Taiwan Govt to opt PPP in High Speed Rail and other Infra Projects to prevent losses

Plan to stop Taiwan’s high-speed rail going bust set for review.  Indian Infrastructure Cos. keen to evaluate options in PPP models in High Speed Rail and other Infrastructure projects

ताइवान Taiwan:  The Act for Promotion of Private Participation in Infrastructure Projects, aimed at preventing the Taiwan High Speed Rail Corporation (THSRC) from going bankrupt, was set to be reviewed by the Legislative Yuan on Wednesday.

The Ministry of Transportation and Communications plans to reduce the company’s capital and then to increase it again in an attempt to modify its financial structure and let state-owned shareholders take the lead in the firm’s management.

Amending the statute will allow Taiwan’s government to legally acquire the company, according to our Chinese-language sister newspaper China Times. This statute not only applies to the THSRC, but also the financially strapped Kaohsiung Rapid Transit Corporation (KRTC).

A spokesperson for the ministry said that civilian investment in and management of the company will be frozen after the government takes over the firm’s management before any acquisition. This is an approach to avoid misappropriation of part of the capital, or the inappropriate transfer of creditors’ rights. This is also a way to ensure that the company will keep on providing its services.

The company has capital of NT$105.3 billion (US$3.5 billion) and has been operating for over seven years. The company has accumulated a deficit of NT$52.2 billion (US$1.7 billion) during this time, and an estimated annual material depreciation of NT$23.2 billion (US$762 million) is expected in the future, while the company has to pay an annual mortgage of NT$19.2 billion (US$630.7 million) each year, according to Taiwan’s Central News Agency.

The amendment is set to upgrade the financial chapter’s status from an executive order, which granted it no power over civilians, to grant the government more authority in their dealings.

The newly amended article 43-3 stipulates that any decision made by the civilian part of the board of directors will be ineffective at management level.

If the company were to go bankrupt, the government and shareholders would lose NT$48 billion (US$1.6 billion) in dividends, and the NT$26 billion (US$852.7 million) held by the 60,000 shareholders would also be lost.

The company’s value is only NT$390 billion (US$12.8 billion), but the total amount that the company has to pay back to all parties would be over NT$600 billion (US$19.7 billion). Even if the government were to buy the firm, it is uncertain if shareholders would get their money back.