It must be a time of great head scratching in the boardroom of the Mass Transit Railway Corp, with directors sitting on a fence, trying to make a dollar out of 10 cents. The impending privatisation of the MTRC was announced to much fanfare in the Budget speech in March but, unfortunately, there is a thorny problem here and the Government has dropped that problem directly into the hands of the MTRC itself to solve. The problem is that the MTRC is not really worth very much on the basis of its fare structure and earnings as they stand at present. The Government reportedly thinks it is worth $60 billion. Your correspondent's analysis (Monitor, September 18) suggests that the market will pay about $13 billion at best unless it is all obscured in property. Keep one crucial point in mind here. You may rate the MTRC highly for its track, rolling stock and stations but the only MTRC talk anyone will listen to when it is brought to the market is money talk. Call this mercenary if you will but it is not so by the choice of investors who will look at it. If the MTRC wants money from the listing then investors only want payment in kind. It is the MTRC that has chosen money talk. There is, however, a simple and elegant way out of the problem. Start with the understanding that there are really two businesses here. One is concerned with the building and construction finance of a railway, the other with operating a railway. They really are quite different businesses if you stop to think about it. They may have a railway in common but when was the last time you ever heard of an aeroplane manufacturer also being an airline because the two businesses have aircraft in common? What counts is not what you have but what you do, and there really cannot be two businesses more different in what they do than construction/finance and making sure that trains are clean and run on time. So let's separate them. First we set up a company that should accurately be called LossCo but, to make it sound good, we'll call it MTR Asset Holdings Ltd. This one owns all the MTR rail lines, rolling stock and property plus associated debt, and the share capital is 100 per cent held by the Government. MTR Asset Holdings then turns over the use of all its assets to MTR Operations Ltd on a long-term finance lease and pitches the lease terms at a low enough level to ensure that MTR Operations makes buckets of money. MTR Operations then goes public and if the Government wants $30 billion from selling half the shares it can get it. It can practically dial the market value it wants. All it has to do is set the lease terms at the appropriate level and, hey presto, it can dictate the launching price of MTR Operations to the second decimal. Of course it means LossCo . . . ahem . . . MTR Asset Holdings gets a poor return on all the investment made building the railway but this is no loss it has not already suffered. The book losses will mean nothing. They will be the result of depreciation and depreciation is a cash flow item not involving movement of funds. The money itself was all paid out long ago and the taxpayers suffer no further sting. If the Government wants a bigger return, however, then MTR Operations can jack up its fares and, under an agreement with MTR Asset Holdings, pay most of the extra money back in the form of higher lease payments. Once again, dial your figure. You can do whatever you want this way. And, lest you think this is just a journalist trying to be clever, it is increasingly the way that public service companies across the world are being privatised. Separation of asset and operations with privatisation of operations is the way to go. It is simple, it works, it solves the MTRC's problem beautifully and we should seriously consider it.