TNAG-0772-FCO40-976-Modernisation-and-electrification-of-the-Kowloon-Canton-Rail-1978 — Page 170

C.S. 166

XCC(78)9

CONFIDENTIAL #2

An Economic Evaluation

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of 80

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In accordance with the Government brief, the consultants expressed costs and income at current prices at 8 per cent discount rates over a project life of twenty years. Their estimates of the financial outturn on the project were presented in the form of a comprehensive table of revenue possibilities predicted on differing inputs associated with a variety of possible Government transport policies. On their most likely expectations, however, the consultants have estimated that there will be a discounted revenue-cost ratio of $1,354 million: $1, 059 million, resulting in a net present value to KCR of $295 million. Looked at in another way this would mean that the electrification project would earn sufficient additional revenue to pay back the expenditure on investment by 1992/93 and that it would have an internal rate of return of 15%. If revenue were 10% less than expected, the internal rate of return would drop, but would still be 12.5%.

Land

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The only further land requirement would be for a depot for rolling stock to the north of Sha Tin and this would involve an additional cost in terms of revenue lost for other potential uses. Some of this could, however, be recovered from commercial development above the depot. In addition, further revenue could accrue to Government through Commercial development and/or the provision of Government offices above certain stations. A case in point is at Kowloon Tong where it would be the intention to develop a new interchange station with the MTR with associated commer- cial development. Given the gradients involved, this interchange would only be feasible if electric traction, with its greater pulling power, were to be adopted.

Lead Times

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The consultants have advised that electrified trains could be operating on the main line within three years of June 1978 if the authority to proceed with and let the first contract could be taken by that time.

Freight Traffic

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The consultants' proposals were mainly concerned with the modernisation of KCR's passenger carrying capacity. The likely additional returns from the expanded freight traffic which could result from these proposals were not included in their final report. Moreover, for a variety of reasons it is difficult to forecast and quantify freight traffic with any precision. Nevertheless, the consultants did estimate

CONFIDENTIAL

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