The government will have to deal with a request by debt-ridden Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) to extend the 35-year concession period to allow the company to reduce mounting deficit, a transportation official said in an interview yesterday.
Vice Minister of Transportation and Communications Yeh Kuang-shih (葉匡時) said an extension of the time when THRSC is supposed to hand over the project to the government would help the company deal with its depreciation and amortization issues in the face of its huge debts.
THSRC’s board appointed Ou Chin-der (歐晉德) as company chairman last month — a decision that was widely seen as a bid to help the company recover from its snowballing losses.
Since the system went into operation more than two years ago, THSRC — the nation’s largest build-operate-transfer (BOT) project — had incurred losses of NT$70.2 billion (US$2.18 billion) as of June this year mainly because of high interest payments, as well as depreciation and amortization costs.
THSRC is expected to hold an extraordinary shareholders’ meeting next month to elect new board directors and supervisors, which will pave the way for the government to play a leading role in steering the future course of the company.
On Tuesday, THSRC added another government-appointed independent director, International Bills Finance Co (國際票券) chairman Victor Liu (劉維琪), to its board. All three independent directors are government representatives.
The government is aiming to win nine out of the 15 seats during the board election next month, sources said.
The government is also trying to arrange a new deal between the bank syndicate and the company to obtain lower interest rates so it could better service its loans, Yeh said.
Yeh said the ministry thought it was unreasonable that the contract sets the depreciation rate for THSRC equipment and facilities at 26.5 years, because the service life of the company’s rail equipment and construction is estimated at 100 years and 80 years respectively.
Arthur Chiang (江金山), a board director representing Continental Engineering Corp (CEC, 大陸工程), said the contract would have to be revised to allow for an extension of the handover period.
Natural disasters should also be factored in, Chiang said.
During the construction of the high speed rail, work was suspended because of an earthquake on Sept. 21, 1999. He said it made sense then to extend THRSC’s depreciation and amortization period.
Continental is one of THSRC’s five original principal shareholders.
Meanwhile, Susan Chang (張秀蓮), chairwoman of the Bank of Taiwan (臺灣銀行), said yesterday that the five major shareholders of THSRC had refused to increase their investments, despite a legislative resolution asking them to do so.
The bank consortium arranging the syndicate loan is also asking the THSRC’s five founding stakeholders to provide a joint liability guarantee for the new loan. Chang said the five major shareholders had rejected the proposal.