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TERRITORY FOR CONTRACTORS. THE PROPOSED INTERVAL OF 10 MONTHS FROM FORMATION OF JOINT COMPANY TO AWARD OF CONTRACT IS NOT VERY LONG FOR THE PROCESS OF COMPETITIVE BIDDING ENVISAGED BY THE REPORT. GREATER SECURITY WOULD BE GIVEN TO THE PROGRAMME BY ADOPT- ING A PROCESS OF DIRECT NEGOTIATION WITH THE UK. THIS WOUL ALSO HAVE VALUABLE TECHNICAL EFFORT WHILST STILL ACHIEVING THE OBJECTIVES IN REGARD TO SAFETY TECHNICAL STANDARDS, COMPLETION SCHEDULE, COMPETITIVNESS AND PURCHASER INVOLVEMENT IN THE MANAGEMENT OF THE PROJECT TO SECURE TRANSFER OF TECHNOLOGY. IN ADDITION OUR DISCUSSIONS WITH FRAMATOME ONLY THIS WEEK SUGGESTED A THREE YEAR ERECTION AND COMMISSIONING PERIOD AS A MINIMUM TOGETHER WITH A THREE HALF YEAR MANUFACTURING PERIOD FROM CONTRACT SIGNATURE DATE. GIVEN THE ACTIVITIES REQUIRED FOR CONTRACT SIGNATURE, YOU MAY FEEL THAT THE PROPOSED FIRST COMMISSIONING DATE PUTS A LITTLE TOO MUCH PRESSURE ON ALL PARTIES. CONSIDERATION WILL ALSO HAVE TO BE GİVEN TO THE RESPONSIBILITIES AND LIABILITIES THAT THE JOINT VENTURE COMPANY (THE CLIENT) IS PREPARED TO ASSUME AS THIS WILL BE CRUCIAL TO THE FEASIBILITY OF THE PROJECT. NOWHERE IS IT CLEAR WHERE ULTIMATE CONTRACTUAL RESPONSIBILITIES WILL REST NOR ABOUT THE FINANCIAL OBLIGATIONS OF SHARE- HOLDERS. SIMILARLY THE ISSUE OF RESPONSIBILITY FOR OVER- RUN COSTS OR THIRD PARTY LIABLITY COSTS IN THE EVENT OF NUCLEAR ACIDENTS DURING CONSTRUCTION OR OPERATION OF THE STATIUON ARE NOWHERE IDENTIFIED. NOR DOES THERE APPEARE TO BE ANY PROVISION FOR COMPLETION GUARANTEES. IT ALSO APPEARS THAT CLP ARE NOT EXPECTING TO BE RESPONSIBLE FOR GUARANTEEING THE LOANS NOT COVERED BY THE BANK OF CHINA GUARANTEE. FOREIGN EXPORT CREDIT AGENCIES ARE ONLY LIKELY TO SUPPORT A LOAN ON THE BASIS OF GUARANTEES FROM THE SHAREHOLDERS. WITHE THE LIABILITEES ON THE CHINESE SIDE BEING UNDERWRITEN BY THE BANK OF CHINA, IT IS REASONABLE TO EXPECT THAT THE REMAINING 40 PER CENT SHOULD BE THE RESPONSIBLITIY OF THE OTHERE SHAREHOLDER. ALTERNATIVELY, ONEHUNDRED PER CENT BANK OF CHINA GUARANTEES WILL BE REQUIRED.
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NOTE THAT THE FEASIBILITY REPORT ASSUMES AN EXPORT CREDIT INTEREST RATE OF 7 1/2 PER CENT. THE CURRENT CONSENSUS RATE IS 7 3/4 PER CENT FOR CHINA FOR A PROJECT OF THIS NATURE (ONLY CREDIT OF UP TO 5 YEARS IS AT 7 1/2 PER CENT). FURTHERMORE YOU SHOULD KNOW THAT THERE IS EVERY LIKELIHOOD THAT OECD COUNTRIES WILL DECIDE TO RAISE MINIMUN INTEREST RATES IN THE FUTURE AND THERE CAN BE NO GUARANTEE THAT
THAT RATE WILL BE HELD UNTILL CONTRACT SIGNATURE.
WHILE IT IS NOT UNREASONABLE TO ASSUME A 10 PER CENT RATE OF
INTEREST FOR THE COMMERCIAL LOANS, THIS WILL IN FACT BE A FLOATING RATE AT A MARGIN OVER LIBOR. IT MAY BE OPTIMISTIC TO ASSUME THE SAME INTEREST RATES FOR DEPOSIT AND OVERDRAFT INTEREST (PARA5.2.(B)(VII)) AND THE 10 PER CENT LEVEL ITSELF MAY BE OPTIMISTIC GIVEN THAT IT IS
TH SAME AS THE INFLATION ASSUMPTION,
FOCAL SATU *TLIC COM
ENTED ROTHA AND ZEN.