Recurrent annual costs from opening in 1992 are estimated at $22m. Since construction would be undertaken by a contractor on a tender basis there would be minimal, and possibly no staffing implications during the construction period. Governmment operation of the tunnel would
would involve annual staff costs in the order of $7.2 m., these are included in the $22 m. recurrent costs indicated above. With an estimated toll revenue in year one of about $144m. p.a., (based on toll levels set out at para. 9)
9) the net operating profit would be about $122m. p.a. in year one.
ECONOMIC IMPLICATIONS
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Although the financial aspects of implementing the tunnel as
as a private sector venture or through the public works programme differ, there is little to
to choose between the two approaches on economic grounds. During construction, the resources required would be the same in both cases. Also, during subsequent operation, the service provided and the price charged would presumably be the same or very similar.
RECOMMENDATION
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Studies have indicated that the Project is financially viable on 'its own', (i.e.
(i.e. as defined in para. 9) and a number of consortia have already expressed interest. Studies have also shown that if Government constructs and
operates the tunnel and the assumptions set out in para. 9 above and employed in the calculations at Annex C hold good, it should make a net operating profit and cover its capital costs in less than half of the likely franchise period. In addition, under these circumstances the NPV for a government constructed and operated tunnel is $488m, compared with a discounted PV of royalty at 6% of about $119m., and at 12% of about $238m. if the project is privatized. Other scenarios are of Course possible. It is therefore recommended, both on financial grounds and on the traffic management and other grounds set out in paras. 5-7 and 14-15 above, that the Project is constructed through the Public Works Programme.
CONSULTATION
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The Sha Tin and Wong Tai Sin District Boards and the Inter-District Working Group on Lion Rock Tunnel Traffic Problems, which includes members from the Sha Tin, Tai Po and North District Boards, have been briefed on this subject. They all support the project in principle. The main concern of those representing the North East New tunnel should be built as quickly as Sin District Board is more concerned make the best possible arrangements for land compensation and rehousing.
Territories is that the possible. The Wong Tai that Government should clearees in respect of
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