2 billion dollar loss/ 14 billion debt for HSR

It’s a great concept but poorly executed IMO, much like the MRT. It was hard to believe that the MRT was apparently one of the most expensive metropolitan subway systems in the world, yet they couldn’t get some of the things right. How about better timed transfers so you can keep the amount of passengers standing around on the platform waiting down a little bit to make it more orderly and convenient? How about adding more branches and connections in between the major lines so that not everyone has to ride into the city or Taipei Main Station to make a transfer to the other line (like Nanshijiao to Nangang or even Xindian to Nanshijiao)? How about making the stations a little further spaced? I mean it’s ridiculous how close Gongguan-Taipower-Guting and Shandao-Main Station-Ximen-Zhongsan stations are to each other…

Imagine how much more traffic they could get if the HSR stopped at TPE airport instead of Taoyuan (or had a subbranch going directly to TPE from Taoyuan without passengers having to haul their luggage and disembark to take a shuttle), or has an exit right next to Hsinchu Science Park/Tsing-Hua/Chiao-Tung Universities so students and employees can get there within walking distance? It’s not like it can’t be done…the BART stops inside SFO before heading off to its southmost terminus at Millbrae, NYC metro does something similar with JFK, and the Boston T has a stop right in Harvard Square…

Seriously, if they had a better thought out plan then they could increase the ridership, and when traffic increased they could justify lowering the prices, which in turn could potentially further increase the traffic and might actually turn a profit.

The expansion of the MRT underway will remedy that.

They are building a link between the Xinzhu HSR station and Xinzhu center.

The new airport MRT will make the HSR station a 5 minute train ride away from Taoyuan airport. Currently it’s a 10 minute bus ride.

This issue reminds me of a similar situation in India about 5 years ago. They have one of the largest and busiest railway systems in the world that was constantly losing money. A new minister took over and changed that around very quickly. Here is a quote from Wikipedia:

[quote]When Yadav took over, the Indian Railways was a loss-making organization. In the 4 years under his leadership, a cumulative total profit of Rs. 25,000 crore (US$ 5.2 billion dollars) has been reported. Ironically, under the previous government, the Rakesh Mohan Committee (headed by Rakesh Mohan, secretary, department of economic affairs) had termed The Railways a ‘white elephant’ and predicted that it would suffer a Rs 61,000 crore (US$15.4 billion dollars) loss possibly ending in bankruptcy by 2015. [21] The only solution seemed to be privatization.

Lalu Prasad Yadav, along with the IAS officer Sudhir Kumar[22], is credited with engineering the financial turnaround of Indian Railways, that was on the verge of bankruptcy before his appointment to the office. He left passenger fares untouched and found several other profitable sources of revenue for the Railways.[/quote]

Surely there must be similar turnaround scenarios possible for the Taiwan HSR, along with Taipei and Kaohsiung MRT.

Is the Taipei MRT losing money? I thought it was doing pretty well. Maybe it’s just harder to get Kaohsiung people off their scooters when the weather is so nice down there.

TAipei MRT is profitable but the Kaohsiung one is not, and of course the HSR is not able to pay off its interest, let alone its capital.

Sort of reminds me of the Maglev in Shanghai which takes you and your luggage from Pudong airport to the middle of nowhere in the blink of an eye. Then a three-quarters of an hour taxi ride home. Which is what you would have done anyway. Still, a lot of people got to buy a lot of nice houses in California, which is after all what it’s all about.

From what I read before Taipei MRT is insanely profitable. I’ll see if I can get supporting info later.

The primary premise of rail travel is city center stations. Shinkansen in JP and KTX in KR got it right. HSR was yet another chabudo scam. If the 'wan govt really wanted to do it right, it could have played the military card… sorry, Ah Huang, your house is toast. The failure of HSR (I predict it will actually shut down for a period before the govt steps in, after the largest down-round in VC history) is that it did not have the power of eminent domain to put the stations where they should be. I love the HSR, but it is really only good (as in time and cost effective) to replace Songshan/KHH by air.

Two billion USD loss a year is a tuff nut for anyone to crack.
Unsustainable.

