TNAG-0563-FCO40-658-Construction-of-an-underground-railway-system-in-Hong-Kong-1975 — Page 226

MODIFIED INITIAL SYSTEM (as illustrated in Appendix A)

3.1

3.2

3.3

3.4

3.5

The estimated costs submitted to the Provisional Authority meeting on 16th December, showed that using 1974 values, and after allowing for escala- tion over the construction period to 1980/81, the estimated cost of the initial system would exceed HK$9,000M. Furthermore, the projected rate of return on the increased investment at 11.3% was unacceptable, as was the payback year 1998, and the total and residual loan position.

This arose in part from the inclusion in the initial system of substantial capital items relating to subsequent extensions rather than being specifically necessary for the initial system. The ceiling price proposals from the Japanese Consortium accentuated this position by increasing the incentive to include as much as possible within the related fixed price.

Following the withdrawal of the Japanese Consortium, any new contract for the initial system would reflect in one way or another current prices and inflation during the construction period. It is necessary therefore to eliminate any sections or parts of the railway not strictly relevant to the initial system or individual items where the projected revenue does not justify the related cost.

However, any consequent alterations to the initial system should not prejudice the financial viability of future extensions to the MTR and the eventual ability to achieve the preferred system envisaged in the engineering consultants 1970 reports including the maximum revenue necessary to justify such an overall system. Consequently for example, the proposed size of train has been retained, as any reduction would reduce the maximum eventual carry.

In this context, considerable savings can be achieved by deferring the building of the section of the MTR between Argyle and Lai Chi Kok, which is of expensive tunnel construction. This in turn defers the building of the complicated Prince Edward Station at the top of Nathan Road, as the system becomes simpler by avoiding in the initial stage converging of two lines at this point.