XN000022-1976-11-24 — Page 2

WEDNESDAY, NOVEMBER 24, 1976.

FURTHER AMENDMENTS TO MTR LOAN ARRANGEMENTS SCHEDULE

*****

THE LEGISLATIVE COUNCIL TODAY APPROVED A MOTION TO FURTHER AMEND THE SCHEDULE TO THE COUNCIL'S RESOLUTION OF OCTOBER 23, 1975 DEALING WITH LOAN ARRANGEMENTS GUARANTEED BY THE HONG KONG GOVERNMENT ON BEHALF OF THE MASS TRANSIT RAILWAY CORPORATION.

IN MOVING THE MOTION, THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, PROPOSED TO ADD THE FOLLOWING NEW ITEMS TO THE SCHEDULE:

* THE FIRST RELATES TO ONE OF THE EIGHT ELECTRICAL AND MECHANICAL CONTRACTS THE CORPORATION LET IN EARLY JULY TO A BRITISH FIRM FOR THE SUPPLY OF ELECTRIC MULTIPLE UNIT TRAINS. BY THE TERMS OF THIS CONTRACT A GERMAN FIRM IS TO SUPPLY THE BOGIES FOR THE TRAINS AND THE CORPORATION HAS TO PAY THIS FIRM DIRECT IN DEUTSCHE MARKS. THE FIRM HAS ARRANGED A SUPPLIER'S CREDIT FACILITY TO COVER THIS PART OF THE CONTRACT AND THE 10 MILLION DEUTSCHE MARKS INVOLVED WILL BE GRANTED UPON CONDITION THAT THE GOVERNMENT GUARANTEES REPAYMENT. THIS SUPPLIER'S CREDIT FACILITY IS QUITE SEPARATE AND DISTINCT FROM THE EXPORT CREDIT FACIL ITY TOTALLING 69.6 MILLION DEUTSCHE MARKS WHICH HAS ALREADY BEEN GUARANTEED FOR USE IN RESPECT OF VARIOUS OTHER CONTRACTS.

* THE SECOND ADDITION CONCERNS A GUARANTEE OF HK$67 MILLION IN THE FORM OF EXPORT CREDITS TO FINANCE A CONTRACT PLACED WITH A JAPANESE CONSORTIUM IN EARLY NOVEMBER FOR INSTALLING THE ENVIRONMENTAL CONTROL SYSTEM FOR THE RAILWAY.

* THE THIRD AND FOURTH ADDITIONS ARE TO PROVIDE FOR TWO MEDIUM TERM HONG KONG DOLLAR FACILITIES WHICH HAVE BEEN NEGOTIATED. ONE, FOR HK$15 MILLION, IS SPECIFICALLY TO FINANCE THE LOCAL PORTION OF A CONTRACT PLACED WITH AN AMERICAN FIRM IN JULY TO SUPPLY THE AUTOMATIC FARE COLLECTION SYSTEM FOR THE RAILWAY. THE OTHER, FOR HK$60 MILLION, IS TO BE USED TO FINANCE PARTS OF BOTH INTERNATIONAL AND LOCAL CONTRACTS.

MR. HADDON-CAVE SAID THE LETTING OF A FURTHER ELECTRICAL AND MECHANICAL CONTRACT EARLIER THIS MONTH HAD VIRTUALLY COMPLETED THE CONTRACT LETTING PROCESS FOR THE RAILWAY.

+THE TOTAL VALUE OF THESE CONTRACTS LET IS WITHIN ESTIMATE AND INCLUDES 36 PER CENT IN VALUE LET ON A FIXED PRICE BASIS, + HE SAID, +ALSO THE ESCALATION DURING THE FIRST YEAR OF CONSTRUCTION ON CONTRACTS WITH PRICE VARIATION CLAUSES WAS ALSO WITHIN ESTIMATE, REFLECTING THE MODERATE INFLATION RATES PREVAILING GENERALLY DURING THAT PERIOD.+

+ IN VIEW OF THESE POSITIVE FACTORS THERE MUST BE INCREASED CONFIDENCE THAT THE PROJECT AS A WHOLE WILL BE COMPLETED WITHIN THE ORIGINAL ESTIMATE OF $5,800 MILLION, EXCLUDING THE COST OF INTEREST DURING CONSTRUCTION, WHICH IS ALSO LIKELY TO BE LESS THAN ANTICIPATED, HE ADDED.

/IN