TNAG-0422-FCO40-468-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 14

[Dear Ron,]

Стил в еро

(Aindayser)

69

16th March 1973

(43)

Hong Kong Mass Transit System:

F.G. Case No.903

At the meeting you chaired on 13th March, I undertook to provide details of the calculations we have done to identify the subsidy element in two of the proposals in Cotterill's letter to you of 28th February.

Calculations involving the technique of time discounting are nsitive to assumptions made about the interval to the starting dates of loan disbursements and receipts of principal and interest payments. Because more realistic assumptions can now be made, we have recalculated the subsidy element in Appendix B of Lazards' proposals (my letter to you of 17th November 1972) to bring the basic timing assumptions into line with those used in the figures kindly made available to us by E.C.G.D. for our more recent calculations. We thus have a result for the subsidy element in each of three increasingly concessional proposals.

1. Appendix B of Lazaris' proposals (with adjusted timing assumptions).

These involve financing for 85% of the value of U.K. goods and services plus financing for local costs of the equivalent of 15% of the U.k. element. Repayments of principal do not begin until after the completion of stage 4 and there is no deferment of pre-completion interest payments. The subsidy element is arrived at as follows:

Present value of loan

Present value of receipts (capital & interest) Present value of exports (assuming that the

timing of exports coincides with that of the loan drawings)

This results in a subsidy to U.K. exports [(a) percentage of (c)] of 24.3.

2. Proposal in Annex 1

HK$ mus. (a) 1,722.22

(b) 1,303.67

(c) 1,722.22

(b) as a

The figures at Annex 1 are based on the same assumptions as in 1. above, but with interest accruing up to the end of stage 2 capitalised and repaid*six months after the end of stage 4:

Present value of loan

Present value of receipts (capital & interest) Present value of exports (assuming that the

timing of exports is as in 1.)

from

HK$ Ens

(a) 1,884.96

(b) 1,269.40

(c) 1,722.22