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1. Recipients and donors bask in glow of a job well done

2. Cheung Kong trumps 10 rivals for Dream City deal

3. Drop single developer plan, says arts chief

4. Towngas demonstrates competitive edge in playing the system

5. Cheung Kong lands $5b Dreamcity project

1. Recipients and donors bask in glow of a job well done
ANNEMARIE EVANS, SCMP 19 January 2005

Representatives of the recipient charities (top) and the donors (above) celebrate the record-breaking total from Operation Santa Claus at the Mandarin Oriental Hotel last night. Picture by David Wong

Darren Chan Sheung-chung beamed on stage with Karen Mok last night, basking in the celebrity's glow as well as that of the record-breaking total raised by Operation Santa Claus this year.

The campaign has ensured his charity, the Direction Association for the Handicapped based in Choi Hung, has the cash to buy furniture and amenities for its new premises in Tseung Kwan O.

Another beneficiary of Operation Santa Claus, Jill Samelson, director and founder of the Children's Institute of Hong Kong, has wasted no time in anticipation of the operation's donation.

"The second classroom's already done," she said, "and decorated as well." Her charity's wish was funding for a trainer from the United States and a second classroom to serve the autistic children the institute supports.

Twelve local charities will benefit from the first stage of Operation Santa Claus fund-raising; the children of the tsunami from the second. In just two weeks of tsunami fund-raising, more than $9.5 million was raised, bringing the total for the two stages to $16,851,275.

Bryan Curtis, head of Radio 3, which co-organised Operation Santa Claus with the Post, listed the huge number of corporate and community donors. But there were also many individual donors who privately sent cheques or dropped money in donation boxes.

The Families of SMA Charitable Trust will use its funds to provide helpers for families with children who suffer from spinal muscular atrophy and other paralysing muscular diseases.

Chan Kwan-mei, a 14-year-old paralytic who has spent three years in hospital, can now have her wish fulfilled - to come home to her family, who will receive a helper through the charity and a larger flat from the Housing Authority.

Then there is epilepsy sufferer David Leung Cheong-yiu, who sang his heart out for a CD produced by EMI for Enlighten Hong Kong, which should be released in the next few weeks to raise more money for the charity and raise awareness about epilepsy.

Funds raised by Operation Santa Claus will go to: Hong Kong Alzheimer's Disease Association, Breakthrough Youth Crime Prevention Initiative, Children's Institute of Hong Kong, Direction Association for the Handicapped, Enlighten Hong Kong, Families of SMA Charitable Trust, Richmond Fellowship of Hong Kong, Riding for the Disabled, Spastics Association of Hong Kong, Society for the Promotion of Hospice Care, Hong Kong Youth Arts Festival, Hong Kong Society for the Deaf and, through Operation Santa Claus - Help the Tsunami Children, to Unicef.

2. Cheung Kong trumps 10 rivals for Dream City deal
Raymond Wang, The Standard 19 January 2005

Cheung Kong (Holdings) has beaten 10 rivals to win development rights to the HK$5 billion first phase of the Dream City housing project atop Tseung Kwan O Mass Transit Railway station.

The MTRC said Cheung Kong offered the best terms, but it gave no details.

The decision was based mainly on the split of profits from flat sales, which market sources said would be 65-35 in favor of the subway operator.

Sale prices should exceed HK$4,000 per square foot on completion in three to four years, and Cheung Kong's profit margins could reach 20 percent, Centaline Surveyors senior manager Chris Chau said.

The MTRC said it received 11 bids. About half were from major developers such as Sun Hung Kai Properties and Henderson Land. The rest were from small and mid-sized developers drawn by the MTRC's offer to pay half the government land premium of about HK$2.32 billion.

Dream City is the first project launched by the MTRC since it suspended new projects in 2002 to help the government prop up the home market.

Dream City's first phase will have 2,096 flats in five towers. When completed in about 10 years, it will have 50 towers and 21,500 apartments.

3. Drop single developer plan, says arts chief
GARY CHEUNG, SCMP 19 January 2005

The new chairman of the Arts Development Council has added his voice to calls for the government to drop its single-developer plan for the West Kowloon cultural district project.

Ma Fung-kwok told the South China Morning Post that a single developer would not be conducive to the sustainable development of cultural activities in Hong Kong.

He said options worth exploring were dividing the 40-hectare site into various phases of development, or auctioning the land to finance the construction and operation of cultural facilities in the district.

"Under the single-developer approach, the bidding consortiums are likely to lose incentives to sponsor arts and cultural activities if they eventually fail to win the right to develop the project."

Mr Ma, a filmmaker and former lawmaker, was appointed chairman of the Arts Development Council last Wednesday.

The government has been criticised by lawmakers and small developers for insisting on its plan to grant the entire project to a single developer for 30 years, and for failing to disclose the tendering details.

A motion calling on the government to scrap its single-developer approach and to do away with the planned giant canopy was passed by the Legislative Council two weeks ago.

Mr Ma, also a Hong Kong deputy to the National People's Congress, said apart from the massive arts hub project, the government should devise strategies to ensure the sustainable development of cultural activities in Hong Kong.

He said the administration should encourage the private sector to sponsor arts and cultural facilities by granting tax deductions for donations to relevant activities.

The government should also increase the West Kowloon site's plot ratio for residential estates if the developers agree to reserve certain floor areas for arts and cultural facilities in the projects concerned.

"The proposal can help spread cultural activities to various districts [without requiring] any government spending."

While he supported the development of the arts hub project, Mr Ma said the development did not require a canopy to make it a landmark for the city.

Chief Secretary Donald Tsang Yam-kuen believes construction of the giant canopy over the cultural district could give Hong Kong an extraordinary landmark.

