With the legislature’s Transportation Committee scheduled to meet on Wednesday to review Taiwan High Speed Rail Corp’s (THSRC) financial restructuring plan, the Bureau of High Speed Rail reiterated that the impending bankruptcy of the company is a serious issue and that Chinese investors are not allowed to buy into the high-speed rail system.
The bureau said that Wednesday would be domestic investors’ last opportunity to salvage the debt-ridden company before it folds, adding that the government would have to begin procedures to take over the operation of the high-speed rail system.
The bureau said the Measures Governing Investment Permits to the People of the Mainland Area (大陸地區人民來台投資許可辦法) states that Chinese are banned from investing in the high-speed rail system.
Meanwhile, investors from other nations must also be reviewed by the Ministry of Economic Affairs’ Investment Commission, which would limit the shares held by overseas investors to less than 49 percent. Foreign investors can buy shares in THSRC now because the company is listed on the emerging stock market, regardless of the financial restructuring plan, the bureau added.
Experts said the urgency of saving the company was triggered by the difficulty some of the preferred stockholders have in redeeming their stock. They said the government could weigh in by asking some of the preferred stockholders — either state-run institutions or those with shares owned by the government — to halt their plans to redeem the stock.
To buy back the preferred stock and pay the interest of more than NT$53.3 billion (US$1.67 billion), the government should tap the company’s restricted-use fund of NT$43.6 billion, some have suggested.
However, the bureau said that private preferred stockholders had succeeded in having a court side with them in redeeming the stock in the first trials, including Bank of Panhsin, United Microelectronic and Continental Engineering Corp. It further estimated that the final rulings would be issued in March this year.
The bureau said the company has only NT$1.8 billion available in cash, which is not enough to pay the preferred stockholders.
The bureau also emphasized that NT$43.6 billion is pledged to banks as a way of protecting the banks’ right as a creditor. Even if the bank agrees to unfreeze the fund, regulations state that the fund be used to pay preferred stockholders first.
Should the financial restructuring plan fail to pass the Legislative Yuan, it is impossible that the banks would agree that the fund be used to buy back the preferred stock, the bureau added. Others said that should the government consider extending the concession period, giving THSRC an exclusive right to operate for 40 more years, the company would generate NT$800 billion in revenue.
The bureau said it estimated the high-speed rail company would generate about NT$3.16 trillion in revenue if it were given four more decades to operate. However, the company would have to pay operational costs of NT$1.43 trillion and NT$550 billion in maintenance as well as loans, taxes and royalties to the government.
The company could make about NT$196.4 billion profit over a 59-year period as a return on investment to shareholders, the bureau said.
The bureau said the financial restructuring plan has taken into consideration several factors, including the potential increase in passenger volume of the high-speed rail system and projected population growth. If the system generates higher-than-expected profits, the excess would go to the government rather than the company, the bureau said.
As part of the restructuring plan is to reduce capital first and then raise more capital later, the bureau said the extension of the concession period is an important incentive to attract interested investors.
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