Airport Authority chief says possible causes of cost of overrun were ‘all extreme cases’
EDDIE.LEE@SCMP.COM
PUBLISHED : Tuesday, 22 December, 2015, 9:20pm
UPDATED : Tuesday, 22 December, 2015, 9:22pm
Airport Authority chief executive Fred Lam Tin-fuk outlines the latest financial report on the runway project yesterday. Photo: Felix Wong
The Airport Authority did not rule out the possibility of extending the period of collecting a new passenger charge to help finance its multibillion-dollar project to build a third runway if there were unexpected cost overruns.
The statutory body declined to specify if a sudden surge in costs would also lead to its failure to resume paying the Hong Kong government – its sole shareholder – the annual dividends out of its surpluses.
But its financial adviser said even an adverse event with severity compared to that of the outbreak of the severe acute respiratory syndrome, which devastated the city in 2003, would not impair the authority’s ability to borrow more to fund the construction of the third runway.
Authority chief executive Fred Lam Tin-fuk said the latest report compiled by HSBC on the financial arrangements for the third runway had assessed the possible impact of five downside scenarios on the body’s financial position. “These are all extreme cases,” said Lam.
According to the findings, a single adverse event like Sars would prompt the authority to borrow HK$3 billion more than the planned HK$69 billion, but would not significantly dented its financial robustness.
In other extreme scenarios, the body can also manage if the capital expenditure goes up 50 per cent or the interest rate rises by 2 per cent.
Lam reiterated the authority would closely supervise the project’s implementation and ensure it would not lead to cost overruns.
He said the current financial plan, which encompassed the use of the authority’s surpluses, user charges and external financing via bank loans and bonds, would be able to fund the HK$141.5 billion project.
“Our preference is to go to the market to ask for the issue of funding,” Lam said when he was asked about the authority’s last resort if cost overruns eventually occurred and its financial plan was no longer viable.
He did not rule out the continued imposition of the proposed airport construction fees on departing passengers, which ranged from HK$90 to HK$180 per trip, beyond the original schedule that was supposed to end in 2031.
“We have no plans to ask for government money to fund the third runway project,” Lam said.
Asked whether the authority needed to continue to retain its surpluses and dividends to make up the shortfall in the coming years if there were unexpected cost overruns, Lam said it was up to the authority’s board to decide its dividend policy.
Lam said the authority’s good financial position could enable it to borrow from the market at a low cost.
The third runway project would generate a financial internal rate of return of about 8 per cent, higher than that in the financial feasibility study completed in 2011, according to the report.
http://m.scmp.com/news/hong-kong/economy/article/1893968/hong-kong-airport-bosses-dont-rule-out-extending-passenger
