Contingent Liabilities
10.
It is envisaged that the financial arrangements for the AA and the MTRC will entail,
in addition to equity injection described above, some contingent liabilities on the Government in
the form of callable equity and deficiency payments in the case of project delay. The maximum
contingent liabilities in respect of the AA is estimated at $5.9 billion while that for the Airport
Railway is estimated at about $7 billion (in March 1991 dollar value). The purpose of such
liabilities is to provide a comprehensive financial package for each of the two corporations to enable
them to raise loans in the private sector without the need for Government guarantee. This is
achieved by giving assurances to potential lenders that the Government, being the sole shareholder
of the corporations, will provide the latter with the necessary support in adverse circumstances. The
undertaking of such contingent liabilities is a much more cost-effective means of supporting the
corporations in the construction, finance and operation of these projects. The alternatives being
direct Government expenditure in full or Government guarantee on the total amounts of their loans
for the full loan period would be less cost-effective. The proposed financial arrangements have
been structured most cautiously so that the probability of the contingent liabilities materialising is
not high.
AFFORDABILITY TO THE GOVERNMENT
11.
The financing of the whole ACP is planned in accordance with the strategies set out
in paragraph 2. Throughout the process of reviewing the scope and cost of the ACP and the
individual projects, and the structuring of the financial arrangements for the statutory corporations,
we have endeavoured to keep the overall cost down, balancing with the efficiency of the future
airport and the supporting infrastructure. At the same time, the cost to the Government (both Hong
Kong Government and the SARG) is maintained at an affordable and stable level.
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