TNAG-0098-FCO40-134-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 146

T.C. 157/66

107/et

10th April,1968

Dear Sir,

107/2/17

I refer to your letter of 30th March. appear that you have reduced the figure for total shareholders'

It would finance required from $100.5 million as given in January to $94 million now, by reducing the contract price by $10 million and contingencies by $4 million; but you have not explained the reasons for this. It is further noted that you are still relying on contractor's finance to the amount of £13 million although it has been made clear that no more than £10 million will be made available. The further reduction in equity in relation to loan makes it even less likely that further contractors loan finance would be forthcoming.

The question of contingencies is one which particularly interests this Government for, if the provision proves inadequate (and the proposed provision is remarkably small even given the nature of the proposed contract), it seems inevitable, in the light of your difficulty in raising even a reduced amount of capital, that responsibility for completing the project will in all likeli.... hood fall on public funds.

Nevertheless, we are prepared to take part in further discussions in London with the authorities there on the basis that, if acceptable arrangements can be made with them, and we can be satisfied that you have been able to raise adequate finance to complete the project, then we should be prepared to put to the Legislative Council your proposal that Government should provide a loan of $12 million in addition to taking up equity to the extent of $20.5 million (assuming that represents no more than 25% of total equity capital).

J.L. Harden,Esq.,

Chairman,

The Cross-Harbour Tunnel Co.Ltd.,

Wheelock Marden & Co.,Ltd.,

12th floor, Union House,

HONG KONG.

/I shall be..