B.
Permitted Return
1.
-
2
The Permitted Return after taxes of the combined operations of the Companies shall be the sum of
a.
b.
13.5% per annum of the average net fixed assets in respect of assets acquired by China Light and PEPCO before 1st October, 1978, and
15% per annum of all other average net fixed assets of the Companies, less 1.5% per annum of
i.
ii.
the increase in the opening balance of the Development Fund (see paragraph 2.i) below) and
the increase in the opening balance of long term borrowed capital
as set out in Annex II
provided that the total Permitted Return shall not be less than 13.5% per annum of the Companies' combined average net fixed assets.
With respect to each class of assets referred to in a) and b) above, average net fixed assets for any year means the average value of the opening balance for that year of investments in land, buildings, plant and equipment (including assets in course of construction, payments on account and capital stores) less depreciation at rates agreed with the Government (as set out in Annex II) and of the year end closing balance, similarly calculated, as shown by the records of the Companies.
From such Permitted Return there shall be deducted the charge referred to in paragraph B.3 below and interest payable on long term borrowed capital as set out in Annex II.
The Companies will agree on a basis for the division among them of the remaining funds which shall represent the net return to shareholders.
2.
i)
ii)
If the gross tariff revenues of China Light in any year shall exceed or be less than the total for the Companies of :
a)
total operating costs including depreciation and taxes, determined in accordance with Annex II, and
b)
the Permitted Return specified in paragraph B.1 above,
such excess shall be added to or such deficiency shall be deducted from a Development Fund. The purpose of the Development Fund is to assist in the acquisition of fixed assets.
The balance in the Development Fund shall represent a liability of China Light and shall not accrue to the interest of its shareholders except as envisaged under this Scheme of Control.
: