CO129-611-1 Hong Kong Electric & China Light & Power Company Ltd. 1-12-1945 - 2-5-1947 — Page 47

£66,581

4

47

schemes were considered but all the proposals put forward by the Companies were unacceptable as they were based on pre-war profit which was not regarded as a suitable criterion on which to base calculations in regard to the present position. Efforts to base a rental on the capital of the Companies proved impracticable as one of the Companies is under-capitalised. Finally it was agreed that the fairest basis on which to calculate the rental would be the market value of the total of the Companies' issued shares as quoted on the Hong Kong Stock Exchange on the 6th December, 1941. This figure reflects as nearly as possible the actual value of the undertaking in the opinion of the market and any question of under or over capitalisation is automatically corrected. The Company pointed out that if it had been necessary for the Administration to import generating plant of the ir own instead of utilising the facilities which existed on the spot the cost would have been in the region of £500,000. They felt therefore that it was reasonable that the Administration should pay a rental not only for generating plant but also for the use of their distribution system.

After some discussion it was agreed that 4% per annum on the market value of the total of their issued shares would be a reasonable figure and that this rental should be divided between the Companies in proportion to the number of units generated by each. The actual effect of the Clause is as follows:

Capital on Market Value Rental @ 4%

Hong Kong Electric China Light and Power

$33,225,000 20,040,000

$1,329,000 801,600

Full Year

Or six months

2,130,600 1,065, 300

A rental of 1,065,300 for a period of six months represents approximately £11,097 a month for the systems of the two Companies. Receipts from Electricity Accounts for the period October 1st to the beginning of January, which have already been paid over to the Administration, amount to $385,533.

12.

Clause 7 was inserted as it was considered that the overhaul of part of the plant might in a sense be regarded as an advance payment on reparation account. It was felt that if in the future His Majesty's Government made any reparation payment from its own funds over and above any amounts received from Japanese sources, any claim submitted by these Companies should be reduced by the value of any replacements which have already been supplied under the terms of the agreement.

Clause 8 is common form and does not call

13. for any comment.

14.

It is hoped that the terms of the agreement will meet with your approval. They may be regarded as not ungenerous to the Companies over which the Administration was forced to take control. They are likely to represent however, a very considerable saving to the Administration on the cost of providing light and power as estimated during the planning stages. As the agreement will expire at the end of February it will be convenient if your decision could be communicated to this Administration by signal at the earliest possible date, though it is probable that the present arrangements will have to be prolonged to March 31st.