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XCS(77)2
48
18
In May 1962 the Government and the boards of the two companies reached provisional agreement in principle on the terms for the merger of the two companies and for the control of charges and dividends. But the shareholders opposed the meger and in November 1963 the Government formally announced its intention to control the companies separately.
49
Whereas China Light and Power Company in 1963 started negotiations with Esso for the formation of the Peninsula Electric Power Company and by February 1965 accepted the existing CLP Scheme of Control, Hongkong Electric Company continued discussions with the Government about its future financial position and in 1965 it was agreed that no formal Scheme of Control should be established for HEC's operations provided that its profits, expressed as a return on net fixed assets employed, did not differ substantially from that allowed to CLP under its Scheme of Control and provided further that HEC would provide regular information to the Government on its financial position so that its profitability could be monitored. This it has done. The Company further agreed in writing in 1965 to accept a franchise involving the formal control of its tariffs.
50
It is now proposed to open negotiations with HKE to take place at the same time as those with CLP. Initially at least, the brief for the negotiations with HKE can be the same as for those with CLP. If any significant changes are necessary as the negotiations develop, honourable Members' advice will be sought.
51
HKE have suggested that their future generating expansion should be met through a common generating facility with CLP. Con- sultations with the two companies will take place to determine the extent to which an arrangement can be negotiated bilaterally between the two companies, and to which the Government needs to be involved.
52
Finally, it is also intended to tackle with both companies the question of introducing a franchise to cover all matters relating to the supply of electricity.
Public relations
53
There are two presentational difficulties:
(a)
annual tariff increases; and
(b)
using consumers' money for capital which, in the public mind, will imply using their money to make profits which will go to shareholders.
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