set out on page 46, the forecast profits for the period from 2013 to 2030 under Option 2 will amount to HK$102.7 billion after depreciation charges of HK$87.2 billion and increase in working capital of HK$4.6 billion. In the same period, capital expenditure on committed capital projects and routine replacement of fixed assets will amount to HK$83.0 billion. On the basis of the previous practice of payment of approximately 80% of the profits of the preceding years by way of dividends, which will amount to HK$78.9 billion, the net cashflow after dividend is forecast to amount to HK$23.4 billion (representing HK$102.7 + HK$87.2 – HK$4.6 – HK$83.0 – HK$78.9 billion). When comparing the cash outflow required for the capital expenditure with the net cashflow after dividend, it is clear that there would be a funding shortfall for most of the years between 2013 and 2030, with the exception of a few years beyond 2025. The funding shortfall is also much bigger than that of Option 1. The annual funding shortfall is shown in Figure 7.11 and the total funding shortfall would peak at HK$112.8 billion in 2030 (see Appendix 2 for details). A similar approach to debt sizing has been adopted in Option 2 as for Option 1, resulting in a net additional borrowing capacity of approximately HK$17.0 billion. After allowing for the related interest cost over a slightly longer period, the net incremental cashflow available from borrowings would amount to approximately HK$11.0 billion under Option 2. This amount would not be sufficient to meet the funding shortfall as shown in Figure 7.12. 7.10 5 4 3 2 1 0 (1) (2) (3) 2013 Figure Option 2 – Annual Net Cashflow after Dividend in HK$ billion HK$23.4 Billion Cumulative Net Cashflow after Dividend 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2026 Positive Net Cashflow after Dividend Negative Net Cashflow after Dividend 7.11 (16) (14) (12) (10) (8) (6) (4) (2) 0 2 2013 Figure Option 2 – Annual Funding Shortfall/Surplus Maximum funding shortfall after dividend, peaking in 2030 (HK$112.8 Billion) in HK$ billion 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2027 2030 2028 2029 Annual Funding Shortfall Annual Funding Surplus 7.12 120 100 80 60 40 20 0 2013 Figure Option 2 – Cumulative Funding Shortfall after Debt Financing HK$112.8 Billion Pre-financing Funding Shortfall 2030 7 COMPARISON BETWEEN THE TWO OPTIONS in HK$ billion About HK$102 Billion Cumulative Funding Shortfall after Debt Financing (HK$112.8 Billion – HK$11 Billion) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 HKIA MASTER PLAN 2030 2030 About HK$11 Billion Additional Debt (Less Interest Expense) 49