Legislators hit out at tunnel deal
LEGISLATORS criticised the Government yesterday for forcing them to rubber stamp the controversial franchise terms for the $7.5 billion Western Harbour Crossing.
Expressing dissatisfaction at the toll formula, which allows the franchisee of the territory's third harbour crossing almost automatic right to raise tolls - a right not enjoyed by existing tunnel operators - some legislators pledged to call for an amendment to the proposed franchise terms.
Defending the package, Secretary for Transport Yeung Kai-yin denied it was a ''sweetheart'' deal.
''We are not forcing them to rubber stamp it. I am not putting a pistol against their [legislators'] heads. I am just putting market reality in front of them,'' Mr Yeung said.
He stressed the Government was not trying to take away the Legislative Council's powers to approve toll increases.
Mr Yeung said the Western Harbour Crossing Bill was a ''package'' arrived at after seven months of tough negotiations.
He warned that the consequences would be ''very grim'' if legislators insisted on amending the franchise package for the dual three-lane tunnel project.
''It may mean the tendering exercise may have to start all over again. At best, it will take another year before we come up with another investor. There may not even be another investor,'' he said.
The 30-year tunnel franchise was offered to the only bidder of the project, a consortium comprising CITIC Hongkong, CITIC Pacific, Cross-Harbour Tunnel Co Ltd, Kerry Holdings Ltd and China Merchants Holdings.
Gazetted yesterday, the controversial franchise terms for the Western Harbour Crossing seek to introduce a new toll regime under which profits are capped and the franchisee also takes the risk that it might earn less than it expects.
During the early years of its operation, which begins in mid 1997, toll for private cars using the Western Harbour Crossing will be $30 at 1997 prices, or $20 at today's prices.
The Western Harbour Crossing Bill stipulates the investor will be allowed to raise its fee automatically in the year its Internal Rate of Return (IRR) of its investment falls below 15 per cent.
If the IRR falls within the range of 15 per cent to 18 per cent, the company will be allowed a toll increase once every four years. Should the percentage reach 18 per cent or higher, no toll increase will be allowed in that year.
Half of the excess revenue between 18 per cent and 19 per cent, and all the revenues above 19 per cent, will be channelled to a new Toll Stability Fund to be administered by the Government and used to offset toll increases.
The amount of toll increases each time is fixed at $10 for private cars during the first 15 years of the 30-year franchise period and $15 for the second half of the period.
Mr Yeung conceded that the changing political climate had prompted the Government to lay down the whole toll regime for the next 30 years once and for all before legislators.
''What the investors and bankers want is certainty.'' Liberal Party legislator Steven Poon Kwok-lim said the present arrangement was tantamount to leaving the Legislative Council with only the choice of endorsing the bill.
''Are we being regarded as rubber stamps?'' he asked.
United Democrat legislator Albert Chan Wai-yip said the targeted IRR of 16.5 per cent was unreasonably high. He agreed with Mr Poon that the Government's move amounted to threatening legislators to serve as rubber stamps.
Mr Chan said the United Democrats would propose their own changes to the bill if the Government refused to amend it.
The Association for Democracy and People's Livelihood said its chairman Frederick Fung Kin-kee would ask the Government to push down the IRR to the 10 per cent to 12 per cent range.
Convenor of the transport and traffic sub-committee of the Airport Consultative Committee Hu Fa-kuang, however, found the bill acceptable.
He said it set a good example for future private investment in public works project.
Managing Director of the Western Harbour Tunnel Company Gerry Higginson said the consortium was confident the tunnel could be constructed within four years.
The bill will be tabled in the Legislative Council for first and second reading on Wednesday.