The Taiwan High Speed Rail Corp (THSRC) is to be listed as bankrupt on its financial statement that is set to be published near the end of April, as it is unable to repay its debts, Minister of Transportation and Communications Chen Chien-yu (陳建宇) said yesterday, while adding that there might be a solution to the financial quagmire if the firm’s original investors are willing to increase their holdings.
Despite having the cash flow to keep the high-speed rail operating, Chen said the bankruptcy on the balance sheet would nevertheless constitute a major violation of the terms in the company’s contract with the government, adding that THSRC would be given 80 days to address its financial issues.
If it fails to fix the problems before the deadline, the government would have to terminate its contract and take over the high-speed rail system, he added.
“Between the end of April and the last day of the 80-day improvement period, the ministry would be open to any negotiations with THSRC if the company responds in goodwill,” Chen said, adding that one of the possible “goodwill” measures would be for the original investors to increase their stakes.
Chen further estimated that the original investors would have to raise at least NT$100 billion (US$3.16 billion) in capital so the firm could stay afloat.
He added that any new financial restructuring plan that THSRC could propose during the improvement period would definitely involve an extension of the concession period.
The government and the rail operator would have to negotiate to determine what a reasonable concession period would be, he said.
Previously, the ministry endorsed a company-proposed financial restructuring plan to 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.
The plan had failed to secure approval from the legislature’s Transportation Committee, leading to former transportation minister Yeh Kuang-shih (葉匡時) choosing to step down.
The company’s assets are valued at NT$501 billion, based on a financial report in June last year, Bureau of High Speed Rail’s First Division Director Yang Cheng-chun (楊正君) said.
He added, however, that the assets have suffered a loss, as the company has downgraded the estimated passenger volume from 290,000 per day to 180,000 per day.
“Without the incentive of a longer concession period, which investor would want to raise its stake in the company if it knows that the high-speed rail system carries just 130,000 passengers daily and it would have just 18 years left to recoup its money?” Yang asked.
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