TNAG-0770-FCO40-974-Construction-of-underground-railway-system-in-Hong-Kong-1978 — Page 252

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increasing importance has been placed on the need and priority for an early extension to Tsuen Wan, most recently in the CTS.

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The Corporation estimates the cost of the 10.7-kilometer extension to Tsuen Wan to be $2, 900 million (at 1975 prices) excluding cost escalation, interest, finance charges and Crown Land premia, that is approximately 65% of the equivalent MIS cost of $4, 487 million. Assuming construction from 1979 to 1982 and the same rate of cost escalation of 7% per annum assumed for the MIS, the escalated cost, excluding interest, finance charges and Crown Land premia, would be $4,085 million.

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The Corporation estimates that the MIS/Tsuen Wan extension would carry some 1.8 million passengers daily by the mid-1980's,

The revenue compared to an MIS total of slightly more than 1 million. estimates are some 80% higher in the mid-1980's than for the MIS alone, with an average fare of about $1.50 (at 1975 prices).

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When examining the financial feasibility of the MIS, the internal rate of return was calculated at 13%. This calculation excluded the cost of premia for Crown Land and profits tax. Using the same basis of calculation for comparison purposes, the effect of adding the Tsuen Wan line to the MIS would be to raise the rate of return on the combined system to 15% as compared with 132% on the MIS investment alone. The Corporation considers that, conservatively, it would be in a position to repay all loans for the MIS/Tsuen Wan extension system in 1992, that is 10 years after the opening of the extension at the end of 1982 (compared with a 12 year payback period for the MIS alone as previously calculated). It estimates that the maximum outstanding debt for the combined system would be about $9,800 million in 1982 (after assuming a further $500 million in equity from the Government), compared with $5, 600 million for the MIS alone in 1981. The Corporation expects that about one-half of this additional debt would be obtainable without Government guarantee. A copy of the Corporation's cash flow projection in respect of the extension is at Annex C.

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The Corporation's analyses show that, if revenues were 20% lower than estimated, the final repayment of loans for the combined system would be delayed by three years. A 25% increase in operating costs would delay the payback only by about one year.

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