ENG-1979 — Page 36

ENTER THE MTR

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authority abandoned the single contract concept, and the work was divided into 25 major civil engineering contracts and 10 electrical and mechanical contracts. Tenders were then invited on a multi-contract basis. To supervise the work, the Mass Transit Railway Corporation was established to replace the provisional authority. The corporation, whose board appointments are controlled by the government, is required to operate on prudent commercial principles.

From 1972 to mid-1975, the government constructed additional road capacity to compensate for road areas that would have to be dug up while sections of the railway were built beneath them. It also organised the diversion of all possible utilities before the railway construction began, in order to reduce overall construction time and dis- ruption. At the same time legislation was enacted to compulsorily acquire and pay compensation, including business loss, for property affected by the railway construction. With the government's direct financial contribution to the railway being set at $1,150 million, the MTR Corporation adopted a clear-cut strategy in its moves locally and overseas to raise the rest of the $5,800 million needed for the MIS. This was to ensure that sufficient funds were available in the early stage to cover the completion of the project, and thereafter to refine the terms of loans with a view to lengthening the life of the debts, limiting the corporation's exposure to currency fluctuations, and allowing flexibility of drawdown. Clearly, there were considerable benefits to the corporation in arranging as much fixed-interest debt or Hong Kong dollar loans as possible, and this has been achieved largely through export credits and bond issues.

For the MIS, some $1,900 million in export credits were arranged for overseas contracts the major part in currencies of the exporting countries. The credits carried a fixed rate of interest of between 74 per cent and nine per cent, with repayments between 1980 and either 1990 or 1992. For the Tsuen Wan extension, it was possible to arrange about 60 per cent of the credits in Hong Kong dollars, thereby minimising the corporation's exposure to exchange risks. The total amount of export credits available to the corpora- tion is expected to be about $3,900 million. To this has to be added some $460 million arranged with commercial banks to cover specific contracts.

Public issues made in Hong Kong included a $400 million, 10-year bond issued in 1976 at a rate of 93 per cent per annum, and the issue of $207 million in Guaranteed Registered Notes to licensed banks in 1978 at a price of 99, and with a coupon of 63 per cent, due in 1983. The balance of construction and other costs were arranged in Hong Kong or overseas in the open market, all at floating rates of interest with a margin over the interbank rate or best lending rate. These included a US$600 million facility arranged by a group of banks, Hong Kong dollar loans of approximately $2,100 million, and some $400 million in United States dollar medium-term facilities. In addition, the corporation has overdraft facilities with banks and short-term credit lines which introduce a valuable element of flexibility into the management of the corporation's sources of finance. It is expected that the corporation's cash flow will become positive in 1984, and that all debts will be repaid by 1992.

Rapid Movement

Eventually, the corporation intends to operate the railway for 19 hours a day, between 6 am and 1 am. During the peak periods a two-minute headway will be maintained between trains. The journey time from Kwun Tong to Chater will be 28 minutes; Chater to Tsuen Wan, 30 minutes; and Tsuen Wan to Kwun Tong, 45 minutes. The system has been designed to handle 60,000 people per hour past any given point. This will stand it

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