Toll firm fears NT$2.7 billion loss

The private company operating the nation's freeway electronic toll collection (ETC) system plans to introduce recapitalization to cover expected widening losses incurred from a series of government-required operational adjustments, a company official said yesterday.

Far Eastern Electronic Toll Collection Co (遠通電收), which began offering the ETC services early last month, had originally expected to post losses of NT$1.7 billion (US$52 million) by the end of the year.

But with the latest preferential packages it introduced last Friday in response to the government's demands, the company might be NT$2.7 billion in the red by the end of the year, company spokeswoman Lin Li-ling (林麗玲) said in a phone interview yesterday.

The packages unveiled last Friday make on-board units available to all motorists at the promotional price of NT$680 apiece. The company had originally planned to offer just 500,000 units at that price.

As the company also has to increase the number of service outlets offering on-board unit installation, increased rent and employee salaries are expected to worsen the bottom line, she said.

"The estimated profits of NT$10 billion to be derived during the 20-year BOT [build-operate-transfer] contract are likely to be completely wiped out. We plan to launch recapitalization by adding between NT$1 billion and NT$2 billion to the initial capital of NT$2.5 billion by the year-end," Lin said.

As the business model has undergone unexpected changes, Lin said Far Eastern hopes to generate profits as soon as possible by adding value to its products by, for example, incorporating various functions on its integrated-circuit toll cards.

With the ETC controversy having subsided somewhat, the number of motorists purchasing on-board units finally showed signs of improvement, climbing to over 1,000 per day over the weekend. The ETC usage ratio reached 5.66 percent on Saturday, according to the company's figures.

However, uncertainties surrounding ETC operations remain, as verdicts for the relevant lawsuits are still pending. In addition, the Taiwan Area National Freeway Bureau under the Ministry of Transportation and Communications is expected to amend the contract with Far Eastern within seven working days as required by Minister Kuo Yao-chi (郭瑤琪) last Friday.

The issues still to be addressed include a means of rewarding heavy users, the introduction of a simpler registration procedure and the availability of more service locations, which all need to be detailed in the contract.

The government is also considering appointing two independent directors to sit on Far Eastern's board to better supervise its operations, a move which the firm's vice chairman, Champion Lee (李冠軍), said they do not oppose, according to a report published yesterday by the Liberty Times, the Chinese-language sister paper of the Taipei Times. The government might also require Far Eastern to make its financial statements public on a regular basis, the report said.

Faced with the ministry's policy U-turn, observers said they are adopting a wait-and-see attitude as details of the new contract are yet to be finalized.

"Although Far Eastern has promised to halve the on-board unit price and reward heavy users, which I think is reasonable, we have not yet seen how the firm will improve its service quality by reducing the waiting time for prospective on-board unit buyers and increasing service locations," said Wang Jin-yuan (王晉元), associate professor of transportation technology and management at National Chiao Tung University.