XN000022-1964-11-23 — Page 2

148

REFERENCE

CO 10301558

CROWN! EN

TROBA

METROPOST: -

PEPADASION

required for expansion during the five years 1964 to 1968 will be 5778

sillion; and that of this, 351 nillion will be available from depreciation, #174 million from new capital, 3146 million from re-investment of undistributed shareholders' profite, and 2107 million from additional profita.

Schame Of Contacl

The main features of the scheme of control are as follows

-

(1) The fixing of a basic tariff within which the Companies

must work, except to the extent of my agreed increase

The indic in consequence of increased costs of fuel ate. tariff will be at a level such as to affect a reduction ef approximately $18 million a year in revenue (onleulated on 1964-65 estimated sales) or rather less than ten per It will be brought into foros as soon as

Dent.

practicable. As it is also intended to introduce a Dev tariff structure, the reduction enjoyed by individual onpaimers may vary substantially from this ten per cent.

(2) The recognition of a fixed parneantage on net fixed assete

as being shareholders' maxims disposable profit; net Fixed assets being defined as capital investment less depreciation at Inland Revenue zutes.

This is based on

the normal practice of American regulatory agencies. The rate of return on net fixed assets ia 134 per cent After tax. This is forscant to produce a return in the range of twelve per sent te 14 per cent on shareholders * equity capital on the basis of present plans for finanning expansion. Whether this rate of retum sotually scoruss depends on the companies' ability to saz adequate profits within the bario tariff; it is not guaranteed. percentage return la subject to review if plans for financing expansion are substantially modified.

(3) Any profits acoruing in excess of the shareholders'

percentage retum on nat fixed assets are to be put to a

It is estimated Development Fund and used for expansion. that 8107 million will soorue in this way during the years 1964-68. Interest of sight per omt will be charged the Development Fund against the shareholders" zet net fixed assets and applied by

of further radosti

/et charges *******