XN000022-1992-04-02 — Page 3

2

THURSDAY, APRIL 2, 1992

"THE REMAINING

$5.7 BILLION PARTLY COVERS COSTS OF AIRPORT RAILWAY-RELATED CIVIL WORKS ON CHEK LAP KOK, NORTH LANTAU AND THE LANTAU FIXED CROSSING, WHICH WERE ORIGINALLY INCLUDED UNDER THE OTHER ACP PROJECTS.

"IT ALSO COVERS LAND ACQUISITION AND THE DESIGN, CONSTRUCTION, SUPERVISION AND MANAGEMENTS COSTS WHICH, IN LINE WITH COMMON PRACTICE, WERE NOT INCLUDED LAST JULY," HE SAID.

MR MACLEOD POINTED OUT THAT THE AIRPORT RAILWAY WOULD SIGNIFICANTLY IMPROVE EXISTING MTR SERVICES, THROUGH HAVING A LOCAL LINE RUNNING THROUGH THE WEST KOWLOON RECLAMATION AND ALONG NORTH LANTAU.

MR MACLEOD SAID IT WAS IMPORTANT TO NOTE THAT IN THE PAST NINE MONTHS THE GOVERNMENT HAD BEEN MOVING EXTREMELY RAPIDLY FROM FEASIBILITY STUDIES TO DESIGN AND TENDER STAGES.

"50 THESE INCREASES SHOULD NOT BE SEEN AS A NINE-MONTH ESCALATION. THEY ARE THE RESULT OF THE RAPID PROGRESS WE CONCENTRATED INTO THIS SHORT PERIOD AND WE DO NOT EXPECT TO SEE CHANGES AGAIN.

I

COST

HAVE

SUCH

BEEN

ON CONTINGENCIES, MR MACLEOD SAID THESE HAD ALREADY INCLUDED IN THE COST ESTIMATES OF INDIVIDUAL PROJECTS, AS WAS CUSTOMARY FOR THE GOVERNMENT'S PUBLIC WORKS PROJECTS.

HOWEVER, PRUDENT FINANCIAL AND PROJECT PLANNING MEANT THE GOVERNMENT HAD TO INSURE ITSELF AGAINST UNFORESEEN INTERFACE PROBLEMS IN SUCH A LARGE PROGRAMME AND TO PROVIDE FOR SPEEDING UP WORKS WHICH MIGHT FALL BEHIND.

$2.5

THE CONTINGENCY FUNDING FOR THIS PURPOSE HAD NOW BEEN PUT AT BILLION, AND IT WAS EXPECTED THAT FUTURE CHANGES IN THE ACP ESTIMATES COULD BE CONTAINED WITHIN THIS $2.5 BILLION CUSHION.

ON THE LEVEL OF GOVERNMENT SUPPORT FOR THE RELEVANT AGENCIES, HE SAID THE PLANNED FINANCIAL ARRANGEMENTS WERE BASED ON A GOVERNMENT EQUITY INVESTMENT OF $13.6 BILLION INTO THE FUTURE AIRPORT AUTHORITY AND $3 BILLION INTO THE MTRC.

"THE GOVERNMENT WILL ALSO PROVIDE SUPPORT IN OTHER WAYS, FOR EXAMPLE BY FOLLOWING PAST PRACTICE OF GRANTING LAND TO THE MTRC AT FULL MARKET VALUE SO THAT PROFITS FROM PROPERTY DEVELOPMENT CAN BE USED TO REDUCE THE NEED FOR GOVERNMENT EQUITY. **

MTRC,

A

AS THE SOLE SHAREHOLDER OF THE AIRPORT AUTHORITY AND THE THE GOVERNMENT HAD ALSO TO ENSURE THAT THE CORPORATIONS HAD SUFFICIENTLY COMPREHENSIVE FINANCIAL PACKAGE TO ENABLE THEM TO RAISE LOANS IN THE PRIVATE SECTOR WITHOUT NEEDING GOVERNMENT GUARANTEES. THIS INVOLVED DEMONSTRATING THAT THE GOVERNMENT WOULD PROVIDE NECESSARY FINANCIAL SUPPORT.

"IT HAS BEEN DECIDED THAT THE MOST COST-EFFECTIVE FORM OF INSURANCE IS FOR THE GOVERNMENT TO COMMIT ITSELF TO PAY UP CALLABLE EQUITY WHEN THE CORPORATIONS ARE FACED WITH SUCH CIRCUMSTANCES. THIS HAS BEEN ESTIMATED AT $5.9 BILLION (1991 PRICES) FOR THE AIRPORT AND ABOUT $7 BILLION FOR THE AIRPORT RAILWAY."

/MR MACLEOD