XN000022-1975-08-13 — Page 4

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WEDNESDAY, AUGUST 13, 1975

PROFIT CONTROL SCHEME FOR HK ELECTRIC CO.

AND CHINA LIGHT AND POVER BEING CONSIDERED

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THE GOVERNMENT IS CONSIDERING WHETHER OR NOT LEGISLATION SHOULD BE DRAWN UP TO PROVIDE MORE FORMAL CONTROL OF THE PROFITS OF THE HONG KONG ELECTRIC COMPANY AND THE CHINA LIGHT AND POVER COMPANY LTD.

THIS WAS ANNOUNCED IN LEGISLATIVE COUNCIL TODAY BY THE FINANCIAL SECRETARY, THE HON. PHILIP HADDON-CAVE, IN REPLY TO A QUESTION FROM THE HON, JOHN DREMRIDGE.

MR. HADDON-CAVE INDICATED THAT IF IT WAS DECIDED TO GO AHEAD WITH SUCH LEGISLATION THE HONG KONG ELECTRIC COMPANY WOULD BE THE FIRST TO BE AFFECTED. HE MOTED THAT DISCUSSIONS VERE TO DEGIN EARLY NEXT YEAR ON THE FUTURE OF THE CHINA LIGHT AND POWER SCHEME OF CONTROL AFTER SEPTEMBER 1978.

THE FINANCIAL SECRETARY SAID THERE WERE NO FORMAL' ARRANGEMENTS AT PRESENT WHEREBY THE GOVERNMENT DIRECTLY CONTROLS THE PROFITS OF THE HONG KONG ELECTRIC COMPANY, AS IS THE CASE WITH CHINA LIGHT.

HOWEVER, IN 1965 THE HONG KONG ELECTRIC HAD AGREED IN WRITING THAT IT WOULD BE WILLING TO ACCEPT A FRANCHISE INVOLVING, AMONG OTHERS, THE FORMAL CONTROL OF ITS TARIFFS.

HE RECALLED THAT FOLLOWING NEGOTIATIONS OF A SCHEME OF CONTROL FOR THE CHINA LIGHT AND POWER COMPANY, IT HAD BEEN AGREED IN 1965 THAT NO FORMAL CONTROL SCHEME SHOULD BE ESTABLISHED OVER THE HONG KONG ELECTRIC COMPANY'S OPERATIONS PROVIDED THAT ITS PROFITS, EXPRESSED AS A RETURN ON RET FIXED ASSETS EMPLOYED, DID NUT DIFFER SUBSTANTIALLY FROM THE 13--1/2 PER CENT ALLOWED TO CHINA LIGHT AND POVER UNDER ITS SCHEME OF CONTROL,

IT WAS FURTHER AGREED AT THAT TIME THAT HONG KONG ELECTRIC WOULD REGULARLY PROVIDE THE GOVERNMENT WITH

INFORMATION ON ITS FHANCIAL PUSITION SO THAT ITS PROFITABILITY COULD LE MONITORED. THIS HAD BEEN DONE EVER SINCE, AK. HADLON- CAVE SAID, NOTING THAT THE COMPANY'S PROFITS OVER THE

LAST FIVE YEARS HAD AVERAGED 13.25 PER CENT PER ANKUM ON NOT FIXED ASSETS AFTER TAX.

THE FINANCIAL SECRETARY SAID THAT ON THE GOVERNMENT'S INITIATIVE, IT HAD ALSO BEEN AGREED IN LATE 1974 THAT THE COMPANY WOULD CONSULT THE GOVERNMENT IN ADVANCE SHOULD THE COMPANY AT ANY TIME WISH TO RAISE ITS TARIFFS.

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