CONFIDENTIAL,
fraud would be identical to that known in the United Kingdom. Additionally,
if the loss is due to force majeure or failure by one party to observe
obligations then termination of the joint venture can only occur after what appears to be a procedure that might be exceedingly difficult for the non-
Chinese joint venture.
5. ANALYSIS
Means of Finance
Since equity will only account for some 10% of total estimated project value
with the remaining finance being through loans, equity would not appear to
be serving a major financial purpose. The debt: equity ratio would give no security to those providing loans and the project could probably be financed
totally from loans.
Equally from other recent examples of joint ventures in PRC, it would not
appear that equity involvement is a pre-condition for partnership in the
Western sense of the world "equity". The minimum 25% "equity" input required
under joint venture laws need not necessarily be in cash or even in materials;
rather evaluation may be put on transferred technology and expertise and be
counted towards the overseas partners equity contribution.
Symbol of Commitment
An equity stake would be symbolic of a commitment to the successful completion
of the project and operation of the station. As such, it could be a valuable
lever in securing an effective UK lead in the project if UK interests were to
take up the substantial part of the equity of HKNIC.
The commitment of Hong Kong interests is particularly important given that the
viability of this project relies on Hong Kong purchasing a substantial part of
the output of the station especially in the early years. Nevertheless
commitments can be given in ways other than equity involvement. The off take
agreement between CLP and KEC could for example be underwritten by the Hong Kong
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