CO885-(11-12) — Page 110

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PECORD OFFICE

Reference-

C.O.882/1

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|ALLY WITHOÛT PERMISSION OF THE [BE REPRODUCED PHOTOGRAPHIC- | COPYRIGHI PHOTOGRAPH-N01 10

PUBLIC RECORD OFFICE. LONDON

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of reconstruction is found to be inevitable, this Government will be prépared to face any losses, pro rata, with the other Shareholders.

Si Arnoid B. Gridley, K.B.E.,

Director,

I have, &c.,

W. E. PEPYS,

Acting Under-Secretary to Government

Federated Malay States.

Perak River Hydro-Electric Power Co. Ltd.

Ipoh.

Enclosure 2 in No. 2.

OUTLINE OF SCHEME FOR Moratorium and Reconstruction of CAPITAL.

3rd November, 1930.

1. THE abnormal fall in the price of tin has had a serious effect on the business of this Company, as the greatest part of the power generated is supplied to tin mining companies in the Kinta Valley. Whilst, however, the Company was formed principally to supply power to the tin mining industry, the Company has made continuous effort to extend its business in other directions and although 84 per cent. of the present total output of the Company is supplied to consumers consisting of dredging and other tin mining companies, the remaining 16 per cent. is taken by the Federated Malay States Government (Ipoh and Batu Gajah Town supplies) and the Kinta Electrical Distribution Company (covering at present the supply to nine small towns). class of business is of a growing nature.

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3. The maximum saleable capacity of the whole plant is approximately 33,550 K.V.A., which is far below the business procurable in the Concession Area. The rate of growth of the Company's business at present mainly depends on the tin situation. The position regarding sales of power is that contracts actually signed represent connected installations aggregating over 22,700 K.V.A., from which, in normal times, a demand of over 16,000 K.V.A. would be forthcoming. Owing to the present policy of "curtailment of output "in the tin mining industry, only a maximum of 11.123 K.V.A. was sold last year.

4. The question of charges for power sold has been constantly under discussion and review and, as a result, it has been determined that the existing charges are as high as they can be put without loss of custom. There can be no question. therefore, of altering the existing schedule of charges.

5. The following table shows approximately the K.V.A. which must be sold in order to meet the various costs and financial charges down to the payment of the interest upon the 7 per cent. Participating Debenture Stock. These payments would normally have to be made up to and including the 31st July, 1933. After that date, sinking funds in respect of the Federated Malay States Government Loan and the 7 per cent. Participating Debenture Stock would also commence to operate.

*Minimum operation and administration

necessary to maintain system

Costs Equivalent No. of and K.V.A. required Charges. £

to be sold.

costs

5 per cent. Guaranteed Debenture Stock interest

120,000 62,500

6,836

3,558

This

£182,500

10,394

5 per cent. Guaranteed Debenture Stock Sinking

Fund

35,000

1,993

£217,500

12,387

Federated Malay States Government Loan interest

42,500

2,419

£260,000

14,806

7

per cent. Participating Debenture Stock interest

94,500

5,380

£354,500

20,186

2. An examination of the Company's position at the 31st July (subject possibly to correction when final accounts are available from Malaya) reveals that:-

(a) As a result of the slump, the revenue actually received for the year ended 31st July, 1930, has fallen short of the estimate by approximately £30,000. (b) Accounts are being paid by consumers far more slowly than would be the case in normal times: a substantial sum for liquid working capital is accordingly required.

(c) In January, 1930, with the assent of the share- and debenture-holders, the Company contracted for a loan from the Federated Malay States Govern- ment for £850,000 for the purpose of completing the original construction programme. Payments in respect of loan and debenture interest during the year ended 31st July, 1930, amounting to approximately £135,000, were, however, made from this loan under powers contained in the Deed of Charge as it was reasonably anticipated that with the steady growth of business in sight from contracts already signed, this amount would be recouped from revenue receivable during the next two financial years in time to meet the construction commitments mentioned below. In view of the tin slump, however, the expectations of expansion of revenue for the current year are so seriously endangered that it would be imprudent to expect recoupment of any part of the above payments during the present financial year, although payments approximating £130,000 are still due to be made under the original construction scheme.

(d) Taking (b) and (c) together, a further sum of approximately £150,000 is required to complete construction payments and to carry on the under- taking.

(e) After provision of the sum mentioned in sub-paragraph (d), there will be no surplus revenue available on the 1st February, 1931, to pay the interest charges on the £850,000 Federated Malay States Government Loan and the 7 per cent. Participating Debenture Stock amounting in the aggregate to £68,500.

(f) In consequence it is necessary forthwith to reconsider the financial position of the Company and to prepare a scheme to meet the situation which has arisen.

*Note.-In_considering this figure of £120,000 for operation and administration costs, it must be borne in mind that the area of the Company's Concession is 3,052 square miles, in which two main power stations 75 miles apart and a further 11 sub-stations at widely separated points have to be operated. In addition, 126 miles of transmission line route have to be patrolled and maintained in continuous operation. Working costs are under continuous scrutiny and every effort is being made to keep them as low as possible. At the same time, it should be observed that in order to supply any demand exceeding approximately 20,000 K.V.A., the steam station, now used as

a voltage regulation station in conjunction with the hydro-electric power generated at Chenderoh, will be called into operation to generate the additional power required, and the minimum operation and administration costs of £120,000 necessary to operate and maintain the system for a supply up to 20,000 K.V.A. will be increased by the cost of the coal required to supply the additional demand. The operation and administration costs should not otherwise increase.

From the 1st August, 1933, the following figures would be additional :-

£

Repayment of Government Loan

14,233

7

per cent. Participating Debenture Stock Sinking

Fund

28,368

£42,601 say 2,420 K. V.A.

6. The liabilities on construction account at the 31st July last exceeded the cash resources of the Company at that date, and as already indicated the Company has to rely upon its net revenue to meet its financial charges in future. In view of the probable effect of the tin slump upon the number of K.V.A. estimated to be sold and paid for