TNAG-0424-FCO40-470-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 68

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(d) on requirement II(c), the E & M sub-group wished it to be understood that the word 'timing' related solely to their ability, unaffected by factors beyond their control, to meet delivery dates;

(e) as regards requirement II(f), it must be recognised

that the figure of $6,489 million was the MTSG's rather than the British Group's figure; it was also noted that

the British Group's response to this requirement was

negative; and

(f) in relation to requirement V(b), Lazards could confirm that the sum-total of the various charges for ECGD credits would not exceed 0.5% p.a.

Escalation of Fares

15. Mr. Kindersley tabled three sets of calculations which showed that, other things being equal:

(a) a 5% p.a. escalation of fares (as opposed to 4% p.a.);

would reduce the system's cumulative debt by the year 2000 from $9,143 million to $1,905 million; and

(b) a 6% p.a. escalation of fares would result in the

system's cumulative debt being liquidated by the year

1997.

Mr. Wiltshire considered that this provided ample evidence that the financial viability of the system would be very sensitive to changes in the level of fares. Mr. Haddon-Cave accepted this but pointed out that there might be offsets in other directions: there had been indications, for example, that the 8.5% p.a. interest rate assumed for market finance might not be sufficient. In any case, while he could see the relevance of the calculations to the $5,000 million figure, he did not think the concept of a

CONFIDENTIAL

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