MTR Corp. (00066.HK) has given notice that its high-speed rail project will be delayed by a year and won’t start operating until 2017, prompting the Secretary for Transport Anthony Cheung to demand a full report.
Damage to the tunnel boring machine in Yuen Long and problems at the West Kowloon terminus have been blamed for stalling work at the Expressway Rail Link (XRL) which will connect Hong Kong to Guangzhou.
However, Goldman Sachs believes the delay, along with the cost overrun, will have minimal impact on the city rail operator.
The investment bank notes that the XRL operates under a “service concession” agreement, which means MTRC will be responsible for constructing the railway and operating it once it is completed, but it won’t bear any of the construction costs.
Given that the rail operator will not to bear any cost overruns, and the potential contribution from the XRL is very low, the delay won’t do much harm to the firm, according to Goldman Sachs.
MTRC shares were down 0.84 percent during morning session Wednesday, compared with a 0.63 percent gain in the benchmark Hang Seng Index.
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