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it has actually been using either to take the load or as a standby. Plant not required for the present load is excluded completely. The plant which is actually in use or which is required as a standby has necessarily been put in order as far as possible and replacements which are still required in order to restore it to reasonably effective running condition are not excessive. Advantage was taken of the presence of a member of the staff of Messrs. Preece, Cardew and Rider, who are Consulting Engineers to the Crown Agents for the Colonies, to obtain from him a full report on the repairs and replacements still necessary, bearing in mind that in order to generate current at all in the early days it was necessary to operate plant which obviously could only be run at the cost of further damage. It is therefore reasonable that the Administration should pay for any overhauls that become necessary as a result of the operation of plant in this condition. A copy of Mr. Jackson's report is attached and it is to this aspect of the matter he refers when he states in his covering letter' that "it does however include damage due to Japanese abuse, lack of maintenance or other similar causes".
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10. Attention is specially invited to the portion of Mr. Jackson's report on the China Light and Power Company dealing with Nos. 11 and 12 boilers. It will be observed that these boilers are not at present required to meet the current load but one was used continuously and the other as a standby for the first month after the re-occupation of the Colony. Both these boilers were in very bad condition and had been converted to wood fuel. Their use in such condition must have materially increased the damage but it was neces: ary as no coal was available in the initial stages. Mr. Jackson therefore recommends that the Administration should bear the cost of the repair of one or both boilers and after discussion with the Company who felt rather strongly on the point, it was agreed that the Administration should bear half the cost of repairs to both boilers. Mr. Jackson is not in a position to give a close estimate of the total cost of putting the plant now being operated into reasonable running condition. He expressed the view however that something under £20,000 might be regarded as an intelligent guess which would include the cost of running spares to the value of £1,500 for each Company. As explained in my telegram No. 1170 timed 281612 December, indents already submitted by the Hong Kong Electric Company contain a few items for which, under the terms of the agreement, the Administration will be responsible. Mr. Jackson on his return to London will indicate which these particular items are, Other replacements which are a liability of the Administration under the terms of the agreement will be indented for separately.
11. As regards Clause 6 of the agreement, the Company stipulated from the outset that if their plant was to be operated by the Military Administration they would expect a fair rental for it. They suggested that this should be settled on the expiration of the agreement and, in the event of failure to reach a settlement that the matter should be submitted to arbitration. As an indeterminate liability of this sort would have been most unsatisfactory from all points of view various alternative