A plan to salvage debt-ridden Taiwan High Speed Rail Corp (THSRC) suffered a setback during a meeting of the legislature’s Transportation Committee yesterday morning when Democratic Progressive Party (DPP) lawmakers demanded that the Ministry of Transportation and Communications hold a public hearing on the proposal before reviewing it.
As of June, THSRC had assets of NT$501 billion (US$16.4 billion) and liabilities of NT$452.8 billion. It had accumulated losses of NT$47 billion. It is also obligated to pay dividends of NT$48.2 billion to shareholders.
The Bureau of High Speed Rail, which oversees THSRC’s operations, said that based on its estimates, the company could go bankrupt in March unless it obtains NT$53.3 billion to buy back the preferred shares issued during the construction of the rail system.
Photo: Wang Min-wei, Taipei Times
Resolving this issue is crucial because the company is facing 39 lawsuits demanding that it redeem the preferred shares and pay dividends, the bureau said. Four lawsuits have seen the court side with the plaintiffs, it added.
THSRC’s board of directors last month approved a restructuring plan hammered out during negotiations between the ministry, the bureau and the company that would see the firm buy back NT$39.2 billion in preferred stock, reduce its capital by NT$39.1 billion and then later increase the capital by NT$30 billion, while its concession period would be extended from 35 years to 75 years.
As Transportation Committee members scrutinized the financial blueprint yesterday, DPP lawmakers asked the ministry to provide more information on the financial figures and explain them at a public hearing.
DPP Legislator Lee Kun-tse (李昆澤) said that extending the company’s concession period to 75 years would save it NT$7.1 billion in annual amortization costs, while the government could increase its investment in the company by raising NT$13 billion from government-affiliated institutions and THSRC shareholders could see a return of up to 5.9 percent.
The ministry has said that high-speed rail ticket prices could drop if the restructuring plan was implemented, but the prices proposed in the plan are higher than those set before prices were hiked last year, Lee said.
“This shows that the government only cares about being nice to THSRC and is stingy when it comes to consumers,” Lee said.
DPP Legislator Kuan Bi-ling (管碧玲) said that the government needs to explain how it arrived at the figures in the plan because she does not see why the concession period should be extended.
The government has also not made enough effort to communicate with the owners of the preferred shares, which are mainly government-affiliated institutions.
“I have handled many disputes in civil lawsuits,” Kuan said. “Even if the final verdict is handed down, there could still be room for an out-of-court settlement. These institutions are all affiliated with the government. What is the government’s role in this matter?”
Minister of Transportation and Communications Yeh Kuang-shih (葉匡時) told lawmakers that the ministry has tried to dissuade THSRC’s five original investors from investing more money in the company, even though the Company Act (公司法) does not ban them from doing so.
The ministry would like to raise the needed funding from the government-affiliated institutions that had purchased the preferred shares, which would allow government shareholders to dominate THSRC’s board.
“By allowing the government to gain control of the company, we can erase the doubts that only certain private shareholders will benefit from the deal,” he said.
None of the government-affiliated institutions have an incentive to invest if the concession period is not extended, he said.
Asked what the ministry would do if the original investors continue investing in THSRC if the legislature approves the restructuring plan, Yeh said that he would resign.
THSRC could still go bankrupt if ticket prices are set too low, Yeh said, and the public would end up paying the consequences.
However, there is still room for discussion, he said.
The ministry did consider the option of a government takeover, but it estimated that the government would need about NT$390 billion just to purchase the high-speed rail system, a figure that did not include facility maintenance or equipment replacement costs, Yeh said.
THSRC chairman Tony Fan (范志強) said the company has spent NT$28 billion building four new stations and buying new trains.
“We are supposed to start paying back these costs next year,” Fan said. “We will be cash-strapped if we do not raise funds in time.”
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