The Ministry of Transportation and Communications yesterday proposed first reducing Taiwan High Speed Rail Corp’s (THSRC, 台灣高鐵) capital by at least 60 percent through preferrred stock redemption and later raising it by NT$30 billion (US$3 billion) to help the railway operator avoid bankruptcy, with the concession period being extended by up to 75 years.
Speaking before the legislature’s Transportation Committee, ministry officials said that as of the end of last year, the high-speed rail operator’s liabilities totaled NT$457.5 billion, including NT$364.4 billion in loans. It had accumulated losses of NT$52.2 billion.
The company will be mired in debt for the next five years if it does not undergo financial restructuring, the ministry said.
Photo: Chang Chia-ming, Taipei Times
THSRC will have to generate an annual revenue of NT$40 billion to NT$75 billion to cover the costs of amortization, and repay loans and finance construction of new rail stations in Miaoli, Yunlin, Changhwa and Nangang (南港), it said.
The company will not be able to afford these costs with its current annual revenue, nor would it be able to do so even after factoring in revenue growth of 6.2 percent per year, it said.
The company had issued preferred shares valued at NT$40.2 billion during the construction of the high-speed rail system. The stakeholders — mainly banks — had filed lawsuits demanding redemption of the shares or payment of interest.
With two of the stakeholders winning the lawsuits in the first trial, the ministry is concerned that other stakeholders would follow suit.
Minister of Transportation and Communications Yeh Kuang-shih (葉匡時) said the ministry would present a comprehensive financial restructuring plan by the end of next month.
Based on the current plan drawn up by the ministry, the company’s capital must be reduced by at least 60 percent via preferred share redemptions, adding that the company will have to raise an additional NT$30 billion in capital after the capital reduction is completed.
The concession period, in which THSRC holds the exclusive right to operate the high-speed rail system, would be extended from 35 years to 65 to 75 years.
“We have examined cases around the world and found that 35 years might be too short,” Yeh said.
“The company that manages and operates the Channel Tunnel between the UK and France, for example, was first awarded a concession of 55 years, but it was later extended to 99 years. I am afraid that 99 years might be deemed too long by some people here, but we could consider extending the concession for THSRC by another 30 to 40 years,” the minister added.
Yeh said THSRC’s initial investors would be banned from investing further in the company when it seeks recapitalization, but it would be open to companies wholly or partially owned by the government.
The government would control the seats on the company’s board of directors after completing the procedure.
THSRC chairman Tony Fan (范志強) said the company aims to raise NT$50.5 billion to buy back its preferred shares and pay dividends in order to settle its accounts with the banks once and for all, and avoid collective lawsuits filed against the company.
The ministry’s proposal drew mixed reactions.
Democratic Progressive Party (DPP) Legislator Tsai Chi-chang (蔡其昌) said the company should lower ticket prices after solving its financial problems.
DPP Legislator Yeh Yi-jin (葉宜津) opposed the extension of the concession period. Apart from the financial restructuring plan, she asked the ministry to submit a feasibility study on turning THSRC into a state-owned firm.
Chinese Nationalist Party (KMT) Legislator Lo Shu-lei (羅淑蕾) said the company should not rely on raising ticket prices to increase its revenue, but should explore other revenue sources and save on overheads.
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