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helpful that CLP/PEPCO had issued a contract for site evaluation work to Mouchel. This could be presented to Exxon in Houston as evidence that all work was not being delayed while the British package was being put together;
Crucial discussions on the new Scheme of Control (which sets CLP/PEPCO's rate of return) would be held in the next few weeks. The new scheme of control was important so far as ECGD were concerned and Mr Birch had stayed on in Hong Kong for further discussions with the Hong Kong Government officials dealing with this;
CLP were happy with the scope of the package which was being proposed, including the preparation of civil engineering designs by Mouchel.
4 Mr Gemmill said that the proposal for financing the buyer credit in Hong Kong dollars had met with the approval in principle both of the Hong Kong banks and the Hong Kong Government. The advantage to the customer was the avoidance of any exchange risk, while the proposed arrangement still allowed for UK companies to be paid in sterling. The advantages to the proposed package were both financial (by our taking advantage of the difference between the rate of interest charged to CLP and that accumulated on the sterling balance of the loan held in the UK), and presentational (as the UK was uniquely placed to provide this facility it could be put forward as part of the "novel approach" Sir Lawrence was looking for).
5 After some initial misgivings, caused by inaccurate rumours which had filtered through to Hong Kong following Sir Lawrence's meetings with banks in the UK, the Hong Kong and Shanghai Bank had agreed in principle to make the necessary amount of HK dollars available for the requisite period (approximately 1.4bn dollars over 15 years). The bank had been quick to grasp that the handling of this transaction would be to its own financial advantage. The Hong Kong Bank's considerable local influence could prove to be a vital asset in the negotiations with CLP/PEPCO.
6 The Hong Kong Government's Financial Secretary, Philip Haddon-Cave, had also been amenable to the proposal which was consistent with Hong Kong's current foreign exchange policies. His agreement was conditional only on the Hong Kong Government being kept informed of events and in particular of the day on which the HK dollar transaction would be made.
7
On the UK aspects of the HK dollar arrangement Mr Gemmill said that he hoped Mr Birch (ECGD) would consider that there were no insuperable problems. So far as security was concerned, the Hong Kong banks themselves were very closely interested in the