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Hong Kong taxpayers to bail out MTR for express rail link to Guangzhou: Government hopes Legco will agree to HK$19.6 billion in extra funding
From: SCMP
By: Phila Siu and Christy Leung
Date: 30/11/15

The MTR Corporation will be bailed out by taxpayers upfront for the cost overrun of the long-delayed, high-speed rail link to the mainland, but the troubled operator plans to offset the amount by paying the government, its majority shareholder, a special dividend.

Under a controversial agreement announced on Monday, the Guangzhou-Shenzhen-Hong Kong Express Rail Link will be completed in the third quarter of 2018, with the cost revised to HK$84.42 billion - HK$880 million less than the corporation's last estimate.

The government hopes to persuade a highly sceptical Legislative Council to approve the HK$19.6 billion in extra funding by February. Almost exactly the same amount should eventually be recouped through a special dividend to be paid by the MTR.

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MTR Signs Agreement with Government on Proposed Arrangements
on Additional Funding for Completion of XRL Project

MTR Press Release 30/11/15

The MTR Corporation has reached an agreement ("XRL Agreement") with the Hong Kong Special Administrative Region (HKSAR) Government today (30 November 2015) to demonstrate our commitment to take forward the Hong Kong Section of the GuangzhouShenzhen-Hong Kong Express Rail Link Project (“Project”) which is expected to commence commercial operations in the third quarter of 2018. The XRL Agreement, which includes a proposal to resolve the additional funding for the Project, is subject to approval by MTR’s independent shareholders as well asthe approval of the HKSAR Legislative Council.

Key elements of the proposed arrangements include the following:
1. The Government to bear and finance the Project cost up to HK$84.42 billion1
(an increase of up to HK$19.42 billion (Current Cost Increase) from the original Project cost estimate of HK$65 billion);
2. MTR to bear and finance any Project costs exceeding HK$84.42 billion (if any) except in limited circumstances specified in the XRL Agreement;
3. MTR to pay a Special Dividend of HK$4.40 per share in aggregate, in two equal tranches (of HK$2.20 per share in each tranche). These are expected to be paid in the second half of 2016 and the second half of 2017 respectively (total dividend to be paid of approximately HK$25.76 billion);
4. Other terms of the Entrustment Agreements previously entered into relating to the Project between the Government and MTR remain except for amendments required to reflect the XRL Agreement’s proposed arrangements; and
5. The Government reserves its right to seek a determination of MTR’s responsibility (if any) under the Entrustment Agreements for the Current Cost Increase through arbitration, after the commencement of commercial operations on the Project.

(Summary of the XRL Agreement in Annex)

"We believe the proposed arrangements provide a pragmatic and viable solution to take the Project forward," Dr Raymond K F Ch'ien, Chairman of MTR Corporation said at the joint news conference held with the Secretary for Transport and Housing Professor Anthony Cheung to announce the way forward. "The Corporation is aligned with the Government to see through delivery of the Express Rail Link project, which is important in enhancing Hong Kong's connectivity and ensuring our long-term competitiveness. Indeed, the XRL Agreement was reached after detailed discussions with the Government and has taken into account the interests of different stakeholders. Our underwriting of any further cost increase above HK$84.42 billion and the declaration of the Special Dividend, made possible by our healthy financial position, are major steps forward to demonstrate our commitment to this Project." 

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