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HKR 16611
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PRIME MINISTER
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took to me 4/24/2
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Mr Mon 24/2
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Mr Gillmore
Mr Denaid
NED MKGD
GUANG DONG NUCLEAR PROJECT
24.2
Jurowa 1.2 Sex (10)
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I have seen Patrick Jenkin's minute to you of 8 February.
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I have no reason to quarrel with Patrick's judgement that
the best course is to keep both options open. In the circum-
stances I agree that it would be wise for you to write to
Lord Kadoorie as Patrick Jenkin proposes.
3. Since Peter Carrington mentioned the financing aspects, I
ought to sound one note of warning. The normal export credit
terms which we would expect to have to provide for a project of
this sort would require a subsidy of 25-30% of the export content.
The eventual cost to exporting Governments of this project could
well be higher: if, as is all to likely in this sort of case,
the Chinese succeed in playing one competitor off against another
to provide extra concessions such as longer repayment terms,
finance for local costs and capitalisation of pre-commissioning
interest, this could take the subsidy element to 40% or even more.
I think therefore that our posture towards this project ought to be
as non-committal as possible until we are clearer about the cost.
This consideration reinforces Patrick Jenkin's arguments for
avoiding too firm a commitment to either option.
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It is perhaps worth adding that moves are currently afoot
within OECD which could lead eventually to an agreement among
the power-plant exporting countries to reduce the subsidy element
in export credit for nuclear and conventional power plant.
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