Third runway
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Hong Kong International Airport

Hong Kong Airport Authority plans HK$5 billion in retail bonds to help fund third runway

HK$47 billion, or one third of the project’s total cost, would come from authority’s operating surplus

PUBLISHED : Tuesday, 26 September, 2017, 8:01pm
UPDATED : Tuesday, 26 September, 2017, 10:46pm

HK$5 billion worth of retail bonds could be up for grabs next year as the Hong Kong Airport Authority revealed plans for raising HK$141.5 billion to fund construction of its third runway.

The authority emphasised the plan would enable Hongkongers to enjoy the fruits of Hong Kong International Airport’s success and denied it was a ploy to secure a stronger mandate for the controversial project.

While construction for the third runway commenced in August last year, details have yet to be hammered out as to how the bill would be settled as no taxpayer money is now involved.

An HSBC consultancy report released on Tuesday shed more light on the funding plan.

It stated that HK$47 billion – or one third of the project’s total cost – would come from the authority’s operating surplus, while another HK$26 billion would be covered by a surcharge levied on outbound passengers.

The levy, ranging from HK$70 to $180 depending on seat class and destination, would remain in place until the loans have been repaid.

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The remaining 49 per cent, or HK$69 billion, would be sourced from different financing channels over an eight-year period, the report added.

The channels include commercial bank loans ranging from HK$20 to $30 billion, while institutional bonds of different tenors would raise another HK$30 to $43 billion.

The public could still chip in, as the authority confirmed plans to issue retail bonds worth around HK$5 billion as early as the third quarter of next year.

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Authority CEO Fred Lam Tin-fuk denied the announcement was intended to secure a public mandate for the project, whose claim of increasing airport capacity by 30 million passengers each year has raised doubts.

“Our consultant’s advice was that all financing options should be explored to minimise risk,” Lam said. “We also believe Hongkongers should be able to share in the success of the airport.”

We also believe Hongkongers should be able to share in the success of the airport
Airport Authority CEO Fred Lam

William Lo Chi-chung, the authority’s executive director of finance, expressed confidence that the financing would be raised based on both market capacity and what he described as the body’s sound track record.

Lo said in jest that a bank agent rang him as soon as the report was released, advising “they were ready to provide the loans”.

Asked why the authority did not set aside a larger portion of its surplus to reduce the debt amount, Lo explained the third runway was only one of many projects in the pipeline.

“We also have to replace ageing facilities at the [current] terminal as well as invest in technological upgrades.”

The body expected the debts to be fully repaid by 2030 – six years after the third runway and its facilities are completed – although it could come sooner should the airport take in more surpluses in the future.