XN000022-1978-02-27 — Page 2

MONDAY, FEBRUARY 27, 1978

NEW AGREEMENT FOR SCHEME OF CONTROL WITH CHINA LIGHT AND EASTERN ENERGY ******

THE GOVERNMENT HAS REACHED AN AGREEMENT WITH CHINA LIGHT AND EASTERN ENERGY ON A REVISED SCHEME OF CONTROL COVERING A 15 YEAR PERIOD FROM OCTOBER 1, 1978, FOR CHINA LIGHT, THE PENINSULA ELECTRIC POWER COMPANY AND A NEW COMPANY, THE KOWLOON ELECTRICITY SUPPLY COMPANY.

ANNOUNCING THIS TODAY (MONDAY) A GOVERNMENT SPOKESMAN SAID THAT THE NEW AGREEMENT REPLACES THE SCHEME OF CONTROL WHICH CAME INTO EFFECT FROM OCTOBER 1, 1963 AND WHICH EXPIRES AT THE END OF SEPTEMBER.

+ THE ESSENTIAL FEATURES OF THIS SCHEME ARE TO ENSURE THAT THE SERVICE TO CONSUMERS CONTINUES TO BE ADEQUATE TO MEET DEMANDS AND IS PROVIDED AT THE LOWEST POSSIBLE TARIFFS.+

+THE TARIFFS, TOGETHER WITH THE PROFITS OF THE COMPANIES, WILL CONTINUE TO BE CONTROLLED, HE SAID. THE NEW SCHEME IS SIMILAR TO THE PRESENT ONE AND THE PERMITTED RETURN ON AVERAGE NET FIXED ASSETS BASICALLY WILL REMAIN AT 13-1/2 PER CENT.+

TO ENCOURAGE CONTINUED CONFIDENCE AND INVESTMENT IN THE COMPANIES, HOWEVER, IT HAS BEEN AGREED THAT THE PERMITTED RETURN CN FIXED ASSETS, ACQUIRED BY SHAREHOLDERS' INVESTMENTS ASSOCIATED WITH NEW GENERATING, TRANSMISSION AND DISTRIBUTION FACILITIES, SHOULD BE RAISED BY 1-1/2 PER CENT.

+ THE EFFECT ON TARIFFS OF THIS EXTRA 1-1/2 PER CENT WILL BE MINIMAL, THE SPOKESMAN EMPHASISED. IT WILL ENCOURAGE NEW AND EXISTING INVESTORS TO HAVE FULL CONFIDENCE IN THE COMPANIES AND TO HELP FINANCE FUTURE EXPANSION BY SUPPORTING NEW CAPITAL ISSUES+ HE WENT ON. +IT WILL ALSO ENCOURAGE THE COMPANIES THEMSELVES TO RETAIN FUNDS IN THEIR OWN BUSINESS.+

ANY SURPLUS PROFITS WHICH ACCRUE AFTER MEETING DEPRECIATION AND THE PAYMENT OF CORPORATION AND OTHER TAXES ABOVE THE PERMITTED RETURN, WILL, AS AT PRESENT, BE TRANSFERRED TO THE DEVELOPMENT FUND.

INTEREST AT 8 PER CENT PER ANNUM WILL CONTINUE TO BE PAID BY CHINA LIGHT ON THE DEVELOPMENT FUND AND WILL BE PASSED ON TO THE CONSUMERS IN THE FORM OF A REBATE.

THE FINANCIAL POSITIONS OF THE COMPANIES WILL BE CLOSELY MONITORED BY THE GOVERNMENT AND, WITH THE FULL AGREEMENT OF THE COMPANIES FINANCING AND ANNUAL AUDITING REVIEWS WILL BE CARRIED OUT TO DETERMINE WHETHER ANY ADJUSTVENT TO TARIFFS IS JUSTIFIED.

/THE PRESENT