PUBLIC
PECORD
OFFICE
Reference -
NEMANNC.O.882/12
PUBLIC RECORD OFFICE, LONDON
TALLY WITHOUT PERMISSION OF THE Í BE REPRODUCED PHOTOGRAPHIC- | coi rau FHOTOGRAPH NITO
C. 92302/32 [No. 54].
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No. 23.
THE HIGH COMMISSIONER to THE SECRETARY OF STATE.
2
(Confidential.)
SIR,
(Received 8th November, 1932.)
Government House, Singapore, 21st October, 1932. WITH reference to your Confidential despatch of the 27th September,* and subsequent telegrams regarding the proposed purchase by the Perak River Hydro- Electric Power Company of the Steam Power Station of the Malayan Tin Dredging Company, Limited, I have the honour to confirm the despatch to you to-day of the following telegram
-
"Confidential. Reference your telegrams 168 and 174† unable to agree to issue of Debentures by Company which I am satisfied would not be in interests of Federated Malay States Government. Despatch follows by air mail."
2.
The matter has been carefully reconsidered by all the authorities concerned since the receipt of your last despatch, and I enclose a copy of a confidential memo- randum by the acting Treasurer, Federated Malay States, which he has written after a complete re-reading of all the past correspondence. Mr. Rex has asked that any terseness or lack of careful phrasing that may be found in the memorandum should be excused in view of the fact that he is burdened with work connected with the imminent introduction of the Federated Malay States budget for 1933. It represents nevertheless very clearly and unequivocally the views held by the local Treasury on the proposed transaction.
I
3. My own views coincide with those expressed by the acting Treasurer, and may say that I would never have accorded my agreement to the creation by the Company of Prior Lien Debenture Stock unless its creation had been subject to the provisos contained in Colonial Office telegram No. 2 of the 1st January, 1931. has always been clear to me that the interests and viewpoints of the Federated Malay States Government, of His Majesty's Treasury, and of the Company concerning future problems of expansion or development might not be identical.
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7. In conclusion I wish to emphasize that the issue of further Prior Lien Debentures must inevitably prejudice whatever prospects the Federated Malay States Government and holders of the Participating Debenture Stock may have of recovering their investments in the Company under any scheme for its capital reorganization, with which eventual project the present application has been definitely associated by Mr. Balfour's letter to Mr. Bamford dated the 4th June, 1932.* In these circumstances it would appear a dereliction of duty on my part to consent to the issue of any further Prior Lien Debentures without having some clear indication as to what form of capital reorganization is in the minds of the Directorate, and on what valuation of their property and estimate of future earnings the idea has been conceived; even though it may be impossible, as you have informed me by your telegram No. 149, for any definite scheme to be prepared at the present juncture.
I have, &c..
Enclosure 1 in No. 23.
C. CLEMENTI,
High Commissioner.
COPY OF A MEMORANDUM BY THE ACTING FINANCIAL ADVISER AND TREASURER, FEDERATED MALAY STATES, DATED 18TH OCTOBER, 1932
(Confidential.)
THE liabilities of the Perak Hydro-Electric Power Company, Limited, in respect
of debentures and share capital are as follows in order of priority :-
(a) 5 per cent. Prior Lien Debentures
-
85,000
189,000
Debentures.
£
£
216,000
(b) 5 cent. Guaranteed Debenture Stock
per
1,250,000
Loan from Federated Malay States Govern-
(c)
ment
850,000
It
Accrued interest
(d)
7 per. cent. Participating Debenture Stock Accrued interest
1,350,000
3,940,000
Share Capital.
(e) 8 per cent. Cumulative Preference Shares (1) Ordinary Shares
500,000 431,237
Total
931,237
£4,871,237
4. The negotiations between the Perak River Hydro-Electric Power Company and the Malayan Tin Dredging Company have apparently been known to a number of unofficial persons here for some considerable time, and it is in my opinion most unfortunate that the proposal of purchase (involving, as it does, the issue of further Prior Lien Debentures) was not communicated for the consideration of the local Government before actual negotiations, which according to Mr. Cochrane's memo- randum of the 23rd September, 1932,§ have reached a stage in which the draft of an agreement "has been definitely agreed to and the terms cannot now be altered,' were put in train. My telegram of 24th May last|| was sent because I had received complaints based on information possessed by certain members of the public but not by the Government.
5. You have informed me by your telegram No. 149¶ that no definite scheme for the capital reorganization of the Company has at present been prepared. There are, however, further rumours current here to the effect that the Company is associating with indefinite ideas for its reconstruction ideas of an ultimate absorption of various State and Municipal electrical enterprises. I do not know what ground there is, if any, for such rumours but I consider it essential that the local Government should be apprised immediately of any trend in the Company's policy in which it is likely to be financially, administratively, or ethically involved. The point to which the negotiations with the Malayan Tin Dredging Company have been carried without such reference has caused me and my advisers extreme uneasiness.
6. While I base my objections to the purchase by the Company of the Malayan Tin Dredging Company's installation on the financial arguments put-forward by the acting Treasurer I should add that the Legal Adviser, Federated Malay States, is not satisfied that the terms of proposed purchase would not conflict with Clauses 12 and 26 of the Concession Agreement, and I enclose a copy of his written opinion on this point.
§ No. 21.
* No. 22. + C.92302/32 [Nos. 47 and 48]: not printed.
C. 92302/32 [No. 14]: not printed.
No. 10.
¶ C. 92302/32 [No. 36] not printed.
Even under the most favourable circumstances and assuming no further issue of Prior Lien Debentures takes place, by 1934 accrued interest under the moratorium will have increased this figure by £274,000 to £5,145,237.
As against this capital and debt of over five millions the Company have assets in the shape of their dam and power station at Chenderoh, their steam station at Malim Nawar and various substations and transmission lines.
What value should be placed on these assets is to some extent a matter of opinion but I do not imagine that even the greatest optimist would put the value anywhere near £5,000,000:
On the basis of cost less depreciation the figure might possibly be as high as £3,500,000, but as there is good reason to believe there was considerable waste and extravagance during the period of construction it is probable that that figure would have to be reduced considerably. On the basis of present-day earnings £2,000,000 would be an outside figure to put on the value of the undertaking. Conditions, however, are not normal and given a return to prosperity in the tin industry, there is every reason to suppose the income of the Company would increase very consider- ably, though not in my opinion to anything like the figure given in some of the highly optimistic estimates of the past.
I should say a fair estimate would be for the sale of some 25,000 KVA, giving a gross income of about £400,000 and a net income of £250,000. These figures do * Enclosure 1 in C. 92302/32 [No. 18]: not printed.
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