Opening remarks by STH at press conference on Hong Kong Section of Guangzhou-Shenzhen-Hong Kong Express Rail Link project (with video)

     Following are the opening remarks by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, at a press conference on the revised Programme to Complete and revised Cost to Complete of the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link project today (November 30):

     On June 30 this year, the MTR Corporation Limited notified the Government of further project delay and substantial cost overrun of the Hong Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link.

     In the past few months, the Highways Department, assisted by its Monitoring and Verification Consultant, has critically assessed the Corporation's works progress and its revised Cost to Complete (CTC), i.e. the Entrustment Cost. At the same time, the Government has conducted lengthy discussion with the Corporation on how to address the cost overrun.

     After rounds of exchange, the Government and the Corporation have reached consensus on the way forward.

     We have agreed to adjust the Programme to Complete (PTC) to the third quarter of 2018, including a six-month contingency period, and to revise the CTC to $84.42 billion, $0.88 billion less than what the Corporation proposed in June. Details are contained in our paper to be submitted to the LegCo's (Legislative Council) Railways Sub-committee later today.

     I must stress that this agreement between the Government and the Corporation on the revised PTC and CTC does not mean that the Government is satisfied with the Corporation's performance as project manager.

     The Government reserves all the rights to pursue the warranties and obligations from the Corporation in respect of project implementation, works delay and cost overrun. While the possibility of taking legal means such as arbitration cannot be ruled out, the two sides have, in view of the extremely tight works schedule, agreed to initiate such action only after the rail project's commissioning in 2018.

     Regarding the revised Entrustment Cost, the Corporation has agreed to accept a cap at the level of $84.42 billion. In other words, further cost overrun beyond this level will be borne and financed by the Corporation. This arrangement is conditional upon the approval of the Corporation's independent shareholders.

     The Corporation has also proposed to pay a special dividend. If approved by independent shareholders, the Government, as the Corporation's majority shareholder, will receive a sum of around $19.51 billion.

     Nonetheless the Government will seek approval of additional funding by the Legislative Council according to established procedures so as to increase the Entrustment Cost by $19.42 billion to $84.42 billion (from the original $65 billion). The related government costs will also go up by $0.1825 billion, to $2 billion. Hence a total increase of $19.6025 billion is required.

     We will report to the Railways Subcommittee of LegCo this Friday, December 4, before going to the Public Works Subcommittee and Finance Committee. We hope to get the Finance Committee's approval by the end of February next year.

     The Express Rail is a major transport infrastructure which will bring significant economic benefits to Hong Kong and enhance our city's overall competitiveness.

     Despite the works delay and cost overrun, we should not give up the project easily and suspend or even terminate the contracts as the consequences of such a scenario will be catastrophic, causing billions of dollars of loss in contractors' claims and maintenance costs, as well as indirect costs relating to delay or disruption to land developments and impact on the West Kowloon Cultural District development.

     The Government believes the arrangement now reached with the MTR Corporation to address the cost overrun issue represents a pragmatic solution in the circumstances to take forward the rail project. It would help clear uncertainties and enable all parties concerned to focus efforts on the timely completion of the project.

Ends/Monday, November 30, 2015
Issued at HKT 17:37