TNAG-0424-FCO40-470-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 230

H

;

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XCC(73)10

(d)

19

(a)

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not having borrowed on the long-term market in the early stages, Hong Kong would stand less chance of overstretching its credit.

The cash-flow analysis at Annex H indicates that, given:

an equity element of $1, 500 million injected

in eight tranches of various sizes over the years 1973-80; and

(b)

export credits amounting to $5, 300 million (representing 54% of the total capital cost of the Full System);

it should be possible to finance the Full System with:

(c)

$2,800 million in bonds (i, e. seven issues of $400 million); and

(d)

about $670 million in medium-term bank loans and/or bridging loans.

The equity element of $1, 500 million, which would include all pre- construction expenses, should be contributed initially by the Govern- ment, and it would be for consideration at a later date whether the private sector should be invited to participate in this equity. Any equity contributed by the private sector would have to constitute a minority position, so as not to put the operation of the MTR into private hands. At the same time, it should be sufficiently large in absolute terms so that the private sector would not in the end be owning a significant proportion of the MTR's assets in return for a very small initial outlay. One method of achieving this would be to capitalise the value of any land assigned by the Government to the MTR system and to add this value to the Government's equity shareholding. In this way, a significant proportion of the $1, 500 million could be contributed by the private sector without affecting the Government's majority position.

20

The broad financing plan outlined in paragraph 19 above is necessarily tentative, and is set out purely for illustrative purposes at this stage. In particular, insofar as market finance is concerned, conditions are liable to change from time to time, so that the choice of the most favourable source of finance at any one time cannot be predetermined. Experienced financial advisers who are in constant touch with the market would be required to advise on, and to organise,

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