Fri, Mar 27, 2015 - Page 3 News List

THSRC board backs new plan

ALL ABOARD:The new financial restructuring plan would provide the government with seven seats on Taiwan High Speed Rail Corp’s board of directors, increasing its control

By Shelley Shan  /  Staff reporter

Taiwan High Speed Rail Corp’s (THSRC) board of directors yesterday approved a new financial restructuring plan, proposing an extension of the concession period to 70 years and allowing the public to buy shares in the company.

The company hoped that the plan would be supported by legislators, THSRC spokesman Max Liu (劉文亮) said, adding that THSRC would have to sign a new contract with the Ministry of Transportation and Communications after it secures legislative approval.

He also said that THSRC would withdraw its petition to arbitrate three matters after the new contract takes effect, including changes in construction design following the 921 Earthquake in 1999.

The company sought compensation of more than NT$300 billion (US$9.55 billion) from the government via arbitration.

Liu said THSRC estimated that the new plan would be implemented by March next year if everything goes as planned, adding that the plan would be on the agenda of its shareholders’ meeting at the end of June.

Last year, the company proposed a financial restructuring plan to save itself from bankruptcy, after facing multiple lawsuits from owners of the company’s preferred shares demanding that it redeem the shares and pay dividends.

However, the plan failed to secure bipartisan support in the Legislative Yuan.

The new plan would allow the public to purchase up to NT$19.2 billion in company shares, in addition to reducing the proposed concession extension by five years to 70 years. Under the new plan, THSRC would be able to continue operations until 2068.

Meanwhile, the four major government funds — the Labor Insurance, Labor Pension, Public Service Pension and Postal Savings funds — would be able to invest up to NT$7.8 billion in the company.

The plan also reserves NT$3 billion for investment from THSRC employees. Before raising the capital, the company would first reduce about 60 percent of its capital. The banks would allow THSRC to use a controlled fund of NT$43.9 billion to buy back the preferred stocks if the new plan passes.

Instead of raising the capital in two stages, the company would raise the capital from different parties simultaneously. If the company misses its NT$30 billion capital target, the CTCI and Aviation Development foundations, four government funds or eight banks owning THSRC preferred stock would cover the difference.

However, THSRC said that the estimated internal rate of return would drop from 6.2 percent in the previous plan to 4.9 percent.

The fare for a one-way trip from Taipei to Kaohsiung is to drop from NT$1,630 to NT$1,490 if the company is allowed to implement the plan. The previous plan would reduce the ticket price by only NT$100.

The new plan would provide the government with seven seats on the company’s board.

World Economic Society president Bert Lin (林建山) said that it would be hard for THSRC to raise almost NT$20 billion from the market alone, as investors would doubt its profitability after it lowers fares.

Lin also said that overseas investors are not likely to gain control of the firm, as spending so much money investing in a company with a low return on investment would not be worth the expense.

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