C.S. 166
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(i)
(ii)
(iii)
(iv)
XCS(77)2
tariffs (including the fuel element) may have to increase on average by about 4% (or 1 cent per unit) a year from 1977 to 1987;
shareholders' contribution through retained earnings would increase from $158 million to $2,853 million;
the maximum level of borrowings would be $92 million in 1984 (to give roughly a 30 70 ratio with shareholders' funds);
from 1977 to 1937, consumers' contribution via the Development Fund could grow from $100 million to $1,043 million, the possible implications of which are mentioned in paragraphs 35 to 40 below.
C
1€
CLP feel unable to commit their shareholders to further capital investment without certain amendments to the Scheme of Control to give the desired security to shareholders, to financial institutions from which CLF might wish to borrow, and to consumers alike. CLP's own proposals for a new Scheme of Control (copy at Annex G) are examined in the following paragraphs.
(D) CLP's Proposals
17
The proposals are presented in the form of a re-draft of the present Scheme (copy at Annex B). The principal changes CLF propose
are that:
(a) provision be made in the agreement for the possible
establishment of a new generating company to finance and to own the proposed new power station to produce electricity for sale only to CLP;
(b) the level of permitted return be raised from 13% of
average net fixed assets per annum to an average of 15%. This CLP consider necessary first to bring them into line with other public service enterprises in Hong Kong; secondly, because they anticipate an increase in the annual cost of capital in major world markets in the eighties; and thirdly because, with the end of the lease of the New Territories in 1997, the risk for investors now is greater than it was in 1964 when the present Scheme of Control was drafted;
(c) the average permitted return of 15% be allowed to
fluctuate within a band of plus or minus 1% in order to provide the companies with a financial incentive for maximum efficiency in planning and operating. This they consider would benefit consumers and investors alike, the former because it should encourage cost savings, while the latter would benefit from the company being able to retain profits earned up to 1% above the 15% base;
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