Think-tank expects the deal will allow MTR Corp to buy KCRC for half its value
The government will have to write down at least half the KCRC's nearly $60 billion asset value and award it property development rights to make a merger with the MTR Corporation financially viable, a think-tank says.
The two arrangements are prerequisites given the commitment made to shareholders at the time of the MTRC's listing in 2000 that any new projects would only be considered so long as they earned at least 1 per cent more than the corporation's average cost of capital, says Civic Exchange in a report calling on the government to consider the public's interest as well as the financial terms of the merger.
The organisation believes lower fares are a possibility after the merger because it will increase efficiency but says the government should not create the impression the merger is being done to make travel cheaper.
Instead, its report urges the administration to take the opportunity to address issues such as the poor execution of its rail-led transport policy, a sustainable financing model for rail operations and a transport strategy balancing road and rail.
'We want to remind the government that the financial arrangement is not the only issue the merger is about and its rail-led transport policy has not been forgotten,' said Civic Exchange chief executive Christine Loh Kung-wai. 'We don't think the government has optimised the policy.'
Ms Loh expects the administration to reveal the way forward for the merger plan next month or in February.
