1
LY MON
CONFIDENTIAL
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bid by the French
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who were earlier negotiating to sell such a PWR to China would be "communautaire" and could lead to joint ventures elsewhere, such as Korea. The third contender, Westinghouse, is preferred from the technical and safety point of view, but prefers to sell only a part of the nuclear hardware. The attitude of the American Administration is also uncertain and cannot necessarily be relied upon.
POLITICAL
BENEFITS
with the New Territories lease due to expire in 1997, the increased economic interdependence between Guangdong and Hong Kong would contribute to Hong Kong's status. stability, business confidence +
help to reassive invertors <bout
the Territory's future status, With HMG's support of the CLP study known to the Chinese, to attempt to disengage now would only be adversely interpreted and so weaken the credibility of the UK and Hong Kong Governments, and the "face" of Sir Lawrence Kadoorie. Apart from the nuclear prospect, Sir Lawrence's good will is critical to secure a negotiated contract for the 4 x 660 MW Castle Peak B Station, decisions on which are expected early next year.
RISKS AND ISSUES TO BE FACED
A project of this size has inevitable risks and issues which will have to be faced once Chinese intentions are clearer. The objective will be to lay off risks wherever possible. The main issues are: -
THE
CREDIT PACKAGE
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The finance package will have a crucial effect on the project's capability to be self-financing. Under OECD rules, ECGD could agree support for a 90% loan repayable over 12 years, but ab initio would propose an 85% loan over 10 years the terms that EEC members are proposing for power stations, both conventional and nuclear. The actual terms will depend upon those proposed by the nuclear island partner, or upon the cast flow projections on the viability of the project. The security of ECGD loans to CLP will also need to be safeguarded.
EQUITY INVOLVEMENT
We have been told by CLP that the Guangdong authorities may seek direct HMG and Hong Kong Government equity involvement probably because it would ensure political and moral commitment.