TNAG-0635-FCO40-783-Supplies-of-electricity-for-Hong-Kong-1977 — Page 109

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In recognition of the above, China Light, Esso and the Government of Hong

Kong have jointly developed procedures to govern the financial affairs of

the Companies as follows:

A.

Tariff Limitation

1. China Light's tariff structure will be subject to escalation to

2.

dolla

cover changes in the Hong Kong dollar cost of plant and equipment

and other local costs including wages, taxes payable by the Com-

panies, etc. (provisions governing adjustment of tariffs to account

for such escalation, among other factors, are included in Appendix I,

attached hereto and made a part hereof). The China Light revenue

system will include, as hitherto, provision for adjusting charges.

to offset changes in the price of fuel.

If it is deemed necessary to adjust tariff schedules under the above

escalation provision, China Light agree that they will consult with.

the Government of Hong Kong prior to making such adjustments.

B.

Control of Permitted Return

1. The Permitted Return after taxes of the combined operations of the

Companies shall be controlled between a minimum of 14% and a maximum

of 16% per annum of the combined average net fixed assets of the

Companies.

Average net fixed assets for any year means the average of the

opening balance for that year of investments in land, buildings,

plant and equipment (including assets in course of construction,