NewWorld Development Company Limited
RISK FACTORS
234
D. MAJOR RISK FACTOR ON SUBSIDIARIES
(continued)
NWS Holdings Limited (“NWSH”)
(continued)
Infrastructure division
(continued)
Roads
3. NWSH invests in and operates a wide range of roads and related projects in Hong Kong and the PRC. The
operation of toll roads generally has a low level of operational risk so long as an effective system of internal
controls over the collection of toll is properly established and appropriate periodic maintenance is carried out.
However, revenue from NWSH’s toll roads and tunnel is principally dependent upon the number and classes of
motor vehicles using such roads and the applicable toll regime. Traffic volume is directly and indirectly affected
by a number of factors, including the availability, quality, proximity and toll rate differentials of alternative roads
and the existence of new competing roads and other means of transportation, including rail and waterway,
fuel prices, taxation and environmental regulations. NWSH’s operating results may also be affected by capital
expenditure requirements for the ongoing repair, maintenance, renewal and expansion of the toll roads.
4. Although NWSH believes that its toll roads and tunnel offer advantages over alternative roads, there is no
assurance that such other roads or modes of transportation will not significantly improve their services and
reduce their charges, and consequently adversely affect the revenue, operating results and financial condition
of NWSH.
Energy
5. NWSH currently operates power plants and a coal distributor company in the PRC. The operations of power
plants are complex and may be adversely affected by many factors, such as the downtime experienced during
system upgrades and overhaul works, the breakdown or failure of equipment or processes, performance
below expected levels of output or efficiency, labour disputes, natural disasters, insufficient or poor quality
fuel, insufficient demand for electricity, the setting of on-grid tariffs and the need to comply with the directions
of the relevant government authorities or utilities. Fluctuations in fuel and finance costs, changes to regulatory
regimes, disruptions in fuel supply or shortage of transportation resources may adversely affect the profit and
normal operations of the power plants which in turn may impact on NWSH’s business and financial condition.
Water
6. Through a joint venture company, Sino-French Holdings (Hong Kong) Limited (“Sino French”), NWSH invests
in a variety of water and sludge treatment projects as well as technical consultancy companies in the PRC,
Hong Kong and Macau. In addition, NWSH also has investments in a hazardous chemical waste incineration
plant in the PRC and a landfill in Hong Kong. NWSH’s water and related projects are subject to environmental
regulation and are exposed to environmental risks, such as water supplies being exposed to pollution from
naturally occurring compounds or from man-made sources. The types and amounts of pollutants in the
water or waste water treated by NWSH may increase unexpectedly due to a number of factors, including
the occurrence of natural disasters or industrial accidents, increases in levels of manufacturing activities
or consumption and shortage of water supplies. Should any such pollution or contamination occur in
respect of the water supplies or the types or amounts of pollutants in the water, waste water or emissions
from treatment projects increase significantly and NWSH is unable to adequately and efficiently treat the
contaminated water or remove those pollutants, then NWSH’s business, financial condition and operating
results may be materially and adversely affected.
