Case studies of 2 tunnels: HK

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Case studies of 2 tunnels HK Australia
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Outline

• Tates Cairn Tunnel, HK
• Lane Cove Tunnel, Sydney
• Concession
• Source of Funds
• Debt funding

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Tates Cairn Tunnel

• twin 2-lane tunnel, 4km in length
• construction commenced July 1988 and opened to
  traffic in July 1991
• construction completed 2 months ahead of schedule
  and within budget
• total project cost HKD2.15 billion
• funding Equity HKD600 million and Debt HKD1.55
  billion
• tunnel to be handed over to HK Government in 2018
• competition from government-run Lion Rock Tunnel

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Lane Cove Tunnel

• Twin 2-lane tunnel connecting the existing M2
  Motorway and the Gore Hill Freeway, 3.4km in
  length
• Final link in Sydneys Orbital Motorway System
  and is the 7th privately owned toll road to be
  commissioned in Sydney in recent years
• Total project cost approx AUD1.75 billion
• Funding Equity AUD550 million and Debt AUD1.2
  billion
• Construction commenced in December 2003 and the
  anticipated construction period is 41 months

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Concession
Tates Cairn Lane Cove
Basis Ordinance Project Agreement
Term 30 years 33 years and 1 month
Project Co obligations Construct, operate and transfer pay royalty Design, construct, operate and transfer pay upfront fees
Govt obligations Land access Land access
Termination Payment by Govt representing asset value if terminated early Early termination payment by Govt limited to certain situations
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Source of Funds
Tates Cairn Lane Cove
Sponsor/equity HKD600 million AUD550 million upfront deferred
Debt HKD1.55 billion Bank Debt AUD1.2 billion 4 tranches of Bonds
Debt/Equity 2.58 2.18
Tolls Subject to agreement with Govt Indexed to CPI
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Project Structure stakeholders
Government
Direct Agreement
Project Agreement
Finance Documents
Project Company
Banks/ Capital markets
EquityInvestors
Operation and Maintenance Agreement
Construction Contract
Construction Contractor
Operator
Insurer
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Lane Cove transaction structure
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Debt funding
Tates Cairn Lane Cove
Type Syndicated bank loan Credit-wrapped bonds
Amount HKD1.55 billion (1988) AUD1.2 billion (2003)
Tenor Scheduled to be repaid at the end of 2005 Bond terms ranged from 7 years to 25 years
Funds Drawdown Staggered drawdowns matching construction payments Different tranches of bonds
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Debt funding
Tates Cairn Lane Cove
Repayment Bi-annual scheduled repayments Combination of annuity bonds bullet bonds
Sponsor Support cost overrun guarantee pre-completion debt service guarantee post-utilisation guarantee post-completion guarantee completion security bonds for AUD40 million deferred equity support
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Debt funding
Tates Cairn Lane Cove
Risks for funders Construction risk, price risk, traffic risk, operating risk Construction risk, price risk, traffic risk, operating risk
Defaults Payment default, failure to comply with ordinance/project agreement, insolvency event, payment default under an equity support document, uninsured damage Payment default, failure to comply with ordinance/project agreement, insolvency event, payment default under an equity support document, uninsured damage
Remedies for default Enforcement of security package Exercise Step-in rights under tripartite agreements to remedy default and Step-out Sell project company subject to consent from Govt Enforcement of security package Exercise Step-in rights under tripartite agreements to remedy default and Step-out Sell project company subject to consent from Govt