TNAG-0636-FCO40-784-Supplies-of-electricity-for-Hong-Kong-1977 — Page 27

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Sir Lawrence Kadoorie had been hoping that the British Government would be prepared to sign a contract for the power station and later developments. He now accepted that the Department of Industry itself cannot sign such a contract. Nevertheless, he remained concerned that Government organisations be associated with the project to the maximum extent by the National Enterprise Board taking a shareholding in the company that provides the equipment and/or by the CEGB being fully involved as consultants. If HMG could not sign a turnkey contract, Sir Lawrence was not interested in a private sector organisation taking on the development on a turnkey basis;

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Sir Lawrence was looking to the British Government to nominate particular companies of the Government's choice which would provide the major items of the power station and for the Government to give an indication of the price at which the power station would be supplied. A bid which was uncompetitive internationally would lose us the chance of a negotiated contract.

since Sir Lawrence Kadoorie saw the Prime Minister in March, Esso (as 60% shareholders in PEPCO) had altered its attitude towards investment in the new company which would purchase the new facilities from one of scepticism to positive interest. The implications of this were twofold. First, as Esso's stated policy is to eschew negotiated contracts, it would not be easy for us to persuade the Esso interest in PEPCO that the British bid is indeed competitive. Secondly, less interest was shown than had been expected in the possibility, mentioned in the telex to Sir Lawrence, of a British investment in the Hong Kong company which would purchase the new facilities. Esso were not attracted by the possibility of a dilution of the equity;

considerable interest was shown in the possibility of the denomination of buyer credit in Hong Kong dollars. Mr Gemmill had had detailed discussions with Schroder and Chartered and with the Hong Kong Bank.

4 In summing up the developments which had taken place during his visit Mr Macdonald said that CLP's own uncertainty over their plans had been quite evident. It was now clear however that Sir Lawrence Kadoorie was looking for a co- ordinated package with a competitive price and a strong

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