7 February 2001
2000 Summary press conference
 
Speaking Notes for Mr K Y Yeung
Chairman and Chief
Executive, KCRC
1.  The year 2000 was another year of steady growth:
AVERAGE DAILY RIDERSHIP
(PASSENGER TRIPS) ON:
2000 1999 GROWTH (%)

East Rail domestic service

558,900

548,100

2.0

East Rail cross-boundary service (to Lo Wu)

229,100

206,500

10.9

Inter-city service

5,300

4,700

12.8

Light Rail service

322,700

314,300

2.7

Bus service

45,900

44,100

4.1

2. Shenzhen and Guangzhou remained popular destinations as reflected in the faster growth rate of the cross-boundary and inter-city services.
3. The performance and safety of our railway services also improved:
PERFORMANCE (%):                                                         2000 1999

East Rail train punctuality                                              

99.6

99.4

East Rail ticketing equipment availability                         

99.9

99.8

Light Rail punctuality                                                     

99.9

99.4

Light Rail ticketing equipment availability                         

99.9

99.8

 

PASSENGER SAFETY

(injuries per million passenger trips):                         

2000

1999

East Rail                                                                      

0.67

0.67

Light Rail                                                          

0.23

0.44

Financial Results
4. Net profit after tax was $2,288 million, an increase of 20.2% over 1999.
5. For the first time, net recurrent profit surpassed the $2,000 million mark, leaving aside property development profit.
6. Transport revenue was $4,089 million, an increase of 7.1% over 1999.
7. Recurrent revenue from rents, royalties, advertising and other commercial activities was $642 million, an increase of 5.4%.
8. Operating profit was $1,901 million, an increase of 22.6%.
9. Operating costs declined by 1.6% to $2,830 million.
10. We issued a US$ 1,000 million global bond in March 2000 which was very well received. Earlier in July 1999, we issued our first US$ 1,000 million Eurodollar bond.  With these two bonds, we have successfully met our financing obligations through pre-funding.
11. The Government, the Corporation’s sole shareholder, once again decided to forego a dividend, and allowed accumulated profit to be used to help find West Rail and the East Rail Extensions.
 
Business Development
12. Losses have been incurred by some services in the past three years:
LOSS AFTER DEPRECIATION ($MILLION) 2000 1999 1998

East Rail domestic service

17

83

22

Light Rail service

116

159

143

Bus service

11

11

11

KCR Freight

33

17

24

 
13. What has been carrying the Corporation in terms of profitability lies partly in rapid growth of our cross-boundary market, and partly in non-transport business.

 

CROSS-BOUNDARY (LO WU) DAILY AVERAGE PASSENGER TRIPS

YEAR ON YEAR GROWTH (%)

1995

117,863

6.6

1996

130,157

10.4

1997

152,228

16.9

1998

178,802

17.4

1999

206,481

15.5

2000

229,120

10.9

14.  An over-dependence on the cross-boundary market has its risks. We have to explore other sources of income, for example :
a. the extension of leveraged leasing operations to include buildings and land.
b. the extension of advertising to include railway structures other than stations.
c. the scope of KCR Freight must be expanded beyond pure cargo haulage to include freight forwarding on an extensive scale.
d. economies of scale should continue to be pursued vigorously. For example, although West Rail was planned as a stand-alone operation; there is no reason why it could not incorporate Light Rail as a future feeder service.
 
West Rail, Phase I
15.  One-third of all works were completed by the end of 2000.
a. Tunnels – 60% complete,
b. Viaducts – 40% complete,
c. The first of nine stations, the Kam Sheung Road Station, was topped out.
 
16. We are confident that West Rail, Phase I can be completed at a revised cost of $46,400 million, in time of it to be operational by December 2003.
 
17. West Rail, Phase I, is the largest single civil engineering project to be undertaken in Hong Kong since the completion of the Government's Airport Core Programme. Some difficult engineering problems have been encountered  when driving piles in extremely difficult ground conditions, including underground caverns, in nullahs and in flood prone areas.  But the most difficult part of the project  now appears behind us. This is due to four main factors:
a. the skill and proven experience of the West Rail Division in the management of design, construction and procurement, and in dispute resolution;
b. the skill, strength, and cooperation of our contractors, who have responded well to our partnering style of project management;
c. the support of many government departments, particularly the Lands Department and the Works Group of Departments; and
d. the patience and understanding of the District Councils and Rural Committees.
 
East Rail Extensions
18. The Ma On Shan Rail and Tsim Sha Tsui Extension were authorised by the Chief Executive in Council in October. Contracts have been awarded and construction will begin in the first quarter of 2001.
19. The Lok Ma Chau Spur Line is put on hold, pending our appeal against the decision by the Director of Environmental Protection not to issue an environmental permit for the works.
 
Future railway Development
20.  The Government's Railway Development Strategy 2000 proposes the development of six new railway corridors targeted to go into service between 2008 and 2016.  Three of these – the Kowloon Southern Link, the Northern Link and the Port Rail Line and Terminal – are regarded as natural extensions of the KCR system.  Two others – The Regional Express Line and the Shatin to Central Link – are open for competition.
21. Early in 2001 the Government invited the Corporation and MTRC to make proposals for the Shatin to Central Link, and the Corporation to make proposals for the Kowloon Southern Link, for submission in July 2001.  In anticipation of this the Corporation created a New Railway Projects Division in October 2000, headed by a Director whose task will be to supervise feasibility studies in respect of these projects.
 
Property development
22. Subject to market conditions proving favourable, some of the following sites could be put onto the market in the period 2001 to 2003 for joint venture development:
Railway project Location
West Rail, Phase I                                                          Nam Cheong Station                
Tin Shui Wai Station                              
Tsuen Wan West (TW 5 Bayside)
Tuen Mun Station

East Rail       

Ho Tung Lau (Site A)

Fo Tan Station

East Rail Extensions

Tai Wai Depot

Tai Wai Station

Che Kung Temple Station

Wu Kai Sha Station

Light Rail

Tin Shui Wai Terminus

23. Under the project agreement for West Rail, Phase I, profits earned from the sale of property along West Rail, Phase I, will accrue wholly to the Government.
24. Profits earned from the sale of property along East Rail and East Rail Extensions will accrue to the Corporation, and will be used as part of the overall package of Government financial support for building the East Rail Extensions.
25. Our interest in property development is to help finance new railway projects, and to increase patronage through more housing stock along our alignment.