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FM BTC HONG KONG
TO PRIORITY DTI
TELNO OTTER 242
OF 19105OZ DECEMBER 91
INFO ROUTINE FCO, ECGD, TOKYO
HKB 182/3
180
182
125450
MDLIAN 3020
MY TELNO OTTER 237: HONG KONG AIRPORT PROJECT: RAIL LINK.
SUMMARY
1. INITIAL AGREEMENT ON THE RAIL LINK TO THE NEW AIRPORT APPEARS IMMINENT. THIS SHOULD PROVIDE ONE OF THE BEST OPPORTUNITIES FOR BRITISH EXPORTS IN THE PROJECT OVERALL.
DETAIL
2. HAMISH MATHERS, CHAIRMAN OF THE MASS TRANSIT RAILWAY CORPORATION (MTRC) HAS STATED PUBLICLY THAT THEY AND THE GOVERNMENT ARE SOON TO SIGN A HKD15 BILLION AIRPORT FINANCING AGREEMENT. HE SAID HE COULD NOT YET RELEASE FIGURES ON COSTS OR FUNDING REQUIREMENT. HOWEVER, THE 32 KM LINK WITH THE AIRPORT WOULD PROVIDE OPPORTUNITIES FOR PROPERTY DEVELOPMENT AT FOUR STATIONS WHICH WOULD BRING IN AN INCOME OF HKD 4.5 BILLION.
3. IN HIS PRESENTATION TO THE DUKE OF KENT DURING THE LATTER'S RECENT VISIT, AND IN A CONVERSATION I HAVE HAD WITH HIM SINCE, MATHERS WENT A LITTLE FURTHER. HE SAID THAT INITIAL AGREEMENT WITH THE ADMINISTRATION TO PROCEED WITH THE RAIL LINK TO THE AIRPORT WAS EXPECTED AROUND 21 DECEMBER AND IT WOULD BE PUT TO EXCO IN LATE JANUARY. THE FINAL DECISION WOULD BE CONFIRMED IN MARCH. HE SAID THEY HAD TOLD THE ADMINISTRATION THAT IN ORDER TO PROCEED WITH A ROUTE WHICH WOULD ALMOST CERTAINLY MAKE A LOSS AT LEAST IN ITS EARLY YEARS, THEY WOULD REQUIRE AN INJECTION OF FURTHER EQUITY, A PROMISE OF FURTHER FINANCIAL SUPPORT SHOULD THE INITIAL INJECTION NOT PROVIDE SUFFICIENT, AND AGREEMENT TO ALLOW MTR TO BENEFIT FROM PROPERTY DEVELOPMENT ON THE ROUTE. HE SAID, STRESSING THE FIGURES' CONFIDENTIALITY, THAT THE OVERALL BORROWING REQUIREMENT FOR RAIL LINK MIGHT BE AROUND US DOLLARS 5,000 MILLION.
4. MTR IN THE PAST HAVE BEEN VERY SUPPORTIVE OF BRITISH COMPANIES. METRO-CAMMELL, OWNED BY GEC ALSTHOM, HAVE SUPPLIED ALMOST ALL THE ROLLING STOCK AND SHOULD BE IN A STRONG POLE POSITION TO SUPPLY THAT FOR THE RAIL LINK TO A VALUE OF HUNDREDS
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