* Ferry with 120 aboard sinks after collision
* At least 36 dead, more than 100 taken to hospital
* Survivors say passengers trapped in flooded ferry
* Government vows thorough investigation
(Adds ferry ownership details, fresh passenger quotes)
By Tan Ee Lyn and Donny Kwok
HONG KONG, Oct 2 (Reuters) - At least 36 people died and dozens were injured when a ferry carrying more than 120 revellers on a company outing collided with another ferry and sank near an island south of Hong Kong on Monday night, in one of the city's worst maritime accidents.
The ferry belonging to the Hongkong Electric Company, controlled by billionaire Li Ka-shing, was taking staff and family members to watch fireworks in the city's Victoria Harbour to celebrate China's National Day and mid-autumn festival when it hit the other ship and began sinking near Lamma island.
Survivors said they had little time to put on life jackets before the ferry flooded, trapping passengers.
"Within 10 minutes, the ship had sunk. We had to wait at least 20 minutes before we were rescued," said one male survivor, wrapped in a blanket on the shore.
Some survivors said people had to break windows to swim to the surface. "We thought we were going to die. Everyone was trapped inside," said a middle-aged woman.
HongKong Electric, a unit of Power Assets Holdings which is controlled by Asia's richest man Li, said the boat had capacity to hold up to 200 people.
The tragedy was the worst to hit Hong Kong since 1996 when more than 40 people died in a fire in a commercial building.
The other ship, owned by Hong Kong and Kowloon Ferry Holdings, suffered a badly damaged bow in the collision but made it safely to the pier on Lamma, an island popular with tourists and expatriates about a half-hour boat ride from Hong Kong.
Several of its roughly 100 passengers and crew were taken to hospital with injuries.
"After the accident, it was all chaos and people were crying. Then water began seeping in and the vessel began to tilt to one side and people were all told to stand on the other side and everyone started putting on life jackets," a male passenger who was on the Lamma ferry told reporters.
SEARCH FOR SURVIVORS CONTINUES
Hong Kong is one of the world's busiest shipping channels, although serious marine accidents are rare.
The waters around Hong Kong were busy on Monday with numerous passenger ferries, private leisure boats and fishing vessels out to watch the city's fireworks, but it is unclear why the two ferries collided.
"Our ferry left Lamma island at 8.15 pm to watch the fireworks display out at sea, but within a few minutes, a tugboat (ferry) smashed into our vessel," Yuen Sui-see, a director for Hongkong Electric, one of the city's two main electricity generators, told reporters.
A spokeswoman for Hong Kong and Kowloon Ferry said they were assessing what had happened.
"Our captain is not well and we have not been able to talk to him so far," the spokeswoman told local television.
A maritime department spokesman told reporters: "Normally vessels ought to stay and help other vessels in distress. But what we heard was that the other ship had passengers who were injured and needed help."
The nighttime collision sparked a major rescue operation involving dive teams, helicopters and boats that saw scores of people plucked from the sea.
Television pictures showed the red and blue bow of the Hong Kong Electric Company ferry pointing skywards, surrounded by rescue vessels. By Tuesday a large crane on a barge had been connected to the stricken ferry.
"We will continue our search. We also don't rule out that some may have swam to shore themselves and haven't contacted their families and so may not be accounted for," Ng Kuen-chi, acting deputy director of fire services told local television.
The search was hampered by the vessel being partly sunken, poor visibility and too much clutter inside the vessel, Ng said.
Teams of men in white coats, green rubber gloves and yellow helmets carried corpses off a police launch in body bags on Tuesday. Local media reported that children were among the dead.
At one of the city's public mortuaries around 50 grieving relatives gathered, some crying, while others were called into identify the dead.
More than 100 people were sent to five hospitals and nine people suffered serious injuries or remain in critical condition, the government said in a statement.
Hong Kong leader Leung Chun-ying visited survivors of the collision and pledged a thorough investigation into the crash.
Flags flew at half mast at Li's Cheung Kong Group headquarters in the heart of the city's financial district on Tuesday, as well as at government headquarters.
Thousands of Hong Kong residents live on outlying islands such as Lamma, which lies about three km (two miles) southwest of Hong Kong island.
(Additional reporting by Stefanie McIntyre, James Pomfret, Farah Master, Venus Wu and Tyrone Siu; Editing by Anne Marie Roantree and Michael Perry)
Keywords: HONGKONG FERRY/COLLISION