Update on the development of the three-runway system at the Hong Kong International Airport
Cost and schedule of the 3RS project
Noting that the 3RS project also comprised the provision of a new automated people mover system (“APM”) and high-speed baggage handling system (“BHS”), Mr CHAN Chun-ying enquired if the prices of the design and build contracts for these two systems fell within the budget estimates, and whether the two systems would be completed as scheduled.
Mr Kevin POOLE of AAHK advised that 14 major contracts, including the ones for the APM and BHS, had been awarded so far, and that all the contracts were awarded on schedule and within the estimates of AAHK. The $141.5 billion budget had included allowance for inflation.
Financial arrangement and bond issuance.
Mr CHAN Chun-ying noted that according to AAHK’s detailed funding plan for the 3RS project, a United States dollar (“USD”) 500 million or Hong Kong dollar (“HKD”) 4 billion equivalent bond with a 10-year tenor and an HKD 5 billion retail bond with a three-year tenor would be issued starting from 2018-2019. In this regard, he enquired about the progress of the relevant funding activities.
Mr Wilson FUNG of AAHK advised that AAHK had adequate cash flow to meet all the recurrent operating expenditure and capital expenditure for the year. He reassured members that there was sufficient time for AAHK to arrange the necessary financing according to their plan. AAHK had started preparatory work for the near term funding activities, including beginning dialogues with financial institutions.
Mr CHAN Chun-ying considered that the recent interest rate hike would largely affect the borrowing cost of bond issuance. In this connection, he asked if the interest rate increase was within the expected range of AAHK.
Mr Wilson FUNG of AAHK advised that in the funding model for 3RS, AAHK had built in a cost of borrowing of 5% per annum throughout the entire period of 3RS construction. He was confident that AAHK’s financial arrangement was able to cope with the future changes in interest rate.