68
DÖBLIC PECORD OFFICI
Reference -
C.O. 882/12
ALEX, WITHOUT PERMISSION OF THE COPYRIGHT PHOTOGRAPH-NOT 10 BF REPRODUCED PHOTOGRAPHIC-
PUBLIC RECORD OFFICE, LONDON
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That it was the intention of the Government not to confer upon the Power Com- pany any monopoly of supply and sale is clear from the Concession Agreement, especially Clause 6 thereof and from the correspondence, already referred to, which passed between ourselves and the British Resident, Perak, in November, 1925, and January, 1926.
Notwithstanding this, the fact remains that unless Government take steps to enforce the strict observance of the slender limitation of rights of the Power Company ⚫ under the Concession Agreement, there is nothing to prevent the Company extending their activities in acquiring other power producing plant which would, in the end, practically crush the existing coal industry of the Federated Malay States and result in not only ruinous loss to those who have been responsible for the development of the industry, but to those investors who have assisted in making it one of the largest industrial concerns in the country.
Malayan Collieries, Limited, are prepared to meet any fair and economic com- petition, but, as we feel sure it is realized by you and by His Excellency, the com- petition of the Perak River Hydro-Electric Power Company, Limited. is of a par- ticularly unfair nature, and is made possible only by Government funds and the sacrifice by Government of its rights resulting in an entire disregard by the Power Company of its obligations. Its motive in fact is to crush a more efficient but an unsubsidized rival which is selling coal at a price which enables consumers to generate power more cheaply than they can purchase it from the Power Company at the Power Company's nominal rates.
If the Power Company were not in the position of a monopolist, and had to appeal to the public for the funds with which to carry out its policy, by the issue of stock to rank in the proper order of priority, we would have no fear of its policy of the reckless purchase of demand at preferential rates, and the continuance of the sale of power at below cost, as it is certain that upon the past and present showing and its future prospects, the Company would not be able to obtain capital.
It seems to us certain that the Company will eventually have to reconstruct, by wiping off the bulk of its present capital and indebtedness to pave the way for the raising of further capital, and we respectfully submit that as Government will be expected to bear the major part of the loss, Government might take the opportunity to revise the Concession Agreement in such a way as to, in fact, afford competitors and the general public some measure of protection against the worst aspects of a monopólistic arrangement.
In the meantime, we respectfully and most earnestly urge that all steps be taken in the interpretation of the existing agreement between the Power Company and Government, and in considering further requests of the Power Company, to prevent the ruination of an established and otherwise prosperous industry.
We have, &c.,
Malayan Collieries, Ltd., per pro J. A. Russell and Company,
R. C. RUSSELL,
General Manager.
The Honourable
The Chief Secretary to Government.
Federated Malay States,
Kuala Lumpur.
Appendix.
Malayan Collieries, Limited, has since its inception contributed to the Federated Malay States Railways some $7,000,000 in freights, to the Selangor Government some $1,500,000 in Royalties, and to the Federated Malay States Customs some $150,000/- for chandu, and throughout it has employed a labour force rising from nothing to over 3,000 people, the population supported being well in excess of 5,000 souls.
(b) The Mining Company's inclusive total cost of power production of 1.7 cent per unit (referred to in paragraphs 7 and 10) is made up as to cents 00.6 for Malayan
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coal at pit head, .cents 00.4 for freights to the Federated Malay States Railways for transportation of that coal from pit head to power station, cents 00.3 for salaries, wages, supervision, and stores, and cents 00.4 for interest and depreciation at 5 per cent. and 6 per cent. respectively.
(c) The normal consumption of Malayan coal by the Mining Company's plant is 30,000 tons annually, while the future normal annual consumption will be increased to 42,000 tons by the recent purchase, and eventual equipment, of a large adjoining area of tin-bearing land.
(d) The freights payable to the Federated Malay States Railways for the transporta- tion of the 30,000 tons of coal amount to $107,000 and for the 42,000 tons to the sum of $150,000 per annum.
(e) In support of our claim that the power of the Power Company is not, and, if its fixed interest bearing capital is to be provided for, cannot be, competitive with power thermally developed with Malayan coal, we would say that if the capacity of the Power Company's Hydro-Electric plant is taken at the utmost figure of 100,000,000 units per annum, the interest charge alone on each unit is cents 2.27. To the foregoing figure depreciation or amortization must be added, and if this be taken on the basis of the amortization of the capital outlay in 45 years (an altogether excessive term) which is equal to 2.22 per cent. per annum, the charge per unit of maximum capacity would be cents 1.0. We thus arrive at a total figure of cents 3.37 per each unit generated, without any allowance for management. working expenditure, and other essential costs, or, for any interest return upon the ordinary capital of the Company.
() On the basis of the Power Company's present sales of a maximum of 50,000,000 units per annum, the cost per unit for interest is cents 4.5 while the cost for amortiza- tion is cents 2.0 making the total cost per unit sold (for interest and amortization only) the fantastic figure of cents 6.5 per unit.
13304/33 [No. 23].
No. 37.
THE HIGH COMMISSIONER to THE SECRETARY OF STATE.
(Confidential.)
(Received 22nd May, 1933.)
[Answered by No. 38.]
SIR,
Government House, Singapore, 22nd April, 1933. WITH reference to your Federated Malay States Confidential despatch of the 9th January, 1933,* on the subject of the Perak River Hydro-Electric Power Company, Limited, I have the honour to submit brief comments on the letter from the, Malayan Collieries, Limited, a copy of which was forwarded to you under cover of my Federated Malay States Confidential despatch of the 31st March, 1933.†
2. It is open to doubt whether Malayan Collieries, Limited, can have any standing in regard to the interpretation of an Agreement made between the Government of the State of Perak and the Perak River Hydro-Electric Power Company, Limited; but as it is possible that the criticisms contained in the letter of the former Company embody the views held by a section of the public, it is desirable that a carefully con- sidered reply should be given to the letter in case publicity is given to the opinion held by this Government on the subject of the purchase of the generating station of the Malayan Tin Dredging, Limited.
3. Although certain clauses, and in particular Clause 26, have been inserted in the Agreement in order to protect the public, such protection is intended for the cus- tomers of the Power Company and not for competitors of the Power Company in the supply of electrical energy, much less for concerns such as Malayan Collieries, Limited, which are only indirectly competitors of the Power Company.
*
92302/11/32 [No. 76]: not printed.
+ No. 36.
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