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WEDNESDAY, JUNE 30, 1993
THE TERMS OF THE FRANCHISE WERE "AT LEAST COMPARABLE AND IN SOME WAYS BETTER THAN THOSE IN EARLIER TUNNEL FRANCHISES".
THIS WAS A "SIGNIFICANT ACHIEVEMENT" BECAUSE THERE HIGHLY COMPETITIVE TENDERING FOR THE OTHER FRANCHISES.
HAD BEEN
-
· $20 IN IF
THE INITIAL TOLL LEVELS OF $30 FOR CAR IN 1997 PRICES TODAY'S PRICES - MIGHT APPEAR EXPENSIVE BUT COULD NOT BE SET LOWER THE FRANCHISEE WAS TO REMAIN SOLVENT.
"THE TOLLS ARE SET AT THE LEVELS NEEDED TO SERVICE DEBT IN THE EARLY YEARS OF TUNNEL OPERATION.
"IN THAT PERIOD, MOST OF THE REVENUE WILL BE USED TO REPAY LOANS, AND THE FRANCHISEE WILL ONLY EARN A SMALL RETURN ON #19 INVESTMENT.
"IF THE TOLLS WERE SET LOWER, THEN QUITE SIMPLY THE COMPANY WOULD NOT BE SOLVENT,' SAID MR YEUNG.
A $30 TOLL WOULD NOT OF ITSELF TRIGGER TOLL INCREASES ON THE OTHER TWO HARBOUR TUNNELS.
UNDER WERE
TOLL INCREASES ON THOSE TUNNELS WOULD HAVE TO
TO BE JUSTIFIED THE TERMS OF THEIR FRANCHISES, AND THEN ONLY IF THE OPERATORS NOT RECEIVING A REASONABLE RETURN ON THEIR INVESTMENTS.
ANY
THE
INCREASE WOULD BE SUBJECT TO LEGCO'S AGREEMENT.
16.5% AVERAGE RATE OF RETURN WAS NOT EXCESSIVE - IT WAS WHAT THE MARKET REQUIRED.
EXCESS REVENUE OVER A SET PERCENTAGE CEILING WOULD BE PLACED IN A TOLI. STABILITY FUND WHICH WOULD BE USED TO DEFER FUTURE TOLL INCREASES.
"THIS IS A NEW AND IMAGINATIVE ARRANGEMENT, AND A MAJOR IMPROVEMENT ON PREVIOUS TUNNEL FRANCHISES.
"FOR THE FIRST TIME WE HAVE DEFINED WHAT IS A REASONABLE RETURN FOR THE FRANCHISEE AND HAVE CAPPED HIS PROFITS, WITH THE EXCESS BEING USED TO STABILISE TOLLS FOR THE BENEFIT OF TUNNEL USERS.
THE EXISTING CONSTITUTES A
WHETHER THE
"THIS REPLACES THE SOMEWHAT VAGUE FORMULA IN FRANCHISES WHICH GIVE US NO GUIDANCE AS TO WHAT REASONABLE RATE OF RETURN, AND THUS NO CLEAR IDEA AS TO FRANCHISEE COULD SATISFY HIS SHAREHOLDERS, SAID MR YEUNG.
THE SUCCESSFUL TENDERERS FOR THE TATE'S CAIRN TUNNEL AND FASTERN HARBOUR CROSSING FRANCHISES HAD BEEN LOOKING FOR RETURNS OF BETWEEN 14% AND 16%, ALTHOUGH THEIR FRANCHISES WERE AWARDED AFTER HIGHLY COMPETITIVE TENDERING AND AT A TIME WHEN INVESTORS DID NOT FEEL THE NEED FOR THE DEGREE OF CERTAINTY THEY NOW REQUIRED.
THIS
FOR SIMILAR FRANCHISES ELSEWHERE IN THE ASIA PACIFIC REGION, THE RATES OF RETURN CURRENTLY BEING SOUGHT TO BUILD AND OPERATE KIND OF INFRASTRUCTURE PROJECT WERE BETWEEN 20% AND 25%.
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