CONFIDENTIAL
150
A. R. Paul, Esq.,
Second Secretary (Commercial),
British Embassy, Peking.
"B"CHI/LPCL(A)
19 July, 1977.
Thank you for your tel:38 of 15 July about the Hong Kong Power Station project. I can understand your confusion and hope that the following will explain both the history of CLP/PEPCO and the current situation.
2. As I understand it, Peninsula Electric Power Company (PEP) are now the company responsible for power generation on the Kowloon peninsula, China Light and Power (CLP) are responsible for the transmission and distribution of power on the Kowloon peninsula. Power supplies (generation and distribution) on Hong Kong Island are, of course, in the hands of Hong Kong Electric Co. i.e. an entirely separate operation.
3.
Originally, CLP covered both generation and distribution on the peninsula but in 1964, they formed a joint venture with EXXON (in fact with a 100% owned subsidiary of Esso Eastern Inc. USA) whereby EXXON acquired a 60% share in the generation side of the business. The new company was registered as PEPCO with shareholding of EXXON (60%) and CLP (40%). The deal provided for CLP to continue to provide the management and technical services for PEPCO and the financial input of EXXON enabled them to expand their generating facilities. Thus CLP have a major say in new power development schemes. But the formal position is that PEPCO is controlled by EXXON's 60% interest and Howard Duncan, the EXXON representative, is the Chairman of the PEPCO board.
4. On the other hand transmission and supply remain the exclusive responsibility of CLP whose Chairman is Sir Lawrence Kadoorie. As a result, PEPCO's generation policies must take account of CLP's exclusive right to supply power to Kowloon and Sir Lawrence Kadoorie's position enables him to co-ordinate programmes which embrace both the PEPCO and the CLP operations. Such is the plan to build a new power station and transmission system for the two companies cannot work in isolation. CLP have exclusive rights to any new distribution schemes and given the success of current operations, CLP would probably be able to raise capital for the new station. But the 1964 deal gave Esso the right to a 60% in any new generation
scheme.
CONFIDENTIAL
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