4. Towngas demonstrates competitive edge in playing the system
JAKE VAN DER KAMP, SCMP 19 January 2005

"There is pressure to raise tariffs. We haven't raised them since 1998, while over the past six to seven years we have made an accumulated investment of more than $3 billion to improve our efficiency." Alfred Chan Wing-kin, Managing director, Hong Kong and China Gas

And this is all we need to go direct to the charts without another word of introduction. The red line in the first one shows you the profit margin of Hong Kong Gas since 1991. The blue line, by way of context, shows you the equivalent for the scheme of control operations of CLP Power.

Yes, you have it. For every dollar that Hong Kong Gas billed its customers in 2003 it kept 42 cents for itself in profits after tax, 52 cents before that tax charge. Now that is what I call looking after shareholders.

And while the company's profit margin may actually have declined from 49.6 per cent in 1999 (56.9 per cent pretax), let me point out that net earnings were still higher in 2003 than in 1999. All that happened was that the dollar value of sales outstripped earnings as the rising cost of fuel for Towngas production was passed direct to customers.

Which brings me to the second point, namely Mr Chan's claim that Towngas tariffs have not been raised since 1998.

Not quite. The consumer price index shows that the average unit price of Towngas has risen 26.6 per cent since mid-1998. This, by the way, is over a period in which prices on the overall CPI declined by 16.1 per cent.

How could this be without a single tariff increase since 1998? The answer lies in that fuel-cost adjustment factor. The official tariffs remain the same but the extra fuel cost is added to the consumer's bill. Hey presto, up goes the price of Towngas without a single tariff increase. And then we get Mr Chan's argument that a tariff increase is justified because of investments the company has made to increase efficiency.

I think it debatable. An investment to increase efficiency is one that is expected to lower unit costs of production. This is how we define efficiency in investment terms and if these investments reduce costs through increased efficiency, then I see an argument for lower Towngas tariffs rather than for higher ones.

Let me set the background for you here. The power utilities are subject to a scheme of profit control to prevent them from taking advantage of their monopoly positions.

No such scheme was ever imposed on Hong Kong Gas, however, as it could always claim that it had no monopoly. Consumers have alternatives for their heating needs in liquefied petroleum gas and electricity. The company is thus free to set its tariffs at whatever level it chooses and, since being taken over by property developer Lee Shau-kee more than 20 years ago, it has rewarded shareholders with a steady increase in annual profit margins to the present high figures.

The second chart shows you the key to its tariff policy. It sets them at a level that, together with fuel-cost adjustments, keeps the price to consumers at about 20 per cent (narrower recently) below the equivalent prices charged by the electric power utilities.

It thus maintains its competitiveness against the power utilities but, because its costs per unit of energy sold are lower than those of the power utilities, it enjoys a much higher profit margin.

This raises the question of whether it is time at last to impose a scheme of profit control on Hong Kong Gas, too. The argument that it has no monopoly because consumers have alternatives is beginning to wear a little thin. It may not have an absolute monopoly but it certainly has the next best thing.

And what particularly induces me to propose it now is that I think Mr Chan has been presumptuous in claiming that Hong Kong Gas is under pressure to raise tariffs while it still enjoys a pretax profit margin of more than 50 per cent.

I see no pressure here at all. I see only a self-interested inducement because there is now room for a tariff increase with a decision by Hongkong Electric to raise its tariffs and CLP to cut its customer rebates.

There is an old saying that may apply to your company, Mr Chan: Don't look a gift horse in the teeth.

5. Cheung Kong lands $5b Dreamcity project
PEGGY SITO and ERNEST KONG, SCMP 19 January 2005

After offering an unprecedented incentive to encourage bids from smaller developers, MTR Corp has awarded its $5 billion residential-retail project in what has been dubbed Dreamcity to Cheung Kong (Holdings).

Cheung Kong yesterday beat 10 other developers to win the right to build the first phase of the MTR's Tseung Kwan O Area 86 project.

It will provide 2,096 flats with a total floor area of 1.5 million square feet.

When it opened the project for tender last month, the MTR offered to pay half of the land premium to help smaller developers compete.

The move followed bitter complaints from small and medium-sized developers that they were being systematically shut out of major projects, including rail-side residential property and government works such as the West Kowloon cultural hub.

The incentive drew a quick response from them, including Kowloon Development, KWah International Holdings and Chun Wo Holdings. About half of the developers that submitted bids for the project were smaller firms.

But the project went to Hong Kong's most powerful developer.

MTR said Cheung Kong won because it met "all the tender requirements and offered the best financial terms".

MTR property director Thomas Ho Hang-kwong said the railway operator had expected at least 60 per cent of the profits from the sale of the completed buildings.

Cheung Kong and MTR declined to comment on the profit-sharing terms in the winning bid.

BNP Peregrine Paribas analyst Adrian Ngan Wai-hung believes Cheung Kong offered to hand over 70 per cent of the profits to MTR. He estimated that Cheung Kong would earn less than $700 million if it sold the project for about $4,000 per square foot, the current price level.

An analyst at a US-based investment bank said that even with half the land premium paid by the MTR, second-tier developers lacked the economy of scale to compete for major rail-side projects.

So far, the smaller developers have not expressed resentment.

Wilson Chan Yuk-sing, an assistant general manager at KWah, said that even though a big player won, he welcomed the MTR's move to draw smaller developers into the bidding.

"Picking a winner is all based on commercial terms," Mr Chan said.

Cheung Kong is already building a 2.6 million sq ft development at the MTR's Tiu Keng Leng station.

It is also developing two residential projects, with about 2,700 flats, close to Dreamcity.

Mr Ngan said Cheung Kong was aggressively expanding its land bank despite diminishing profit margins.