From what I read before Taipei MRT is insanely profitable. I’ll see if I can get supporting info later.[/quote]

I’m not sure about “insanely profitable” but according to this article it is rather modestly profitable. But some 40 million a year in net profit is really not that much to write home about considering the system has cost well over 20 Billion dollars American and is on track to cost well over 36 Billion before the second phase is done (which will also increase revenue and ridership). But at the moment it carries well over a million passengers a DAY and still only makes a modest net profit. This net profit assumes cost of operation and finance charges. Say it makes a net profit of 40 million per year times 30 years still only gives it one point two Billion in todays dollars, while it has cost well over 20 Billion in todays dollars. So the truth of the matter is that such systems simply do NOT make money. They are a Public Service and the benefits come in the increase in the over-all economy and wellbeing of the city’s citizenry as well as that of the island of Taiwan. For this same reason the planners and idealists that brought us the HSR and the Kaohsiung Metro would simply HAVE to know that their projects will also not be financially lucrative in itself but its value will have to be judged by what it brings to the nation’s people. A modest profit of some 40 million a year is modest but taking into account the HSR’s horrendous 2 year 2 Billion dollar loss. That is indeed quite a profit.

sgpolitics.net/?p=1709

More on the MRT

english.taipei.gov.tw/TCG/index. … ordid=2182

note: this articles says it made 30 billion TWd but I think thats a misprint, I dont think the MRT makes 30 billion TWD a year (thats one billion USD about).

HSR is the SHIT.
Screw you naysayers with your saying of "nay’.

It really allows me to make the most out of weekend vacations.

2008 annual report of the MRT, with all numbers included, a slim 130 pages read… :smiley:

http://www.trtc.com.tw/img/all/A61/report2008.pdf

Seems last year were app. 450 million rides with an avarage price of about 21Nt after tax, would make about 9,7 billion NT just from ticket sales.
Than there is rent for the shops and advertisment space, etc.

Just, page 96 has the overview:

Operating revenues: 10,91 Billion NTD
Operating costs: 8,323 Billion NTD
Gross profit: 2,587 Billion NTD

and at the bottom it says Net income after tax: 607 Million NTD

Anyway, the thing is bilingual and there are brighter people out there regarding bookholding and what that numbers mean, have fun.

Oh, and here is the daily ridership statistic for the MRT:
http://www.trtc.com.tw/e/future.asp?catid=%E7%B5%B1%E8%A8%88%E8%B3%87%E6%96%99&small=%E6%97%85%E9%81%8B%E9%87%8F

607 million divided by what 32 now? Less then 19 million USD a year !! And with what investment? MOre then 20 Billion USD and counting. NOt exactly a great ROI is it?

chinapost.com.tw/taiwan/nati … eering.htm

Not sure how the current investments are in that, I mean there are planty of constructions going on right now which all cost money, as soon the system is complete it will look much different.
I mean, where is the big difference between gross profit and the earnings after tax coming from.
But as you said, the owners are Taipei City, Taipei County and the Ministery for Transportation, so while it is nice for them to earn money, the overall benefits from the system are way more important and it creates jobs and tax income for them too.

It will be interesting to see how the daily numbers change after the different branches are finished, like the ones on connecting Sanzhong and the one on Xinyi Rd. and Nanjing East Rd as well as the ring line and the airport line. Anyway, still years to go for that.

Yeah, that’s not that great on its face, but gross profit is fantastic (not hard to understand given the massive front-loading of capital intensive projects like this), and the fact that is running a net profit is great insofar as it is a sustainable public project.

The big loser would be return on assets, not necessarily ROI, since the costs of investment are sunk. Since there is positive net profit, it means that the organization is beating the opportunity costs of the money (it’s beating whatever interest rate is being charged in financing)

I agree the MRT is quite an achievement and to make money even, thats pretty astonishing .

But we need to fix the HSR so its not going to bleed a billion bucks a year or more. We need to re-fi under soft loan terms so it shows less of a loss. Ultimately the “real” payment for the HSR comes in the increased productivity of Taiwan’s citizens. And the resultant tax income that brings is not directly reflected in HSR income

My point being that such projects should not be judged by the cold light of numbers only. Their success is reflected by ridership and what they bring to the table for living in Taiwan. Judging by raw numbers alone as a business isnt it’s raison d’etre in the first place.

to Mingshah, I think I read projected daily ridership should exceed 3 million after phase two is completed.

