$21b Disney park deal sealed
A $21 billion deal has been hammered out between the Government and Disney for a theme park on Lantau, it was disclosed last night.
A $14 billion joint venture will be set up to pay for the park, with reclamation and infrastructure costing another $7 billion.
Of the $21 billion total, the Government will provide $9 billion in cash and $6 billion in loans. The rest will come from Disney and banks.
The deal, which will be officially announced by Tung Chee-hwa today, was reached after seven months of negotiation. Talks concluded early yesterday, 13 hours before the government-set deadline.
Sources said last night that the Government would have a stake of between 55 per cent and 57 per cent in the joint venture, with Disney holding the remainder.
The $14 billion to be injected into the venture will be raised as: $6 billion in interest-bearing government loans; $3 billion in bank loans; $3 billion in cash from Disney; and $2 billion in cash from the Government.
Disney's $3 billion cash injection, however, may end up back with the company because of the venture's requirement to pay licence fees and royalties for use of Disney cartoon characters.
The Government will pay for the $4 billion-plus reclamation needed to build the park at Penny's Bay, but will recoup this from the joint venture's profits.
Up to $3 billion worth of infrastructure needed to accompany the park - roads, railways, ferry piers and other facilities - will also be paid for by the Government.
Sources close to the administration defended the decision to pay for the infrastructure, saying this would have to be built regardless of the park, because of the need to develop the area.
They said the project would have the immediate benefit of creating 16,000 jobs, with most going to local workers and managers.
Contracts will be signed after both the Executive and the Legislative Councils have endorsed the proposal. The first phase of the park is expected to be completed by 2005.
The Government's shares in the venture are expected to be sold to the private sector in the long-run.
Disney will manage the operation day-to-day with executives brought in from the United States.
The plan is likely to include two theme parks, one modelled on Disney's Magic Kingdom and the other similar to Epcot, the science and technology park in Florida.
Details of the deal will be spelled out today in briefings for executive councillors, legislators, the media, tourism experts, economists, environmentalists, urban planners and provisional district board chairmen.
Disney representatives will join officials at the briefings, which will last 90 minutes each at Government House, giving details of the financial arrangements and the concepts and content of the theme park.
Market reaction to the theme park was muted. The Hang Seng Index gained 0.49 per cent yesterday to close at 13,322.11, which brokers said was more to do with a strong performance on Wall Street last Friday than the news on Disney.
'The Disney deal was well-known so it did not have much impact on the market,' said OSK Securities research manager Alex Wong.
The executive director of Hong Kong University's Centre for Economic Research, Dr Alan Siu Kai-fat, said the park would be an injection of confidence, boosting tourism, employment and the economy.
The chief economist of the Hong Kong General Chamber of Commerce, Ian Perkin, said it would bring immediate benefits. 'People will feel good. We've got Disney.' During construction of the park and the related infrastructure, Mr Perkin expects growth in gross domestic product to rise an extra 0.1 to 0.5 of a percentage point.
Mr Perkin said that whether the deal was fair depended on how much the community wanted it.
The acting head of Hong Kong Polytechnic University's hotel and tourism management department, Dr Bob McKercher, said the project was important in rebuilding confidence in the SAR.
'Being able to capture such a major international development is symbolically important. It signifies the beginning of Hong Kong's resurgence,' said Dr McKercher.
Friends of the Earth accused the Government of 'misleading' the public into believing the park would boost the economy. The group is considering rejecting its invitation to the briefing.