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SMRT Corp does not intend to use the S$991 million from the asset sale to the government to pay any special dividend to shareholders but will instead use it to pay off part of its debt.
In a statement on the transition to the New Rail Financing Framework (NRFF), the rail operator said the group's total debt level is expected to be at S$762 million on Sept 30, 2016. It noted: "To be prudent, the company intends to use part of the net proceeds from the proposed sale to retire some of its existing debt."
A portion of this debt was used to fund investments in its rail operating assets. SMRT also said it will pay approximately S$159 million as a tax payable on the difference between the sale proceeds and the residual capital allowances relating to the operating assets. "In addition, the company will invest in the strengthening and further development of its rail engineering competencies for service reliability."
According to SMRT, the NRFF is not expected to affect its other existing non-rail business areas. "We will continue to develop our core competencies and seek new growth opportunities to deepen our rail engineering expertise, expand our road and rail transport operational footprint, and extend our commercial out-of-network reach."
SMRT's president and group chief executive officer Desmond Kuek was also quoted as saying: "We welcome the transition of our lines to the New Rail Financing Framework."
Mr Kuek added: "This will allow SMRT Trains to better focus on fulfilling its role as a public transport operator to deliver high levels of operational reliability, safety, and service for the benefit of our commuters."