Sat, Sep 18, 2004 page10

• THSRC allays fears of gross overspending

  CONSTRUCTION The Taiwan High Speed Rail Corp said the project would be only slightly more expensive than expected, which would make it easier to get bank loans

  • By Jessie Ho / STAFF REPORTER
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  Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) announced yesterday that the total costs involved in building the nation's first high-speed railway would be very close to the original estimate, averting fears of serious overspending and taking pressure off the THSRC to obtain bank loans.

  According to THSRC's latest estimate, calculated last month, the total cost of the project would be NT$460.9 billion (US$13.6 billion), which represents a 3.6 percent increase from the original estimate of NT$445 billion (US$13.15 billion) set in October 1999 when the contractor signed the deal with the government.

  "The range of the increase is considered tiny and affordable to us ... it also reduced our pressure to raise funds to obtain loans from banks," Lee Sheau-jin (李曉金), chief financial officer of THSRC, told a media gathering yesterday.

  In February, the THSRC estimated that the total cost for the project would be NT$513.3 billion.

  The figure dampened investors' enthusiasm for pumping more money into the project, raising fears that the THSRC would face a crisis in raising funds to complete construction.

  Construction spending on the north-south bullet train project jumped from NT$375.5 billion to NT$436.5 billion since 1999, mainly as a result of changes to the track design and terrain construction, Lee said.

  Fortunately, Lee said, the average loan interest rate has dropped from 8 percent five years ago to 3 percent now, so the financial costs were sharply reduced from NT$69.4 billion to NT$24.4 billion.

  The THSRC also got a boost from the Council for Economic Planning and Development at the end of last month. The council agreed that the THSRC only has to raise 25 percent of the total funds to get loans, lowering the figure from 30 percent. The remaining 75 percent is to be made up in bank loans.

  After the adjustment, the THSRC is required to pool NT$20.5 billion, rather than NT$37.7 billion, by October next year, when the bullet trains are scheduled to start running between Taipei and Kaohsiung, Lee said.

  Besides issuing preferred shares to a designated group of investors, the THSRC plans to apply to list its shares on the Taiwan Stock Exchange in the last quarter of the year, and hopefully to officially enter the capital market in the first half of next year, he said.

  Lee declined to say which banks are being considered to manage its initial public offering.

  The company is also considering issuing depository receipts to raise funds from overseas investors, but the timetable has not yet been decided, Lee said.

  With 70 percent of the construction completed, THSRC president George Liu (劉國治) said the company is confident that the stock will be well received among individual investors, adding that the company expects to start reaping profits in the second year of operation.

  Liu said that the company plans to start testing trains next month on a 60km track at its factory in Yenchao, Kaohsiung County, before putting them on the 345km high-speed rail that runs between Taipei and Kaohsiung.

  THSRC shares declined 0.74 percent to NT$8.06 per share yesterday on the Emerging Stock Market (興櫃市場), the first unlisted securities market in Taiwan.
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