XN000022-1995-03-08 — Page 50

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Project Costs

The Company's budgeted project cost of $7,254 million, in money of the day, is the lowest received from the three tenderers. Any cost overrun will be borne entirely by the shareholders of that Company.

Construction Period

The Company has offered a very aggressive construction schedule of 38 months. This is the shortest construction period proposed by any of the three bidders. Road users will therefore be able to benefit from this much needed facility at the earliest possible time. And again, if the franchisee delays completion of the facility, then the Company must bear the loss of revenue that will result.

Opening Tolls Levels

The opening toll levels are set out in Schedule 1 of the Bill. Members will note that the initial tolls, which are in 1998 prices, are highly competitive. The tolls for private cars and double- decked buses, for example, are at $15 and $45 respectively. Furthermore, under Schedule 3 of the Bill, there will be only three anticipated toll increases over the entire 30-year life of the franchise. We must also remember that there will be no compulsion to use the tolled road. Motorists will still be able to use the Tuen Mun Road or Tolo Highway free of charge in their journeys to the urban area, and this factor will also act as a brake on future toll levels.

Toll adjustment Mechanism

The proposed toll adjustment mechanism for the franchise, explained in Part X of the Bill, is almost identical to that introduced for the Western Harbour Crossing, but with some simplification and refinement. The object of the mechanism is to provide the Company with a reasonable but not excessive return whilst maintaining a low and stable toll regime for road-users. I must stress that the toll adjustment mechanism is an inseparable part of the BOT package, because without a degree of certainty on the part of the Company to earn sufficient revenue to service its debts, bankers simply would not lend the Company this money to finance such a costly project.

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