Hiss J Kelley
Hi Treasury
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The potential business currently known to us is as follows:-
Probable Loan Value
UK
Local
(1) Westinghouse Signalling and Control
Equipment
£ 6m
(2) Balfour Beatty Construction Contracts No 301
£21.25m
£3.75m
No 302
£17.85%
£3.15
No 303
£ 8.5m
£1.5m
No 305
£10.2m
£1.8m
(3) MetCam 150 Railcars
£59.5m
(4) GEC Rectifiers and Fower Transmission
£ 9.350*
£1.65m
* GEC have put forward alternative quotes one of which incorporates
£1.5m of French Switchgear (11% of contract value) which is apparently necessary to comply with tender conditions. You will note that they are also seeking local cost support which for Phase 1 was only agreed in respect of civil works contracts.
There may in due course also be applications from Vickers in respect of Workshop Equipment (C £5m) and from Henry Boot in respect of tracklaying equipment (in):
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Of the foregoing Westinghouse have already been awarded a letter of intent and we have indicated in general terms our willingness to support Hong Kong finance for this business. No support is required in respect of local costs nor has capitalisation of interest been an issue but the buyer is resisting a cash with order payment of more than 2%. MARC is also stipulating a 10% retention. Agreement to these exceptional direct payments is therefore sought. It is assumed that the second 2 will be payable on delivery.
6 All the other business remains subject to competitive tenders. Norman Thompson has however said in relation to Balfour Beatty that, though they might get one or more of the smaller contracts, in view of their inexperience he thought it unlikely that they would be awarded the two key contracts los 301 and 302. Nevertheless it is on these that the competition is at present most intense. The Germans have just indicated that they are supporting local costs and there are strong indications from Hong Kong that they have agreed to capitalisation of pre-commissioning interest and to finance in US dollars. Subject to confirmation of these reports we request authority to agree to match these terms we have indeed already indicated a willingness to consider local cost financing up to the level of the 15% direct payments.
7 As to the MetCan and GEC bids hopefully each should be in a favourable position following their success in relation to Phase 1. As regards the GEC contract it is not our intention to object to the inclusion of French switchgear within the loan supported element but we shall only consider local cost support in the light of world competition for the Electro-mechanical bids.
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For the time being however the most pressing issue is the question of capitalisation of pre-commissioning interest in relation to Balfour Beatty's
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