Common use of Additional PMC Clause in Contracts

Additional PMC. As detailed in paragraph (b)(i) above and as previously disclosed by the Company, the programme for the delivery of the SCL project has been significantly impacted by certain key external events. Not only do these matters increase the cost of works, they also increase the cost to the Company of carrying out its project management responsibilities under the relevant SCL entrustment agreement, which is estimated to be around HK$1,371 million. By December 2020, the aggregate amount of project management fee paid by the Government to the Company in accordance with the payment schedule contained in the SCL EA3 was substantially close to the Original PMC (excluding, for the avoidance of doubt, the Additional PMC of HK$1,371 million previously sought by the Company) and has been expended in full by the Company. The Additional Funding approved by the Legislative Council did not include any Additional PMC for the Company which the Company had previously sought from the Government. Therefore, the cost to the Company of continuing to comply with its project management obligations under the SCL EA3 is currently being met by the Company on an interim and without prejudice basis (to allow the SCL project to progress in accordance with the latest programme) and the Company reserves its position as to the ultimate liability for such costs and as to its right to pursue the courses of action and remedies available under the SCL EA3. However, given the Company’s view that there has been a significant delay to the project programme and associated increase in project management costs to the Company, the Company has written to the Government to restate the Company’s belief that the Company is entitled (in accordance with the terms of the SCL EA3 and following the Company’s receipt of independent expert advice) to an increase in the project management fee, to be agreed by way of good faith negotiations or otherwise determined in accordance with the provisions of the SCL EA3. However, the Government has responded to the Company by reiterating that the Government considers there have not been any material modifications to any of the scope of works, entrustment activities and/or entrustment programme contained in the SCL EA3 and, as such, the Government maintains its position of disagreement to any increase in the project management fee. Despite the fact that this matter needs to be resolved, the Company has continued, and will continue, to comply with its project management obligations under the SCL EA3 and has met, and will continue to meet, the costs thereof, on an interim and without prejudice basis, to allow the SCL project to progress in accordance with the latest programme in order to achieve a full opening of the SCL as soon as reasonably practicable, whilst reserving its position as to the ultimate liability for such costs and as to its rights to pursue the courses of action and remedies available under the SCL EA3.

Additional PMC. As detailed mentioned above, the Company is responsible for carrying out or procuring the execution of the works specified in the existing entrustment agreements relating to the SCL Project and the Government, as the owner of the SCL, is responsible for bearing and financing the full amount of the total cost of such activities and for paying to the Company the Original PMC of HK$7,893 million in accordance with an agreed payment schedule. As stated in paragraph (b)(i) above and as previously disclosed by the Company, the programme for the delivery of the SCL project Project has been significantly impacted by certain key external events, including the discovery of archaeological relics in the Xxxx Xxxx Toi Station area, requests for additional scope and the late or incomplete handover by third parties of construction sites to the Company. Not only do these matters increase the cost of works, works they also increase the cost to the Company of carrying out its project management responsibilities under the relevant SCL entrustment agreementAgreement, which is this increase estimated to be around HK$1,371 million. By December 2020Regular updates have been provided to, and discussions have been held with, the aggregate amount of project management fee paid by Government on the Government delays to the Company in accordance with programme for the payment schedule contained in delivery of the SCL EA3 was substantially close to Project and the Original PMC (excluding, for associated impacts on the avoidance of doubt, CTC including the Additional PMC of HK$1,371 million previously sought by the Company) and has been expended in full by the CompanyPMC. The Additional Funding approved by the Legislative Council did not include any Additional PMC for the Company which the Company had previously sought from the Government. Therefore, the cost to the Company of continuing to comply with its project management obligations under the SCL EA3 is currently being met by the Company on an interim and without prejudice basis (to allow the SCL project to progress in accordance with the latest programme) and the Company reserves its position as to the ultimate liability for Given such costs and as to its right to pursue the courses of action and remedies available under the SCL EA3. However, given the Company’s view that there has been a significant delay modifications to the project programme and the associated increase in the project management costs to of the Company and following the Company’s receipt of independent expert advice, the Company has written to the Government to restate the Company’s belief believes that the Company it is entitled (in accordance with the terms of the SCL EA3 and following the Company’s receipt of independent expert adviceEA3) to an increase in the project management fee, to be agreed by way of good faith negotiations or otherwise determined in accordance with the provisions of the SCL EA3. Accordingly, as stated above, the Company has included the Additional PMC of HK$1,371 million in the 2020 CTC Estimate notified to the Government, reflecting the additional scope of work and programme extension. However, the Government has responded to advised the Company by reiterating that that: the Government considers there have not has been any no material modifications to any modification in respect of the scope of works, entrustment activities and/or entrustment programme contained in the SCL EA3 Project and, as suchtherefore, the Government maintains its position disagrees to the inclusion of disagreement to any increase Additional PMC in the project management feeCTC. Hence, the Additional Funding sought by the Government and subsequently approved by the Legislative Council on 12th June 2020 did not include any Additional PMC for the Company. Despite the fact that this matter needs to be resolved, the Company has continuedwill, and will continuein the interim, continue to comply with its project management obligations under the SCL EA3 and has met, and will continue to meet, meet the costs thereof, on an interim and without prejudice basis, to allow the SCL project Project to progress in accordance with the latest programme programme. The Board is of the view that the Company’s entitlement to any Additional PMC should be resolved with the Government in order to achieve a full opening accordance with the terms of the SCL as soon as reasonably practicable, whilst reserving its position as EA3. Given the uncertainty and potential financial impact to the ultimate liability Company in connection with the Additional PMC, at the appropriate time following further developments relating to this matter, the Company will recognise a provision in its consolidated profit and loss account for such costs and as an amount of up to HK$1,371 million to reflect the additional cost to the Company of completing its rights to pursue the courses of action and remedies available under the SCL EA3remaining project management responsibilities.