TAIPEI -- Taiwan intends to rescue a debt-ridden high-speed rail operator after deciding that the entity is too important to go bankrupt.
The transportation ministry and Taiwan High Speed Rail signed a financial improvement plan Monday under which the ministry will invest 30 billion New Taiwan dollars ($951 million) after the operator's capital is reduced by 60%.
Opening in 2007, the high-speed rail was the first overseas to adopt Japanese shinkansen bullet-train technology. Under the "build, operate and transfer" contract, the private sector took charge of establishing the service, aiming to hand it over to the government in 2033. But the new financial plan extends the transition to 2068 to reduce annual depreciation charges and other burdens.
Cumulative losses totaled 46.6 billion New Taiwan dollars at the end of 2014. The plan calls for drawing down capital, writing off these losses and recapitalizing the company by January 2016. The capital reduction target involves common stock worth 65.1 billion New Taiwan dollars, a little over 60% of the rail operator's capital of 105.3 billion New Taiwan dollars.
After the relief measure, the government's stake will grow to about 64% from around 37% currently. Some have voiced concerns that the increased government role could create a negative image for the rail and reduce the quality of service.
The bullet-train service had been projected to draw about 240,000 daily riders in 2008 but carried only a little over 130,000 a day in 2014. Even before the service started, many observers criticized the project's cost of 480 billion New Taiwan dollars, with half going to construction.
The ministry had hinted since last year that the rail operator could go under, but decided to bail it out with public money considering the importance of the infrastructure.
Many Taiwan High Speed Rail officials, including those at the top, are originally from the government. No plans exist to consolidate personnel even after the planned bailout, which some say highlights the bureaucratic complacency at the organization.