0003160 G.F. 316
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(c) Provisions for price variations
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The lumpsum contract price, once agreed, would not be subject to further variation on grounds of cost escalation and unforeseen circumstances. The price would, however, be subject to adjustment in cases of 'force majeure' (e.g. war, civil commotion, riots and strikes) to be defined in the contract. A clause could also be included in the contract to provide for the price to be varied in cases where variations to the design of the system are agreed.
(d) Payment terms
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Payments under the contract should be made in accordance with a payment schedule to be drawn up in relation to the Consortium's construction programme and pattern of expenditure. The Consortium have tentatively indicated that payments might be spread over the proposed construction period as follows: 12-15% in 1974; 18-20% in 1975; 25-26% in 1976; 25-32% in 1977; and 12-15% in 1978.
Export Credits/Consortium Finance
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The Consortium have offered to provide credit finance by means of purchasing bonds issued by the MTR Corporation, on the following terms:
(a)
(b)
Amount: US$570 mn (HK$2,876 mn) if the final contract price is not less than the minimum price indicated for Proposal B (i.e. US$792 mn or HK33,996 mn).
Drawdown: spread over five years commencing from the middle of 1974, with a maximum drawdown of US$114 mn in any one year. Any balance left in one year can be carried down to the following year.
(c) Interest and charges: 6.3-7% per annum inclusive of all
charges. (A fixed rate of interest would be agreed in further negotiation; the Consortium hope that the rate would be as low as possible within the range indicated).
(d) Repayment: in 26 consecutive semi-annual instalments
commencing on the 7th anniversary of the first bond purchase.
(e) Method of repayment: semi-annual instalments of equal
principal repayments. (Interest on the outstanding balance is payable quarterly).
(f) Capitalisation of interest: a separate and additional
loan would be provided to cover interest payable on the bonds over the seven-year grace period. This second loan would itself be subject to interest at 6.5% per annum, and would be repayable in eight consecutive semi-annual instalments of equal principal repayments. Interest on this second loan would be payable quarterly on the out- standing balance throughout the life of the loan.
(g)
Government guarantee: a Hong Kong Government guarantee of repayment is required (although the Consortium appreciate the Government's unwillingness to give such a guarantee).
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