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High Speed Rail system not suitable for gov't takeover: Ing

TAIPEI, Taiwan -- Taiwan High Speed Rail Corp. (THSRC), a major BOT (build, operate and transfer) project, has yet to meet the terms of being taken over by the government, although its accumulative losses have already hit a high of NT$67.5 billion as of the end of 2008, Nita Ing, chairwoman of the THSRC, said yesterday.

Ing made the remarks at an annual shareholders' meeting. She said that although THSRC's operations are undermined by the lackluster economic performance, there are two major reasons behind the firm's huge operating losses; one is the unreasonable financing structure leading to high interest payment, and the other is that the equipment depreciation period is too short to warrant a reasonable appropriation of depreciation reserves.

Ing said she hoped the two unreasonable situations can be settled by the end of this year.

The THSRC head continued that while the High Speed Rail equipment is designed to have a life span of 100 years, the related construction contract requires the depreciation reserves to be fully appropriated within only 26.5 years.

The existing stations of the THSRC can last for 80 years, but the firm is also required to offer full amount of depreciation provisions within 26.5 years.

As a result, THSRC has so far made depreciation expenditures of up to NT$42.4 billion.

On another front, under the existing syndicated lending contract signed between banks and the THSRC, the interest rate for the loans can hardly be reduced as long as one of the syndicated loan lenders disagree to cut the rate. The lending regulation made THSRC still subject to a high interest rate of 8 percent per annum at the end of 2008, although the central bank had cut its key interest rates for several times.

So far, the THSRC has made interest payment of up to NT$65.5 billion, according to Ing. The interest rate has declined to only 2.6 percent for the moment, but should be cut further, Ing stressed.

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