Webb-site has today made the following submission to the Legislative Council Finance Committee and its Public Works Subcommittee regarding the HK section of the Express Rail Link to Shenzhen.

Submission to LegCo on XRL
14 January 2016

Webb-site has today made the following submission to the Legislative Council Finance Committee and its Public Works Subcommittee.

To: The Finance Committee (FC) and Public Works Subcommittee (PWSC)
c/o The respective Clerks to the Committees

Dear Sirs and Mesdames,

Please accept this letter and attachment as a submission to the FC and PWSC.

We refer to the matters currently before the PWSC under “HEAD 706: Transport-Railways”, particularly items PWSC (2016-16) 50 and 51, relating to the Express Rail Link (XRL). It seems to us that the Government has failed to inform members of the following key issues:

  1. If and when the XRL is completed, then under what terms does the HKSAR Government propose to lease the XRL to MTRC under a concession, with regard to tenure, rents (fixed and variable) or revenue-sharing?
  2. What is the proposed revenue split between the Mainland and Hong Kong sides (presumably, China Railway and MTRC respectively) for fares for journeys to and from Hong Kong, including those that reach beyond Futian, Shenzhen? Is this revenue split in proportion to the distance involved on either side of the boundary, or to the moneys invested? The existing revenue sharing for Hunghom-Guangzhou East is 81.2% to Guangshen Railway Co Ltd (see its 1996 H-share prospectus) and 18.8% to KCRC (now MTRC, which pays rent to KCRC since the 2007 merger).
  3. Will the Government instead consider leasing the completed XRL directly to China Railway, the national operator, thereby simplifying the revenue-sharing arrangements and leaving MTRC to focus on operating the HK network?
  4. Given that the proposed dividend distribution by MTRC will return money to the public purse which just happens to equate to the cost overrun of the XRL, why doesn’t the Government cause MTRC to make a much higher one-time distribution to release capital and raise gearing of MTRC to that of other utilities, such as the two electricity companies in Hong Kong and SMRT Corporation (operator of the Singapore Mass Rail Transit)? We calculate that a distribution of $11 per share would do this, and would return an additional $29.4bn to the public purse.

I attach an article published on Webb-site.com this week which provides further research and analysis as part of this submission.

Yours sincerely,

David M. Webb
Editor, Webb-site.com

© Webb-site.com, 2016

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