The plan to restructure the finances of the Taiwan High Speed Rail Corp (THSRC) was made official yesterday after it signed an amendment to its contract with the Ministry of Transportation and Communications (MOTC).
The amendment was proposed to salvage the debt-ridden high speed rail operator from imminent bankruptcy, as it faced multiple lawsuits filed by preferred stockholders who were threatening to redeem the stock, which was valued at approximately NT$54 billion (US$1.71 billion).
The company has less than NT$2 billion of funds available.
Apart from resolving the THSRC’s financial problems, the amendment of the contract also means the end of the build-operate-transfer model under which the company had operated, as the government has become the largest shareholder in the company.
The company also terminated its contract with the MOTC to develop properties surrounding the high-speed rail stations yesterday, with the right of property development being returned to the government.
MOTC Minister Chen Jian-yu (陳建宇) said the amended contract tackled the financial problems of the THSRC in a “very practical manner.”
He called on investors to support the financial restructuring plan, saying that they should believe in the THSRC as well as in the government.
THSRC chairman Victor Liu (劉維琪) said the company is now owned by the state and operated by a private contractor following the amendment of the contract.
As the company has a longer concession period, Liu said the company has plans to invest in railway infrastructure, including installing a new type of ticket gates. The ticket gates currently in use can only read the tickets if they are turned on their backs, which some users think is problematic, Liu said.
Chen said high-speed rail ticket prices would be lowered before Jan. 1 next year.
“The company would have to submit the new ticket-pricing plan for the ministry’s approval, but the fares will definitely be lowered by the date we have committed to,” Chen said.
A high-speed rail ticket from Taipei to Kaohsiung costs NT$1,630 per person. The amendment of the contract would see the ticket price drop to NT$1,490 — the price before a hike in 2013.
Based on the amendment of the contract, the company is to first reduce its capital by 60 percent to about NT$39 billion. This is then to be followed by an extension of the concession period by 35 years. Within six months of its reduction of the capital, the company would have to raise NT$30 billion in capital to clear its debts.
Chen said that the company would have no problem raising the capital, because the funding would come from investments from the China Aviation Development Foundation and agencies which have government funding.
According to the Bureau of High Speed Rail, the company is scheduled to buy back preferred stocks by Tuesday next week. It is also to hold a shareholders’ meeting on Sept. 10.
The reduction of the capital is scheduled to be completed by mid-October, when the government would also take control of the properties near the high-speed rail stations.
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