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August 1977
REGER No. 43
Dear Chorles
159) (163
HONG KONG POWER STATION
3-AU01977777
HKIS 164!1
We met on 29 July, with others concerned, to discuss the problems set out in your letter of 22 July and to pick up related matters in the letter of 26 July from No 10 to the Department of Industry. The object of the discussion was to clear the way for your trip to Hong Kong this week, as part of the team which is going out for further discussion of this project. In this we had the benefit of the Bank's advice in their letters of 20 and 28 July.
First, there was the question whether we could rely on the Hongsha. Bank putting up the dollars for the whole project, with the Diessing of the Hong Kong authorities, and arranging conversion of the dollars into sterling so that there would be no shortfall against the contractors' sterling quotations. Mr Gemmill said he had received assurances on all this from Hongshai and felt we
I welcome this could reasonably rely on them at this stage. assurance. All the pressure to denominate this contract in HK dollars is coming from there. It seems only reasonable that Hongshai, should for their part undertake the necessary internal steps to facilitate the use of HK dollars.
Paragraph 4 of your letter referred to the extra risk arising from the additional interest payable due to the immediate draw down of the whole loan. This is something which will need to be covered by your negotiation in Hong Kong but it will clearly be an advantage if Hongshai will accept a fixed return of 73% for the first 5 years of the loan. In any event, as you said, it would De a factor increasing ECGD's premium charge.
Second, we spoke about the risk in a default situation in discharging liability in Hong Kong dollars which are judged likely
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