MEMORANDUM FOR EXECUTIVE COUNCIL
FINANCIAL PLAN FOR CHINA LIGHT AND
POWER COMPANY'S EXPANSION
Memorandum XCS(77)2 which was considered by Honourable Members on 19th April 1977 is at Annex A to memorandum XCC(77)86. Paragraphs 7 to 9 set out the expected demand for electricity in China Light and Power's (CLP) area of supply in the next decade, the generating plant required to meet this demand and the estimated cost of plant, equipment and land (at full market value), escalated at 8% per annum to allow for inflation.
2
Paragraphs 10 to 16 of the same memorandum discussed the sources of finance available to finance this capital expansion and the part each might reasonably be expected to play in any financial plan drawn up by the Company.
3
Following subsequent negotiations between CLP and the United Kingdom Department of Industry (DOI) on the purchase of plant, the DOI has put forward a "package" offer that is apparently com- petitive and also imaginative in terms of the "back-up" services (such as financing arrangements through the Export Credit Guarantee Department (ECGD), technical consultancy services from the Central Electricity Generating Board (CEGB) and the supervision and co- ordination of the Company's negotiations with their UK contractors) which would be provided to CLP as part of the package. But CLP are employing consultants to check that this is the most efficient way of developing their generating capacity, and they will only accept the offer if independent opinion confirms that it is competitive world wide.
4
CLP plan to accept the package by letter of intent in mid- December, but understandably hesitate to commit themselves until the proposed Scheme of Control and the Company's financial plan for the period up to 30th September 1983 have received the necessary Govern- ment approval. In particular, CLP seek the Government's covering sanction to the average tariff levels to be applied until 1983.
5
(a)
Accordingly the objects of this memorandum are:
to set out the expansion programme now proposed and to examine the underlying assumptions behind
CONFIDENTIAL