TNAG-0423-FCO40-469-Construction-of-an-underground-railway-system-in-Hong-Kong-1973 — Page 66

TMENT SHO

EXPORT

343. GUARAN

PANTEE

139

WKK 21/4 to

Dion Kondd,

EXPORT CREDITS GUARANTEE DEPARTMENT

Aldermanbury House

Aldermanbury

London, E.C.2

HONG KONG MASS TRANSIT PROJECT

n.c

Mr Kerr

Des5/7

4 July 1973

Коже

PA

آن

24.11

In my letter of yesterday's date I said that I hoped to let you have a further letter on the increase in preference which the latest proposals would involve. We have discussed this with those concerned in the Bank of England and the following conclusions were agreed by them.

2. In his letter of 16 March Lindsay Ryan explained how the subsidy element was arrived at given certain assumptions. These assumptions related both to the way in which financing took place and to the actual figures used in relation to such factors as proportion of UK exports involved, building time, etc. You will recall that Example 1 in Ryan's letter assumed no capitalisation of interest but that repayments of principal would not begin until the completion stage 4. This gave a subsidy factor of 23.4%. We can ignore his proposal 2 since this assumed a limited capitalisation of interest proposal. Proposal 3 assumed full capitalisation of interest payments to be repaid over the same period as for the principal amount. This gave a súbsidy figure of 45.7%.

3. We have now provided the Bank of England with more up to date data than those available to them in March. I should say that the latest figures include factors which reduce the preference element. In particular, given a 5 year building period and a 12 year repayment period, the total risk period is reduced from 19 years to 17 years. Furthermore, the actual amounts of any loan have changed somewhat from those which we originally discussed. of the changes in absolute amounts it is not possible precisely to compare the preference that would be offered now with the degree of preference suggested in Lindsay Ryan's letter of 16 March.

Because

4.

Given the latest data however the degree of preference that would be involved assuming that payments of both interest and capital commenced after conclusion of the fourth stage and that both were made on the same payment schedule over 12 years from that time would be as follows:-

present value of loan (capital + interest)

present value of exports

1

present value of receipts pres

(capital + interest)

degree of "preference" of 36.2%

R Jones Esq

HM Treasury

Great George Street London SW1

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