XN000022-1995-03-08 — Page 51

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For the avoidance of any doubt, let me spell out that the mechanism will not guarantee the Company any level of revenue or rate of return. All it does is to provide the Company the opportunity to earn revenues over the 30 year life of the franchise which could give them an average return of 15.18% on their investment. Nor does the mechanism automatically allow the Company to have future toll increases. This is a common misconception. The franchisee must provide annual audited accounts. The Government will carefully examine these to see whether the conditions for allowing a toll increase under the mechanism have been met. The Government will have the power to dispute the amounts, and in the event of failure to reach an agreement with the Company, the matter will be put to an independent expert for arbitration.

Moreover, under Clause 38, any revenue over and above a set limit will be placed in a Toll Stability Fund which may be used by the Government to defer any future toll increases. At the expiry of the franchise, any amount remaining in the Toll Stability Fund will be retained by the Government.

Supervisory Powers of the Government

The Government will have supervisory powers under the franchise to ensure that the Company operates the facility safely and efficiently, and that it meets its obligations under the franchise. These supervisory powers are similar to those adopted in the case of the Western Harbour Crossing, but with a number of improvements including:

(a)

providing the Government with the power to impose financial penalties on the Company for default or breach of the Ordinance or the Project Agreement;

(b) requiring the Company to make public the financial and operational

information which is reasonably requested by the Government; and

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(c)

providing that the Government can direct the Company to make by-laws relating to safety matters.