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Blues, Greens balk at MOTC re-finance plan for HSR

Blues, Greens balk at MOTC re-finance plan for HSR

The Transportation Committee of the Legislative Yuan wrangled with ideas for a restructuring of the debt for Taiwan’s High-speed Railway (HSR) Wednesday, with both Blue and Green legislators throwing up objections to the plan proposed by Minister of Transportation Yeh Kwang-shih.

Yeh noted that the five original shareholders in HSR now hold 37% of HSR’s equity. If the government move to take control of HSR as some lawmakers and other officials are suggesting, the top five shareholders would be able to overrule the government by virtue of their majority stake and there could be endless legal disputes between shareholders and the government.

Some legislators reasoned that if the government moves to effect a capital reduction for HSR, then follows this by increasing public participation through an increase in shares held by publicly-owned banks, HSR would become a quasi state-owned enterprise. This would be an ideal situation, they said, given HSR’s current financial status.

KMT Legislator Luo Shu-lei said that although she supports the idea of fiscal reform at HSR, she believes the greatest danger in allowing HSR to move toward bankruptcy is that the original shareholders in the rail operation invested only tens of billions of dollars, but now they want control of the hundreds of billions of dollars represented by the whole system. She applauded the idea of a capital reduction followed by a capital increase, which she said would allow the government to shunt the five original shareholders to the side. Publicly-owned financial institutions would then hold a controlling interest in the system and the people would profit from its operations.

KMT committee member Lin Kuo-chen countered by saying there is no immediate urgency for fiscal reform in HSR. He warned that carrying out fiscal reform now could lead to a better deal for shareholders while giving nothing to the public who ride the rails. Lin added that HSR offers remuneration to shareholders at a rate of 5.9%, far better than the rates offered by the Bank of Taiwan, the post office and others at 1% to 3%. He said the MOTC’s fiscal restructuring proposal would allow both the original shareholders and new shareholders to make money and would also extend the HSR concession for several more decades. As for consumers, Lin noted that they have had to swallow a 9.4% increase in ticket prices, and the proposed fiscal reform would cut back prices by only 6.13%, meaning the people would gain little from the deal.

DPP Legislator Kuan Bi-ling pointed out that were HSR allowed to go bankrupt, the equity held by the original shareholders would not be zero, and even with a capital reduction they would still be guaranteed a 40% share, which does not amount to "driving out the original shareholders.” She added that even though the government claims that support for fiscal reform in HSR is "universally shared," in fact, if the capital increase proposed by MOTC were put into effect, the banks would hold less than a 20% share of the rail system even with an injection of US$13 billion.

Another KMT committee member, Lee Hung-chun, said there is no hurry in arranging a fiscal restructuring of HSR. He said that bankruptcy of the HSR would be little more than an accounting problem; the trains would still continue to run. Lee said the current arrangement should be kept in place and if HSR goes bankrupt in 2017, the government could then take complete control. He also suggested that if a capital reduction is carried out, a capital increase and extension of the concession period should be effected somewhat later, eventually allowing the government to take full control of HSR

Updated : 2021-09-25 14:37 GMT+08:00