CO885-(11-12) — Page 101

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RIN RECORD OFFICE

Reference -

C.O.882/12

PUBLIC RECORD OFFICE. LONDON |

ALLY VAITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- [COPYRIGHT PHOTOGRAPH-NOT TO

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in our opinion, will be the probable cost of several items. We have put them higher than estimates prepared by Messrs. Rendel, Palmer & Tritton, the Company's Con- sulting Engineers, and higher than entirely independent estimates made by Messrs. Sparks and Partners, another well-known firm of Consulting Electrical Engineers. The latter were specially called in to report on the estimates made in London last autumn, and their report was submitted to the Colonial Office, and confirmed our then lower figures.

13. We are therefore confident that the figures we have taken as the probable all-in costs of operating and maintaining the system when it is producing gross receipts of £600,000 per annum are safe, and can withstand any expert analysis and criticism. So far as we are aware there are few, if any, large hydro systems in operation in tropical countries with which our undertaking here can be compared. We have based our estimates on our experience and on known factors obtained during 17 months of actual operation. It should also be remembered that the great majority of developed electrical undertakings have a large number of small consumers, running into thousands, whereas here we shall have a small number of large consumers, probably not more than 150. The effect of this is that a smaller staff of accountants, clerks, meter inspectors, &c., are needed. Further, the fact that supply is given here at relatively few points of delivery, and from a small number of substations, limits the cost of distribution and the personnel required on maintenance. We are not burdening you with a mass of detailed figures, but we have compiled complete schedules showing in full detail how all the items of cost have been arrived at, and if you desire to have them, we shall be most ready to supply copies.

14. The result of our conclusions is that an annual gross revenue of £604,390, when it is ultimately reached, be it in 1933, 1934, or 1935, can be earned at an annual operating cost not exceeding £166,362. (Meanwhile, we are, of course, not incurring so large an annual expenditure.), We therefore estimate the gross profits at £438,028 (which compares with £432,040 given in London) and, as will be seen on page 1 of the estimates, this suffices to meet all our interest and redemption charges in full and leaves a balnce of approximately £70,000 over.

15. It is proposed, as already explained, that the Directors should consider setting aside £10,000 a year for the time being, out of this balance, to create a "Coal Reserve Fund." Next it would be prudent to contemplate that further capital and cash may have to be found before 1934. The writer is going into this possibility care- fully, and may take it up with you at a later date. Therefore the next allocation out of the balance would be, say, 5 per cent. per annum on £150,000, or £7,500 a year. If the ordinary shareholders be then considered, a 6 per cent. dividend would call for £30.000. There would then remain an unallocated balance of £22,800, more than sufficient, it is submitted, to safeguard any possible under-estimates of actual costs of operation, income tax, and unforeseen contingencies

16. May I say that in submitting all these figures to you, we are honestly con- vinced that they cannot be assailed. I recognize the great responsibility that rests upon the Board and the Management, and that if these results are not achieved in practice (circumstances beyond control being absent) we shall have rendered ourselves justifiably liable to adverse criticism and comment. It can therefore be assumed that we have erred on the side of caution.

17. May I say here that not one of the most successful of the power companies to-day has reached that position without many initial years of struggle during which no dividends were earned; yet none has failed to go forward when once a profit-earning stage has been reached. Their shares and stocks now stand at a substantial premium. I am confident that in due time the investments of the Federated Malay States Govern ment in the shares and debentures of this Company will prove to be equally sound and profitable.

18. Finally, may I point out, with respect, that leaving out of account for the moment the interest of the Ordinary Shares-now widely distributed the Board have responsibilities both to the large financial partnership in the undertaking of your Government, and to the still larger sum provided by the Guaranteed 5 per cent. Debenture Holders and the 7 per cent. Debenture Stockholders in England.

I am satisfied that these responsibilities to all interests can be faithfully discharged, if the Company is allowed unhampered to go forward with its policy of active develop-

7

ment during these next four years, and is assisted and encouraged by a renewal of the help and confidence of your Government.

19.

On behalf of the Board I submit these estimates, and ask for a renewal of your confidence and support. Any further information, now or in future, required by your Government will be furnished on request.

I have, &c.,

ARNOLD B. GRIDLEY,

Director.

THE PERAK RIVER HYDRO-ELECTRIC POWER COMPANY LIMITED.

Estimated Revenue Accounts.

Operation Account.

Dr.

Cr.

Operation Costs

Balance to Revenue Account

£ 166,362 438,028

£604,390

£

Gross Revenue

604,390

£604,390

5 per cent. Government Loan

-Interest

Revenue Account,

Dr.

£

Cr. £

6

per cent. Guaranteed Deben-

ture Stock-Interest Sinking Fund

62,500 35,000

Balance from Operation

Account

438,028

42,500

17,860

94,500

28,368

5,000

152,300

£438,028

Sinking Fund

7 per cent. Participating De- benture Stock-Interest..

Sinking Fund Income Tax on Sinking Funds Balance to Net Revenue Account

£438,028

Net Revenue Account.

Dr.

£

Cr. £

S per cent. Preference Share

Dividend

40,000

Balance from Revenue

Account

152,300

$ per cent. Preference Share

Reserve

15,000

2 per cent. Participating 7 per

cent. Debenture Stock Balance

27,000

70,300

£152,300

£152,300

Balance Unappropriated

£70,300