MTRC to run XRL for 10 years

August 23, 2018

Voiceover:
The Government has granted the MTR Corporation a 10-year concession to operate the Hong Kong Section of Guangzhou-Shenzhen-Hong Kong Express Rail Link through the Kowloon-Canton Railway Corporation, which is wholly owned by the Government.

The MTR Corporation needs to pay the KCR Corporation concession based on the actual patronage of the Express Rail Link.

The Government estimates the daily average patronage to be 80,100 after the XRL begins operation. In 2021, the figure is expected to rise to 95,000.

Secretary for Transport & Housing Frank Chan:
We are pretty confident that the high speed rail would not be incurring any loss in the future as you can see from the very conservative projection that we are taking 80,000 plus passengers a day for the year 2018. Given such a low patronage, we are still making a reasonable return and therefore if we are expecting more patronage in the future, then the probability of incurring a loss would be rather minimal, I would say.

Voiceover:
Mr Chan said it is estimated the MTR Corporation will pay the KCR Corporation a total Additional Concession Payment exceeding the net amount of HK$2.7 billion for the 10-year concession period for the XRL.

Since the XRL will be a brand new mode of cross-boundary transportation, the Government has adopted a prudent approach to forecast patronage for the XRL.

Having regard to commercial considerations and balance of returns and risks, when the actual patronage of the XRL deviates considerably from the projected patronage, the KCR Corporation and the MTR Corporation will share the returns or risks arising from such deviation under a Patronage Cap-and-Collar Mechanism.

If the deviation of the actual patronage is within 15% from the projected patronage, the MTR Corporation will bear all the risk or retain all the return.

If the deviation of the actual patronage is beyond 15%, the MTR Corporation and the KCR Corporation will bear the risk or share the return according to the ratio of 30% to 70%.

The Government has granted the Mass Transit Railway Corporation a 10-year concession to operate the Hong Kong Section of Guangzhou-Shenzhen-Hong Kong Express Rail Link through the Kowloon-Canton Railway Corporation.

The MTR Corporation needs to pay the KCR Corporation, which is wholly owned by the Government, concession based on the actual patronage of the XRL.

The Government estimates the daily average patronage to be 80,100 after the XRL begins operating on September 23. In 2021, the figure is expected to rise to 95,000.

Introducing the XRL’s operating arrangements at a press conference today, Secretary for Transport & Housing Frank Chan said he does not expect the XRL to incur a loss.

“We are pretty confident that the high speed rail would not be incurring any loss in the future as you can see from the very conservative projection that we are taking 80,000 plus passengers a day for the year 2018.

“Given such a low patronage, we are still making a reasonable return and therefore if we are expecting more patronage in the future, then the probability of incurring a loss would be rather minimal.”

Mr Chan said it is estimated the MTR Corporation will pay the KCR Corporation a total Additional Concession Payment exceeding the net amount of $2.7 billion for the 10-year concession period for the XRL.

Since the XRL will be a brand new mode of cross-boundary transportation, the Government has adopted a prudent approach to forecast patronage.

Having regard to commercial considerations and balance of returns and risks, when the actual patronage of the XRL deviates considerably from the projected patronage, the KCR Corporation and the MTR Corporation will share the returns or risks arising from such deviation under a Patronage Cap-and-Collar Mechanism.

If the deviation of the actual patronage is within 15% of the projected figure, the MTR Corporation will bear all the risks or retain all returns.

If the deviation of the actual patronage is beyond 15%, the MTR Corporation and the KCR Corporation will bear the risks or share the returns according to the ratio of 30% to 70%.