TNAG-0097-FCO40-133-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 162

B 21/5

Curtis Gren

sent.

CAFIDENTIAL

29th August, 1967.

I think you will be aware, at least in general terms, of the project for building a Cross Harbour Tunnel in Hong Kong. Eriefly, the promoters are British companies registered in llong Kong, who have formed a Tunnel Company with a capital of $7.5 million of which the llong Kong Government has agreed to take up a proportion (possibly as much as 49%). The estimated cost of the Tunnel is some £17million, and the balance of about £10 million is to be provided by Lloyds Bank (repayable over seven years after completion) subject to ".C.G.D. guarantec. Costains are the intended contractors.

2. Throughout the early negotiations for cover, E..0.2. were regarding this as a section 1 project under the Act, where the considerations are purely commercial. In the absence of any precedents for this sort of project, they have from the beginning felt compelled to take a cautious view of its prospects, in thé circumstances they decided that they must re uire a 100% guarantee of the Lloyds Bank loan from the promoters, Aased on straight underwriting considerations But the promoters (including the Hong Kong Government) felt unable to give a guarantee, on the round that they could not increase the extent to which they would be at risk.

3. But since confrontation with the local communists began i: lloy)~

G. 3. have found it necessary to seek an even tighter guarantee, No longer do they regard this as a section 1 project, since the ric's now exceed the normal cơ›mercial levels for which the approval of their Advisory Committee could be sought. They see it as a ection ? project here, as you now, "the broader United Kingdom national interests" are involved) and are now calling for a 100% guarantec from the ilong Kong Government enforceable gainst their assets in London. se have not put this requirement to the liong Kong Goverment, in view, first, of the difficulty they previously felt about giving a proportionate guarantee, secondly their request to us in Hong Kon telegram No. 833 (a copy of which I attach) that .M.C. should give

;

F.". Fingures, Eng., C.♪., C.M.G.,

Treasury.

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