TNAG-0635-FCO40-783-Supplies-of-electricity-for-Hong-Kong-1977 — Page 111

11)

If the gross tariff revenues of China Light in any year shall be

less than the total for the Companies of the amounts specified in

a), b) and c) of paragraph B.2 1) above and the minimum Permitted

Return specified in paragraph B.1, such deficiency shall be deducted

from the Balancing Fund.

3.

An annual charge will accrue which shall be equal to 9% per annum of the

average of the opening and closing balances of the Balancing Fund and

the Development Funds for each year. As referred to in paragraph B.1

above, this charge will be deducted from the Permitted Return and will be

credited on China Light's books to a Rate Reduction Reserve which will be

liquidated by reductions in charges to consumers. Ordinarily, reductions

will be applied by means of discounts or rebates in the immediately

following year.

Amounts carried in the Rate' Reduction Reserve shall not

exceed the charge for the current year and the preceding three years.

4.

The balances in the Balancing Fund and the Development Funds may be reduced

by rate reductions whenever revenues would otherwise be at a level such

that after meeting all foreseeable obligations and earning the Permitted

Return surplus cash would accumulate in the combined enterprise.

Provisions for Financing

1.

China Light, Esso and possibly other corporate or individual shareholders

will provide the equity capital of the proposed new Generating Company

in amounts to be agreed among the contributing parties.