Good article today with more info:

FEATURE : High-speed rail battles to find way forward

‘ROTTEN MESS’: The new chief dismissed the media’s characterization of the rail company, but a spokesman said that balancing the books may be impossible
By Crystal Hsu
STAFF REPORTER
Monday, Sep 28, 2009, Page 12

Ou Chin-der speaks on Wednesday last week, the day after he took over as chairman of the Taiwan High Speed Rail Consortium.
PHOTO: TSENG HUNG-JU, TAIPEI TIMES
One day after Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) chief executive Ou Chin-der (歐晉德) assumed the company’s chairmanship on Tuesday last week, he told media he did not feel an ounce of joy.

He dismissed the media’s depiction of THSRC as “a rotten mess,” but expressed hope that salvaging the firm would be the final battle of his career. He hoped that under his leadership, the company could break even next year and turn a profit after 10 or 15 years.

Those aspirations may take a lot more than a board reshuffle and lower interest rates to achieve, although Ou has the government’s backing for a refinancing plan of NT$390 billion (US$12 billion).

Created in 1998 with capital of NT$105.3 billion, the company, which operates the 345km bullet train service — one of the world’s biggest build-operate-transfer (BOT) projects — risks default on debt payments in November if its finances remain unchanged.

THSRC has more assets than debts — NT$416.8 billion versus NT$389.9 billion — and had posted NT$70.2 billion in losses as of June this year, equivalent to 67 percent of its capital.

To finance the construction of the rail project, the company took out two syndicated loans — one for NT$308.3 billion and one for NT$65.5 billion — with interest rates of between 2.6 percent and 2.8 percent. It also raised funds by issuing US$300 million in euro- convertible bonds that may begin to be cashed in next year.

THSRC blames its financial woes mainly on interest payments and depreciation costs that consume the bulk of its revenue.

“For each NT$100 earned, the company has to pay NT$36 in interest and another NT$40 in depreciation costs,” spokesman Ted Chia (賈先德) said. “The burden renders creating a balanced sheet difficult, if not utterly impossible.”

A bank official involved in the loan negotiations said on Friday that the company’s interest amounts to NT$10.1 billion a year and that without financial improvement, it will take THSRC decades to pay off its debts.

“The company makes about NT$2 billion a month, enough to cover interest but not enough to pay principal due soon,” the official said on condition of anonymity.

To address the cash shortage, THSRC is seeking to lower the interest rates to below 2 percent. Prospective lenders prefer a milder cut, in light of the company’s financial profile, he said.

Bank of Taiwan (臺灣銀行) chairwoman Susan Chang (張秀蓮), who is organizing the new NT$390 billion loan to THSRC, told a legislative hearing on Thursday the rate cut would not exceed 1 percentage point.

A bigger cut would dampen the willingness of banks to take part in the syndicate and thwart the refinancing plan, Chang said. She expected to settle the matter next month to help THSRC meet a debt obligation in mid-November.

The rail company’s five founding shareholders — Continental Engineering Corp (大陸工程), Teco Electric and Machinery Co (東元電機), Evergreen Marine Corp (長榮海運), Pacific Electric Wire and Cable Co (太平洋電線電纜) and Fubon Bank (富邦銀行) — have washed their hands of THSRC debts after previous investments bore no fruit. But the legislature’s Finance Committee passed a resolution on Thursday requiring the five shareholders to cosign the new loan.

Depreciation costs pose another headache, having eaten away NT$42.4 billion as of June this year, company data showed.

THSRC is due to concede the rail project in 2033, meaning it has only 26 years to absorb all depreciation costs from the beginning of operation in January 2007 to the end of the BOT contract.

Ou said that most equipment can last for more than 60 years and seeking more favorable depreciation terms tops his agenda to put the company on the right track.

To that end, the new chairman also suggested the government should consider extending the BOT contract from the original 35 years to allow the company more time to reverse its finances.

The suggestion promises the quickest way to bring down depreciation costs. The Ministry of Transportation and Communications has said it is better to focus on interest first and address depreciation and other issues afterwards.

Still, others warn that the root of the company’s predicament lies elsewhere and the refinancing plan will offer a respite rather than a solution.

Former THSRC chairperson Nita Ing (殷琪) said in a recent interview that she made serious mistakes with bidding for the rail contract, one of which was an overly optimistic estimation of passenger volume.

