31 July 2000
Kowloon-Canton Railway Corporation Consolidated Profit and Loss Account - HK$ million For the half-year ended 30 June 2000 (Unaudited)
Chairman's Statement
In parallel with economic recovery, the Corporation experienced steady growth in the first half of 2000. Passenger trips on East Rail and Light Rail were up by 4.4% and 1.8% respectively over the same period last year. This led to an increase in fare revenues of $130 million, or 7.3% over the first six months of 1999. Profit after taxation amounted to $1,037 million, 9.7% higher than the same period last year.
On 10 March 2000, the Corporation launched a ten-year US$1 billion global bond to finance the expansion of its network. This was the largest note issue to come out of Hong Kong so far this year, and was oversubscribed by 25%. The bond attracted strong demand from the United States, Asia and Europe. It was registered with the United States Securities and Exchange Commission and is listed in New York, Hong Kong and London. With this global bond issue, KCRC's credit is now firmly established with the worldwide investor community.
On 26 May 2000, the Government committed to inject into the Corporation an equity contribution of up to $8.5 billion towards the cost of building East Rail's Tsim Sha Tsui Extension and the Ma On Shan Rail. These two new railway lines, together with the Sheung Shui to Lok Ma Chau Spur Line, make up the East Rail Extensions project which carries a total estimated cost of $26.7 billion (expressed in money of the day). The balance of this cost, which remains after deduction of the Government's equity contribution, will be funded by way of commercial loans and retained corporate profits.
On 27 June 2000, an agreement was signed with the Export Development Corporation of Canada (EDC) to provide KCRC with a US$42 million export credit loan facility. This loan facility will be used to finance the purchase of a train control and signalling system for West Rail, Phase I, from Alcatel Canada Inc. With a 12-year maturity inclusive of the draw down period, it was the first direct buyer financing offered to Hong Kong by EDC. The competitive terms offered under the agreement will help to reduce the Corporation's overall financing costs.
By the end of June 2000, construction of West Rail, Phase I, was well on its way towards the targeted completion date of December 2003. Tunnelling and piling were particularly far advanced, with 45% and 40% respectively of the works having been completed. In addition, 21% of the works on the viaducts have been finished, together with about 16% of station construction.
The East Rail Extensions have now progressed beyond detailed design. The Corporation has begun inviting tenders for construction contracts. The environmental permits necessary to begin construction have been obtained for two of the extensions, namely the Ma On Shan Rail and East Rail's Tsim Sha Tsui Extension. A permit for the third extension, the Sheung Shui to Lok Ma Chau Spur Line, is being considered by the Government.
The Government's Railway Development Strategy 2000 - a $100 billion blueprint for future railway development in Hong Kong leading up to 2016 - was unveiled in outline on 16 May 2000. This identified three out of six new railway schemes for implementation by KCRC, namely, the Northern Link between Kam Tin and Sheung Shui, the Kowloon Southern Link between West Kowloon and Tsim Sha Tsui and the Port Rail Line, which on completion will enable railborne freight to reach directly the marine container terminals at Kwai Chung. All three schemes are natural extensions of the Corporation's passenger and freight systems and will, on completion, give Hong Kong an incomparable circle line. These projects are scheduled for completion in the years 2008 to 2016. The Strategy also proposes building a Sha Tin to Central Link and a Regional Express Line, and both will be opened up for competitive bidding in due course. The Corporation is currently studying these projects with a view to determining their feasibility.
K Y Yeung

Chairman and Chief Executive

1 August 2000