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Report of the Bills Committee on Tung Chung Cable Car Bill To 立法會 Legislative Council LC Paper No. CB(1)1719/02-03 Ref: CB1/BC/4/02 Report of the Bills Committee on Tung Chung Cable Car Bill Purpose 1 This paper reports on the deliberations of the Bills Committee on Tung Chung Cable Car Bill (the Bill). Background 2. In 1998, the Financial Secretary announced Government's decision to proceed with the construction of a cable car project (the Project) linking Tung Chung and Ngong Ping on Lantau Island as a tourist attraction. The Government subsequently tasked the Mass Transit Railway Corporation (MTRC) (now known as MTR Corporation Limited (MTRCL)) to undertake a feasibility study on the development of the proposal. 3. The MTRC Study concluded that the Project was feasible in both technical and financial terms and would bring about socio-economic benefits to Hong Kong, including additional tourist visits to attractions on Lantau Island, serving as another tourist attraction to enhance visitors' experience in Hong Kong, etc. The Government invited in February 2000 expressions of interest and preliminary proposals on the basis of the alignment as recommended in the MTRC Study. 4. In April 2001, the Executive Council approved the framework for implementing the Project, and on this basis, the Government issued a Project Brief to invite detailed proposals for the finance, design, construction, operation and maintenance of the cable car system. The Government received three proposals upon close of submission in July 2001. The Government short-listed two proponents, including MTRCL, for further negotiations in January 2002. 5. In June 2002, the Executive Council approved the selection of MTRCL as the successful proponent to take forward the Project. In July 2002, the Government entered into a Provisional Agreement with MTRCL. Under the framework approved for implementing the Project, the Provisional Agreement provides the basis for MTRCL to commence work on the Project before the Government grants a 30-year franchise to MTRCL. This includes developing a suitable design for the Tung - 2 - Chung Cable Car System and its ancillary developments, carrying out requisite environmental and technical studies, and completing the necessary statutory procedures. The Bill 6. The Bill provides the legal framework for the grant of a 30-year franchise to MTRCL or its wholly-owned subsidiary for the design, construction, operation and maintenance of the Cable Car System. The Bill also sets out the rights and obligations of the franchisee during the franchise period. The detailed provisions relating to the construction and operation of the Cable Car System will be governed by a Project Agreement to be entered into between the franchisee and the Government. The Buildings Ordinance (Cap. 123) will apply to the Project and the operation and safety standards of the System will be regulated by the Aerial Ropeways (Safety) Ordinance (Cap. 211). Any resumption of land required for the Cable Car System will be deemed to be resumption for a public purpose within the meaning of section 2 of the Lands Resumption Ordinance (Cap. 124) and such resumption may thereby be ordered under that Ordinance. The Bills Committee 7. The House Committee agreed at its meeting on 14 February 2003 to form a Bills Committee to study the Bill. Chaired by Hon James TIEN Pei-chun, the Bills Committee held a total of six meetings to discuss the Bill. The membership list of the Bills Committee is in Appendix I. The Bills Committee has invited the 18 District Councils to give views on the Bill and uploaded an invitation note on the Website of the Legislative Council. The Bills Committee has received two written submissions from interested parties. The list of organization/individual which have given views to the Bills Committee is in Appendix II. Deliberations of the Bills Committee 8. The Bills Committee has invited MTRCL to brief members on the design of the Cable Car System, including the complementary development of a themed Tourist Corridor at Ngong Ping, which will be allocated to MTRCL by the Government under a Private Treaty Grant. The Bills Committee has made various suggestions on the cable car selection and modes of operation of the Cable Car System. 9. The Bills Committee notes that the Administration has adopted the principle that only matters which require statutory backing will be dealt with in the Bill. Matters which can be dealt with through contractual means will be addressed in the Project Agreement. - 3 - 10. The majority of the Bills Committee members support the Cable Car System and have called for the early implementation of the Project. The Bills Committee notes that the Administration is working closely with MTRCL to take forward the statutory procedures necessary to implement the Cable Car System. The target completion date of the Cable Car System is August 2005. 