Fri, Sep 25, 2009 page11

• Ministry defends THSRC’s earnings record, potential

  LOAN WOES The ministry said the company’s financial performance has been dragged down by its financing structure, with huge interest and depreciation payments

  • STAFF WRITER, WITH CNA
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  The Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) has performed well, if not better than many international enterprises, if taxes, interest payments and depreciation costs are taken into account, the Ministry of Transportation and Communications (MOTC) said in a report yesterday.

  The assessment was made based on the earnings before interest, taxes, depreciation and amortization (EBITDA) indicator, one of the most universal and comparable performance indicators, which reflects the actual earning potential of a company.

  The company’s EBITDA margin reached 56.1 percent last year. That was higher than Hong Kong MTR Corp’s 52.9 percent, the Central Japan Railway Co’s 40.8 percent, Singapore MRT Ltd’s 34 percent, East Japan Railway Co’s 28 percent and West Japan Railway Co’s 20.4 percent.

  THSRC’s earnings, after taxes, interest, deprecation and amortization, however, reached a negative 59.6 percent.

  Attributing THSRC’s lackluster operating performance to its unreasonable financing structure, the ministry report said that beginning last year, the company’s monthly revenues totaled about NT$2 billion (US$62 mllion), but after deducting operating outlays, the revenues were not enough to make interest and depreciation payments.

  The NT$500 billion high-speed line was 80 percent funded through bank debt, leaving a legacy of huge interest payments.

  THSRC’s annual report last year said the company’s business turnover was NT$23.05 billion last year, a significant 70.7 percent growth over the previous year. But the company also reported interest payments of NT$17.4 billion and depreciation charges of NT$18.9 billion, which led to an accumulated loss after taxes of NT$25.01 billion.

  If the company wants to become profitable, it should seek a reasonable resolution to its interest and depreciation problems, aside from tapping new sources of revenue and cutting expenditure, the ministry said.

  In related developments, Susan Chang (張秀蓮), chairwoman of the state-run Taiwan Financial Holding Co (台灣金控) and Bank of Taiwan (台灣銀行), said yesterday that the syndicated loan lenders have lowered the interest rate for the company’s NT$308.3 billion in first-round syndicated loan to 2.6 percent.

  If there was still room for further cuts, it would probably be within 1 percentage point, and would be expected to begin from next month, she said.

  Meanwhile, Chinese Nationalist Party (KMT) Legislator Chen Chieh (陳杰) said THSRC’s five major shareholders should serve as guarantors when the second-round syndicated loan involving NT$65.5 billion is granted.

  Another concern is the extraordinarily high salaries THSRC top executives receive, even though the company has been in the red.

  Last year’s annual reports said each of the 22 vice presidents were paid more than NT$2 million per year, while each of its three foreign consultants earns NT$10 million a year.

  THSRC spokesman Ted Chia (賈先德) said the three foreign executives were professionals that many international firms have been scrambling to recruit.

  Chia said there was still a lot of work since the high speed rail became operational, including training and development of drivers and other staff, equipment maintenance, marketing, engineering, and the three have been very helpful in the company’s operations.
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