I REFER to the article on the Western Harbour Crossing published in Steve Vines' Unfinished Business column (Sunday Morning Post, August 29), and entitled ''Tunnel numbers just don't add up''.
The reason why the numbers don't add up is because Vines has made some fundamental mistakes in his calculations.
The most obvious is the assumption that investors in the project will receive a return on their investment equivalent to the estimated net revenue figures he has quoted.
This is not the case. Prior to investors receiving a return, debt must be repaid out of net revenue, tax must be paid, and sufficient profits must be accumulated to meet dividend payments.
As we have stated publicly on many occasions, the internal rate of return (IRR) that shareholders can expect to receive will range from 15 per cent to 18.5 per cent per annum, and the average IRR over the franchise period is expected to be about 16.5 percent.
The higher returns calculated by Vines are simply incorrect. The Western Harbour Crossing franchise was subjected to intense scrutiny by members of the Legislative Council in the Bills Committee, which is a public forum. Among other things, the detailed calculation of these rates of return was thoroughly examined by those members, and accepted by them.
