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Since last November we have been negotiating with China Light & Power for an extension of the contract into 1993 and 1994 at an increased price. This sales thrust culminated in a week-long visit to Hong Kong by our Managing Director, Dick Watts, and the director responsible for Power Cables, Roger Gouldstone. They discovered that for more than a year China Light & Power have been courted by a consortium of South African cablemakers who, helped by a South African government export subsidy of some 19%, have offered to tender the contract at or below our existing (1988 + 2% pa) prices. As well as the South Africans there are several other countries and companies who would wish to obtain this prestigious, base-load business. We are negotiating hard but it now seems unlikely that we obtain a total extension of the contract. The best that might be forthcoming is some 50% of the volume at very tight prices. This scenario would be financially unattractive to us and has triggered development of strategic financial models with options including an exit plan for the cable-types made in Brimsdown.
With an impending election we appreciate that your work schedule is very heavy. If you can find a couple of hours to speak about this, my colleagues and I will be pleased to brief you, and in any case I will keep you appraised of the situation by letter. Whilst you must get fed-up with "whinging" manufacturers, this is a case where we fighting a hell of a battle against unfair South African (and other) competition combining with the new determination of the Regional Electricity Companies to get European cable makers to quote marginally for their business.
Yours sincerely,
Peter
PETER BOURNE
Financial Director and Deputy M.D.