CONFIDENTIAL
ATP CASE PAPER FOR GUANGDONG NUCLEAR POWER STATION PROJECT
INTRODUCTION
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GEC Turbine Generators Ltd (Rugby), the National Nuclear Corporation (Warrington), British Nuclear Fuels Ltd (Warrington) and Balfour Beatty are seeking to win contracts worth an estimated total of £1,600m associated with the construction of a pressurised water reactor (PWR) power station to be built in the Chinese Province of Guangdong adjacent to Hong Kong. This paper presents a case for injecting £90m from the ATP into a financial package to cover the UK content in the project.
2 The UK content in the project is composed of an estimated £500m (on an escalated basis) for the supply and erection of 2 x 900 MW high-speed (3,000 rpm) turbo-generators by GEC Turbine Generators Ltd, £771m for the UK content in the nuclear island (assuming that 75% of the nuclear island will be sourced in the UK) £49m in training and technical support services from British Electricity Interna- tional; and an associated transmission line by Balfour Beatty worth £197m. A baek- ground note on the project is at Annex A.
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The proposal to inject aid into the finance package for the project arises from Chinese reactions to credit terms offered to them by a UK delegation in July 1982. The UK offered export credit at the prevailing Consensus rate of 10% but, since the 1980 feasibility study on the project had assumed offshore finance available at 72%, the Chinese were clearly disappointed with these terms. They asked the UK side to consider ways of "softening" the terms on offer. Within the constraints of the aid budget and OECD and EC reporting requirements the proposed aid input is designed to sustain the UK's position in bidding for the whole project and in particular to strengthen its position as front runner for the turbine island.
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The size, nature and location of the project make it a unique joint venture between the PRC, Hong Kong and Western suppliers.
5 For the Chinese, the transfer of nuclear and non-nuclear technology is the principal attraction of the project, but the economic aspects of the project are also important. There is a large shortfall in generating capacity within the PRC, and the Ministry of Water Conservancy and Electric Power plan to install an additional 2,400 MW a year until the end of the century. Moreover the project is seen as an important hard currency earner by the PRC authorities; power from the sta- tion will be purchased by the China Light and Power Company (CLP) in exchange for Hong Kong dollars. And this cross-border link has political atrractions for the Chinese, strengthening relations between Hong Kong and China and emphasising their
inter-dependence.
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For the UK there are substantial commercial, industrial and political bene- fits to be gained. With maximum UK involvement the project would be the largest single export order ever won by the UK. It would provide up to 42,000 man years of work in the UK and would give GEC the capability to manufacture 900 MW high- speed turbines. Together with Sizewell B, it would offer a great opportunity for the UK nuclear industry to strengthen its skills and experience. And it would enable the UK to gain a foothold in the potentially vast Chinese market for capital equipment.
BENEFITS TO THE UK
A
COMMERCIAL
7 Installed generating capacity in China stood at 40,500 MW in 1978, with an
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