TNAG-0334-FCO40-370-Visits-of-Secretary-of-State-for-Foreign-and-Commonwealth-Af-1972 — Page 185

HONG KONG TUNNEL FROJECT SUMMARY

1

1.

Maymond International Inc and

tunnel between Hong Kong Island s the Cror3 Harbour Tunnel Co Ltd

In 1969 ECGD guaranteed a lo made available by Lloy la Bank Ltd to finance the construction by Costain International Ltd, Paul Y Construction Corpany Ltd of a 4 lane ro and Kowloon. The employer under the contract whose shareholders are

Whelock Marden & Co Ltd

Hutchison International Ltd

Government of Hong Kon

The Hong Kong & Shanghai Banking Corpn Kwong Wan Ltd

Sir Elly Kadoorie Successoru Ltd

The basic price of the contract is approximately £18m.

29.5%

دیگر میان ۰ ۰ تیم

25. F

10.0%

0%

1

•

The loan by Lloyds Bank Ltd

is for £14.75m, is made to the Cross Harbour Tunnel Co Ltd, includes provision within its amount to cover additional cost and in repayable over 10 years from the date of the contract (ie about 7 years after heduled completion of the tunnel) for £11.2m in respect of the UK cost involved and over 8 years from date of contract for £3.55m in respect of the local costs and consultants' services involved.

2.

Negotiations took more than 3 years to complete, were beset with difficulties and were sometimes even bitter. There were two fundamental points of difficulty:

3.

a.

the length of credit, and

the security offered for the borrowing.

b.

As basically a civil engineering proposition the business was not considered appropriate by the UK for credit in excess of 5 years from completion and such a limited period was unacceptable to the employer. Japanese interests in competition for the contract, however, were understood to he offering terms involving credit over 8 years from completion and the UK eventually decided to offer 7 years credit to maintain a competitive position.

4. On security ECGD held out for the borrowing to be secured by the joint and several guarantee of the shareholders in the Cross Harbour Tunnel Co Ltd. The Hong Kong Government, however, looked upon the business as a commercial venture and were reluctant to involve the Colony's finances in this manner; there is evidence to suggest that in any event they considered that ECGD (as a Department of HMG) should evidence HMG continued interest in and support of the Colony and that ECGD should bear a continuing risk on the commercial aspects of the venture. The other shareholders were concerned at ECGD requirement for guarantees which would, even in the event of occupation of the Colony by hostile interests or of the overthrow of the Government of Hong Kong by such inter-sts, place at risk the funds they held outside the Colony; this concern was made more real by the civil disturbances occurring in the Colony at the same time, French interests were in competition with Costains and though insistent upon guarantees were willing to accept several guarantees. In the event a compromise was reached under which the individual shareholders of the Cross Harbour Tunnel Co Ltd agreed to give several guarantees of the Tunnel Company's obligations in proportion to their respective share holdings and containing a waiver that in the event of the Colony being occupied or the Government of Hong Kong overthrown, the guarantee should not be enforceable against aguetu hold outside Hong Kong.

5. So far as is known progress of construction is satisfactory and though we are aware of temporary labour problems in October 1970 we have no reason to believe that these will have caused any appreciable delay to the target completion date of September 1972.