XPORT
pc
CREDITS!
EXPORT CREDITS GUARANTEE DEPARTMENT
HKK 166t| 14/10. ST
9 MAY 1978
Aldermanbury House
Aldermanbury
London, EC2P 2EL
Telex: 883601
GUARANT
RANTEE
1
DEPARTM
DPAK OFFICER
RE: RY
INDEX
PA
Telephone: 01-606 6699 [Action T&Kên
Miss J Kelley HM Treasury Parliament Street
London SW1P 3AG
Dear Jean,
HONG KONG
KESCO UNITS 3 & 4
MAIN CONTRACTOR GEC LTD
CLP TRANSMISSION LINE
J
MAIN CONTRACTOR BALFOUR BEATTY LTD
5 May 1978
Seel 1.15
Members of EGC may recall that Sir Lawrence Kadoorie, Chairman of China Light and Power (CLP) invited the Prime Minister to arrange for the UK to bid for a new power station to be built on the Hong Kong mainland. As a result of this invitation DOI arranged for CEC to submit a bid which resulted in a contract being placed in April for the design and supply of the infrastructure for a 1400 W power station in which two 350 MW turbine generators were to be installed from the outset. The UK now has the opportunity to bid for the two remaining units plus a major new transmission line. The estimated cost of these two contracts including escalation is £280m and the purpose of this letter is to seek Section 2 authority to support these contracts which with other potential contracts could amount to a total liability under Section 2 for project business in Hong Kong of about £1250m.
2 The present GEC contract for the supply of units 1 and 2 is worth approxi- mately US$270m and is supported by a US$390m loan which provides in addition for finance to be made available in respect of modest amounts of site supervision services to be provided by L G Mouchel and Fartners and for design services by British Electricity International Limited. It also allows scope for the possible supply by GEC Gas Turbines of six 50 MW Gas Turbines which may be required before the larger sets can be commissioned. The loan of US$390m is equivalent to the maximum potential supply from the UK and the Loan Agreement provides for drawingo from the loan in respect of 85% of UK supply with a further 15% of UK supply available pro rata for local cost finance to be drawn by either the supplier or borrower. The borrower in the present case is the Kowloon Electricity Supply Company (Kesco) which is owned as to 60% by an ESSO subsidiary and 40% by CIP. The loan is repayable by seventeen equal half-yearly instalments over 8 years from mean commissioning of the two 350 MW sets but actual repayments may be varied in line with an agreed formula based on annual estimates of revenue receipts and actual receipts which are likely to result in carly repayment of the loan but which could, in a disaster situation, result in up to a maximum of three instalnon ts being deferred to the end of the repayment period in such a manner that each of the last three instalments within the overall 81 year period would in an extreme situation be doubled. On past experience the probability is that the loan will be substantially pre-paid. Over the past 14 years revenues have exceeded estimates in every year except one when the shortfall was only 10%. This minor repayment flexibility will require notification to our Consensus partners but we do not anticipate any reaction from them.
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