Swire Pacific has suffered a major financial setback after losing an arbitration case over the payment of land fees on developments in Taikoo Shing, which could cost it about HK$4.5 billion.
The arbitration result, delivered yesterday, put an end to a longstanding dispute over whether land costs were payable on developments in Taikoo Shing.
Swire said it would pay the sum - expected to be determined within the first half of the year - with operating cash flows and credit facilities.
However, the land costs will mainly lower the group's consolidated property valuation reserve with minimal impact on its profit and loss account.
Just HK$151 million, determined by the arbitrator as the premium for the Horizon Gardens development, part of Taikoo Shing's residential portion, will be charged to its consolidated profit and loss account for the year to December 2000. The group's annual report is due in March.
The arbitration result came as analysts, worried by additional provisions for Swire's loss-making Ocean Shores residential project in Tseung Kwan O, revised downward their profit forecasts for the group.