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June 29, 2017

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Concession period extension only way to save THSR: Fan

TAIPEI, Taiwan -- Taiwan High Speed Rail (THSR) Chairman Tony Fan (范志強) yesterday said that extending the concession period is the one and only way to save the firm from going through bankruptcy in the future.

The THSR yesterday held a shareholders meeting that was hosted by Fan, who took over the chairman position this March. Fan started the meeting by apologizing to all shareholders for not being able to reward them since the firm started to operate in 2007.

According to Fan, the THSR's current accumulated deficit has reached NT$52.1 billion, and once the preferred stock is redeemed, the deficit will exceed the assets, which will lead the firm on its way to bankruptcy.

"After countless trial calculations, we discovered that extending the concession period will be the only way to save the firm," said Fan.

According to the build-operate-transfer (BOT) project contract between the government and THSR, the concession period for THSR is 35 years, which means THSR's right to operate will be transferred to the government in 2033.

Government Buying THSR

Not Ideal: Fan

Fan said that the government's plan to buy the THSR back is not the most ideal way to save the firm.

"The process for the government to buy the firm back will take five, eight or even 10 years before the court can come up with a verdict on the case and the firm can carry out the liquidation," said Fan.

He also said that for the THSR's shareholders, they expect the government to purchase the firm at a higher price. However, Fan said, the government might not be willing to buy the firm back at the price that the shareholders expect.

Fan said that it cost the THSR NT$240 billion to finish the construction with the depreciation estimated as 26.5 years under the 35 years of concession period, which means that by the time the concession period is over, the equipment will only have been used for 26 years while the THSR's equipment can in fact be used for about 70 to 80 years.

If the concession period can be extended to 53 years, Fan said, the cost for depreciation will drop by half, which is why the THSR submitted a proposal to the Transportation Ministry earlier this year, hoping to extend the concession period from 35 years to 99 years.

When being asked by the shareholders about when they can receive rationed shares, Fan said that the THSR will have to make over NT$73.5 billion in profit before being able to hand out rationed shares, which will take at least 20 years for the firm to reach that goal.

According to Fan, he will work on solving all the issues and difficulty that the THSR is experiencing currently in order to bring the firm back to a normal operation mode, and the main focus for him is to allow the Transportation Ministry to approve the proposal of extending the concession period.

The Executive Yuan passed the amendment this month to the Act for Promotion of Private Participation in Transportation and Communication Infrastructure Projects. The amendment stipulates that if projects encounter financial or other major difficulties, the government is entitled to take over their management under certain circumstances.

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