CONFIDENTIAL
It does seem reasonably clear that the minimum 25% equity input required from
overseas joint venture partners need not necessarily be in cash, or even in
materials: a valuation may, it seems, be put on transferred technology and
expertise which may be counted towards the overseas partner's equity
contribution.
Apportioning Risk
Equity is risk capital and does not of itself imply any greater acceptance of
liability. Although an equity stake would imply some moral commitment to
liabilities, that liability could arise irrespective of the taking of equity.
Nevertheless the Chinese may view the joint venture as a way of sharing risks. Certainly if 40% of the equity were to be taken by interests outside of the
PRC then they might reasonably expect those interests to provide certain
guarantees on the timely completion of the project with acceptance of
responsibilities for cost overrum. CLP are not prepared to accept those
responsibilities but have not determined the liabilities they would be prepared
to take against the project leadership they would like to assume. Whether it
would be appropriate for other interests to accept liabilities depends on the
objectives of those other interests and the liabilities involved. However if
the real issue is the apportionment of risk and obligations then that could be
considered independent of the issue of equity.
Five general areas of risk might be postulated:
failure to complete on time or within budget and hence failure
to deliver power to programme;
- the failure of CLP to take the power proposed;
the failure of GPC/CLP for operational reasons to generate
power and hence earn revenue;
the failure for political reasons for GPC to supply power;
- liabilities resulting from a nuclear accident.
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