COMBINATION OF THESE TWO FACTORS, THE AVERAGE RETURN ON INVESTMENT WOULD BE REDUCED FROM 16 TO 10 PER CENT PER ANNUM A RETURN WHICH IS STILL QUITE ATTRACTIVE,+ HE SAID.
BUT AS A LAYMAN HE WOULD NOT DARE TO SPECULATE ON WHETHER THE SPEED, REGULARITY, COMFORT AND CONVENIENCE OF THE MTR WOULD COMPENSATE FOR THE HIGHER FARES AND ATTRACT THE BULK OF COMMUTERS. +ONLY TIME WILL TELL WHICH SIDE IS CORRECT, HE SAID.
HE NOTED, HOWEVER, THAT FOR THE FIRST TEN YEARS, THE ESTIMATED TOTAL OPERATING EXPENDITURE OF $1,772 MILLION REPRESENTED ONLY 15 PER CENT OF THE FORECAST TOTAL FARE INCOME OF $11,993 MILLION, INDICATING THAT THE MTR WAS A VERY CAPITAL-INTENSIVE OPERATION.
+ IN THE INFLATIONARY ERA OF TODAY, CAPITAL-INTENSIVE VENTURES HAVE A BETTER CHANCE OF SUCCESS THAN OPERATING-COST-INTENSIVE ONES, HE SAID, AND THIS WAS IN THE MTR'S FAVOUR.
AS TO THE FINANCING OF THE MTR, DR. CHUNG SAID ITS TOTAL OUTSTANDING LOAN FROM 1981-85 WOULD PEAK BETWEEN $9,500 TO $10,500 MILLION WHILE THE POSSIBILITY OF INTEREST RATES RISING IN THE FUTURE COULD NOT BE RULED OUT.
+WİTH SUCH EXTREMELY HIGHLY GEARED LOAN FINANCING (90 PER CENT LOAN AND 10 PER CENT EQUITY), ANY MODERATE UPWARD MOVEMENT IN INTEREST RATES WOULD SIGNIFICANTLY AND ADVERSELY AFFECT THE ECONOMIC VIABILITY OF THE WHOLE NTR PROJECT.+
/HE CITED