XN000022-1986-07-02 — Page 5

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„EDNESDAY,

JULY

1986

+AS A BASIS FOR THESE PROPOSALS A MORE PRECISE PROJECT BRIEF WAS ISSUED WHICH, INTER ALIA, COVERED DESIGN AND CONSTRUCTION STANDARDS, LAID DOWN TARGET TOLLS FOR 1989 $10 FOR A PRIVATE CAR- NOTED THAT THE LENGTH OF THE FRANCHISE AND ROYALTY OR EQUITY FOR GOVERNMENT WERE NEGOTIABLE. OFFERED A FIVE-YEAR EXEMPTION FROM PASSAGE TAX, AND, IN RESPECT OF THE RAIL TUNNEL, STIPULATED THAT THE MTRC LÉ ASE PAYMENTS SHOULD NOT BE GREATER THAN THEIR FORECAST NET INCREMENTAL REVENUE AND THAT THERE BE NO CROSS SUBSIDY FROM THE ROAD TUNNEL, HE SAID.

ON OCTOBER 1, 1985, REVISED PROPOSALS BASED ON THE PROJECT BRIEF WERE RECEIVED FROM THE SHORTLISTED CONSORTIA AND WERE THE SUBJECT OF NEGOTIATIONS UNTIL NOVEMBER 3.

AN ASSESSMENT OF THE RELATIVE FINANCIAL AND ENGINEERING MERITS OF THE THREE FINAL, NEGOTIATED PROPOSALS INDICATED THAT THE BEST BID WAS THAT FROM THE NEW HONG KONG TUNNEL CONSORTIUM AND FOLLOWING THE DECISION OF THE GOVERNOR-IN-COUNCIL, ON DECEMBER 5, 1985, A CONTRACT WAS SIGNED WITH THE CONSORTIUM, ON THE BASIS OF THEIR FINAL PROPOSAL, SUBJECT ONLY TO THE ENACTMENT OF THE EASTERN HARBOUR CROSSING ORDINANCE, HE SAID.

MR GREWAL SAID THAT THE CONTRACT WAS SIGNED BY EACH MEMBER OF THE NEW HONG KONG TUNNEL CONSORTIUM, WHO WERE JOINTLY AND SEVERALLY RESPONSIBLE FOR THE COMPLETION OF THE PROJECT.

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THE CONSORTIUM HAD FORMED A ROAD COMPANY, THE NEW HONG KONG TUNNEL CO. LTD., TO HOLD THE ROAD FRANCHISE AND A RAIL COMPANY. THE EASTERN HARBOUR CROSSING CO. LTD., TO HOLD THE RAIL FRANCHISE.

+THE FUNDAMENTAL OBJECTIVE OF THE NEGOTIATIONS WAS TO MAXIMISE THE BENEFITS FOR THE ROAD USER THROUGH THE LOWEST POSSIBLE TOLLS AND THE MOST ADVANTAGEOUS TOLL REVIEW MECHANISM.

+ IN THIS RESPECT THE CONSORTIUM HAVE AGREED TO THE TARGET TOLL STRUCTURE AND HAVE AGREED TO A TOLL REVIEW PROCEDURE COMPARABLE TO THAT USED IN THE CASE OF THE CROSS HARBOUR TUNNEL. +

OTHER KEY POINTS IN THE ROAD FRANCHISE WERE THAT IT WOULD RUN FOR 30 YEARS FROM THE START OF CONSTRUCTION, AND THAT GOVERNMENT WOULD RECEIVE A TRANSFER OF 5 PER CENT OF THE EQUITY OF THE ROAD COMPANY, AS IT WAS SUBSCRIBED, AND A FURTHER 2.5 PER CENT ON THE OPENING OF TATE'S CAIRN TUNNEL TO GIVE A TOTAL OF 7.5 PER CENT.

+ALTHOUGH NOT INCLUDED IN THE BILL, IT SHOULD ALSO BE NOTED THAT GOVERNMENT HAS AGREED THERE WILL BE NO PASSAGE TAX FOR A PERIOD OF FIVE YEARS FROM THE START OF OPERATIONS.

+ THE ROAD