Ing said she set the number at 230,000 passengers a day when joining the bid for the BOT project 15 years ago, guided by GDP growth and traveler loads at the time at Taipei’s Songshan Airport.

The actual figure has turned out to be roughly 80,000 passengers a day. Ing attributed the disparity partly to the industrial exodus of the last 12 years, which shrank the working population by 2 million and hurt domestic airlines as well as THSRC.

Chinese Nationalist Party (KMT) Legislator Lee Hung-chun (李鴻鈞), a senior member of the legislature’s Transportation Committee, said that the high-speed rail, designed to serve business travelers and tourists, has a slim chance of making profits if there are no supporting public works plans.

Lee said the company had counted on land development projects along the rail line to help boost its revenue but the expectation remains little more than wishful thinking today.

The situation could change, however, if the government takes over the high-speed rail and launches a bold spending program to make the bullet train service part of people’s life.

To that end, the government should subsidize transfer buses and fund land development and other public works projects in towns near bullet train stations so the high-speed rail could be more fully utilized while rural areas are urbanized, the lawmaker said.

“Projects of such scale entail long-term planning and financing, not to mention the legal barriers involved,” Lee said. “The private sector does not have sufficient resources, financially or legally.”

Lee voiced concern that a bailout package of anything less than full government control of THSRC would not be able to fix the problem once and for all.

The government has made clear it does not want to own the company or put more money into it, but will help keep it running after Ou replaced Ing.

With a 38 percent stake in the company, the government will next seek to win a majority of seats in its board of directors in November to dominate its policymaking with a view to listing the firm on the local bourse in the future.

Liang Kuo-yuan (梁國源), president of Polaris Research Institute (寶華綜合經濟研究院), said he agreed with the government on keeping the high-speed rail a self- liquidating project like highways, which can use its own means to make up for losses and yield a profit on the initial outlay of investment.

This way, the high-speed rail would not add a burden to state coffers as it fulfills its purpose of linking Taipei and Kaohsiung, he said.

Liang, like Ing, said that the industrial migration to China is sapping Taiwan’s economy and denting demand for the high-speed rail.

But the academic said the administration is working to foster their return through tax cuts and deregulating cross-strait trade.

“Apart from facilitating syndicated loans, the government can help THSRC by improving the macroeconomic environment, thereby boosting business travel and ticket sales,” Liang said.

Despite the downturn, THSRC narrowed its losses by 75 percent to NT$2.7 billion in the first half of this year from the same period last year, while ticket revenue rose to NT$11.5 billion, from NT$10.8 billion.

Passenger volume dropped to 2.71 million last month, from 2.95 million in July, on falling demand as Typhoon Morakot undermined demand for popular tourist spots in southern Taiwan, the company said.

Paradoxically, the company’s financial crisis may open an opportunity for all parties to sit down and correct past mistakes.

Liang said project planners tend to underscore the bright side of things and play down negative factors and that probably accounted for the discrepancy between passenger numbers now and the projections made 15 years ago.

“THSRC is indeed embroiled in deep trouble that must be handled with care because much is at stake,” he said. “The government and the company must demonstrate more prudence and adopt a forward-looking, yet realistic perspective when resetting contract terms.”
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I use the HSR regularly and can hardly remember how I got by without it, but the people responsible for the decision of not having the primary station at the airport with a shuttle/link to Taoyuan city should be locked up for culpable idiocy… Same goes for the Taichung station being in Wuri instead of Taichung… I’ve also been told that the Jiayi station is a 40min cab ride from downtown JiaYi… Now they’re scratching their heads about why it’s running half empty and at an enormous loss?.. :doh:

[quote=“XinBiDe”]HSR is the SHIT.
Screw you naysayers with your saying of "nay’.

It really allows me to make the most out of weekend vacations.[/quote]

I agree, HSR is one of the few bright spots in Taiwan in recent years, an amazing transport system for reasonable price.
I am also puzzled why they put the stations so far out of town, can only assume it was far cheaper and they hoped to make multiples of land speculation when it got rezoned from agricultural or other use. For instance if you look at the HSR it runs closer to the city than where the actual station is located to the southeast in WuRi, a strange location. The lack of airport stop was also a big one.