Mr Bryant
appropriate contacts with possibility of the CEGB's participation as project managers for this venture. was concerned that if the CEGB undertook the design of the equipment their standards might be higher and consequently more expensive than those required for Hong Kong. Mr Morphet and Mr Havelock agreed that although individual companies would be responsible for the design of their own equipment the CEGB would need to ensure overall design compatability. There had been friction between the CEGB and UK manufacturers in the past over this and it was something to be borne in mind in any future arrangement.
(iii) Contractual Arrangements
Mr Baker said that a turnkey package afforded the best opportunity to disguise the price element. It would be to the advantage of UK contractors and was clearly what Sir Lawrence Kadoorie wanted. One possibility would be for the new company to consist of a 49 per cent NEB stake with the remainder being divided between the main supplier companies as sub-contractors, In this case it would be necessary to come to an understanding regarding contractual liability which would be acceptable to all parties. The Al Jubail' contract indicated a way in which such an arrangement might be insured by ECCD.
(iv)
Financial Arrangements
Mr Lippitt drew attention to the possible leasing arrangement outlined by Mr Hewes. He said that the attraction of this proposal was that it enabled the UK company to take advantage of the available tax allowances on investment which could be reflected in the final price. Mr Hewes advised that while such allowances were still legally possible for a leasing arrangement overseas both the Treasury and the Inland Revenue were felt not to be in favour. It was agreed that an approach ought to be made soon to the Treasury and the Inland Revenue to discuss the implications of the proposed leasing package.
Next action
3 It was agreed that:
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Mr Lippitt would be arranging to discuss the project with Lazards (CEC's financial advisers);
Mr Macdonald would discuss the implications of the leasing proposal with Treasury and Inland Revenue;
Mr Baker would prepare a note on contractual arrangements covering liability and insurance.
IC2
30 May 1977
cc: Those present
Mr Bullock
Mr Clark MEPT Mr Roberts CRE Mr Mann ECGD Mr Mingay Gen Mr Field IC2