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Disney

HK$350 million proposed for struggling Hong Kong Disneyland by US parent company

Lawmakers across the political spectrum are still wary as funding vote for park expansion nears

PUBLISHED : Wednesday, 29 March, 2017, 6:36pm
UPDATED : Thursday, 30 March, 2017, 10:38am

Walt Disney has agreed to inject an extra HK$350 million into its Hong Kong theme park’s six-year expansion plan and waive part of its management fees for two years after renewed public outcry over the deal’s “unequal” financing.

The concession came after loss-making Hong Kong Disneyland sought approval of a HK$10.9 billion facelift project in the Legislative Council last year – with more than half the bill to be footed by taxpayers. It cited fierce regional competition and dwindling mainland visitor numbers.

Some lawmakers earlier vowed to veto the funding application if the government – the park’s largest shareholder – failed to renegotiate a better deal with the American media giant. Questions arose as to whether the newest concessions were significant enough to benefit the city.

Addressing concerns expressed by lawmakers in previous discussions, the government and Walt Disney agreed to fund the project on a 50:50 basis, instead of the previous ratio of 53:47, based on its current shareholding structure, a paper submitted to Legco on Tuesday shows.

That means taxpayers would pay HK$350 million less to fund the project at HK$5.45 million after the renegotiation. But the government’s share in the park would drop to 52 per cent.

Lawmakers will decide on the funding application at a financial committee meeting on Saturday.

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In addition, “adjustable management fees” – ranging between 0 to 8 per cent of earnings before interest, taxes, depreciation and amortisation – are to be waived in fiscal years 2018 and 2019.

Under the plan, the Lantau Island-based theme park could pay up to HK$114.4 million less to Walt Disney during the two-year period based on its financial figures in 2016.

But the American company dismissed the government’s plea to adjust the calculation formula.

“Walt Disney Company has reservations given its business in other Disney resorts outside the United States may be impacted, and that improvements to HKDL’s management fee structure were already made in 2009,” the Legco paper said.

Yet Disney agreed in principle with relaxing height restrictions on government land near the park to facilitate potential development. The restrictions were meant to protect it from visual intrusion and incompatible uses.

However, ahead of Saturday’s vote, lawmakers across the political spectrum expressed their disappointment with the new arrangement.

The new terms do not justify the expenses incurred by Hongkongers
Wu Chi-wai, Democratic Party chairman

Tourism sector lawmaker Yiu Si-wing said the concessions by Disney were merely “a small favour” and failed to show it was sincere in tackling challenges at the park during a difficult time.

“Disney will still be charging fixed management fees even during loss-making years,” he said, noting the company’s increased investment was just a matter of purchasing shares owned by the government.

New People’s Party deputy chairman Michael Tien Puk-sun said he would vote against the “unequal deal”. Holden Chow Ho-ding, vice-chairman of the Democratic Alliance for the Betterment and Progress of Hong Kong, said he would “consider supporting” the bill but would reach a decision after consulting party members.

Democratic Party chairman and lawmaker Wu Chi-wai said his party would not support the funding application.

“The new terms do not justify the expenses incurred by Hongkongers,” he added.

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Despite the reduction in management fees, the royalties – comprising the biggest portion of Hong Kong Disneyland’s payout to its US parent company – were not mentioned in the paper.

Last month it was revealed for the first time that the theme park paid to its American parent between 5 and 10 per cent of its annual revenue, despite recording losses in eight of its 11 years in business. Between fiscal years 2009 and 2016, the payout has totalled between HK$1.68 and HK$3.37 billion in royalties, the Post has calculated.