11. The Bills Committee notes that Mr Albert CHAN objects to the Cable Car System due to its impact on existing public transport operators, its impact on the environment, its financial viability and concern about a need for cross-subsidy from MTRCL’s rail operation for the cable car operations, and its impact on the sustainable development of the local community due to changes in travelling pattern of visitors to the area. 12. In the course of deliberation, the Bills Committee has examined, inter alia, the following issues: (a) franchise for the financing, design, construction, operation and maintenance of the Cable Car System; (b) use and occupation of land; (c) easements and miscellaneous land matters; (d) financial provisions; (e) ancillary legal provisions; and (f) default and termination of franchise. The Franchise 13. Clause 4 of the Bill provides for the grant of a 30-year franchise to MTRCL, or a wholly-owned subsidiary of MTRCL (“the Company”) for the design, construction, operation and maintenance of the Cable Car System from Tung Chung town center up to the Ngong Ping plateau. Assessment of proposals for the Cable Car System 14. The Bills Committee has examined the assessment of proposals for the Cable Car System and the selection of MTRCL as the successful proponent. 15. The Bills Committee notes that the Government received three submissions upon close of submission in July 2001, and short-listed two proponents, including MTRCL, for further negotiations in January 2002. Based on the predetermined assessment criteria, namely the technical aspects, and the financial and general aspects, the Assessment Panel formed to assess the Final Proposals submitted by the two short- - 4 - listed proponents concluded in May 2002 that while both proponents were financially capable of taking up the Project, the proposal from MTRCL had a significant advantage in a number of aspects. MTRCL had shown more commitment to the Project by putting up a Final Proposal which addressed issues more comprehensively, and had put more thought to developing the Cable Car System as a tourist facility. MTRCL also performed better in respect of proposed royalty payment, land requirements, safety and rescue provisions, the implementation programme, and environmental and ecological matters. As such, the development right for the Cable Car System was granted to MTRCL. Fares 16. The Bills Committee notes that the franchisee will have the right to determine and collect fares for the use of the Cable Car System by the public during the franchise period. The Bills Committee has examined the fare levels of the Cable Car System and the need to introduce a fare regulatory mechanism to control its fares. 17. The Bills Committee notes that MTRCL had adopted a working assumption of a fare level of $66 for a round trip and $50 for a single trip based on 2000 prices in working out the financial model. The Administration says that the Cable Car System is a tourism project but not an essential public transport facility. The Government does not provide any guarantee on the level of return to the franchisee who has to bear the commercial risks arising from the investment in the Cable Car System. In determining its business strategy, including the fare structure, the franchisee will have to take into account competitions from other transport operators and other tourist attractions to ensure the competitiveness of the Cable Car System. Concessionary and promotional fares may be introduced as appropriate. Financial arrangement and financial viability of the Cable Car System 18. The Bills Committee has also examined the financial arrangement and financial viability of the Cable Car System, and the concern expressed by members of a need for cross-subsidy from MTRCL’s rail operations for the cable car operations. 19. MTRCL has pointed out that as a listed company, they have difficulty in releasing commercially sensitive information to the Bills Committee. Nevertheless, MTRCL has pointed out to the Bills Committee that when comparing the project cost and estimated revenues of the Cable Car System to MTRCL’s total assets of $101 billion and total revenues of $7.7 billion in 2002, the Cable Car System is only a small project with an initial project cost of $750 million. MTRCL believes that the project is a self-financing project with a satisfactory rate of return which will not require any cross subsidy from the railway operation. 20. Clause 4(3) provides that if there is a delay in the completion of the construction works or the commencement of service of the Cable Car System as a result of - - 5 - (a) the Government failing to give possession of land for the Project in accordance with the Project Agreement; or (b) the water supply system and sewerage system at Ngong Ping on Lantau Island not becoming operational in accordance with the timetable in the Project Agreement, the Secretary for Economic Development and Labour (the Secretary) shall extend the franchise period by an equal period of time.
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