TNAG-0636-FCO40-784-Supplies-of-electricity-for-Hong-Kong-1977 — Page 30

Lir Murray

CONFIDENTIAL

117

Fl

HONG KONG POWER STATION PROJECT

1. I attach a draft reply to HM Ambassador Peking's letter of 2 June. It has been cleared with the Department of Industry and FED.

Flag B 2. I am taking the opportunity to attach the record that Mr Macdonald,

108)DOI

has made of the discussions that he and Mr Gemmill of Lazards

had during their visit to Hong Kong on 13-15 June. I do not suggest that you need to read this very full account. You may, however, Flag B like to look at paragraph 5 of Mr Macdonald's covering minute of

20 June in which he outlines a possible revised package offer to be put to the China Light and Power Company (CLP). The DOI are holding further discussions with the authorities and companies likely to be concerned with a view to a fresh approach to the CLP by mid-August. Mr Macdonald has told us it is now clear that the CLP are far more interested in the question of the price at which British companies could supply their needs than was originally understood.

Flag & 3. I should also draw attention to paragraph 5 of Mr Macdonald's

los record of the meeting that he and Mir March, the Senior British

Trade Commissioner, had with the Governor on 15 June. You will see that the Governor warned that if there were to be a "major collision" between the UK and Hong Kong on the future of the Multi- Fibre Arrangement later this year it could well ruin the DOI's efforts to win the CLP contract for British companies. I have been concerned for some time about the MFA issue coming to a head at the same time as the CLP have said that they will have to place orders. I fear that this might explain Ambassador Kato's remark to

Flag Mr Cortazzi on 17 June that the Japanese understood

(07)

Sir Lawrence Kadoorie had thought it desirable to bring in GEC as a general contractor but wanted to retain Hitachi as a sub-contractor. It sounds to me as though Sir Lawrence may be keeping in close touch with the Japanese in case the British offer to supply the CLP is not sufficiently attractive and/or the prevailing state of UK/Hong Kong relations, as a result, for example, of a confrontation on the MFA, may make it impossible for him to persuade his Board to buy British. Against this, it seems clear from Mr Macdonald's report that Sir Lawrence Kadoorie is not particularly interested in doing business direct with GEC or any other British company.

4. We shall continue to keep in close touch with the DOI as they continue their efforts to work out a revised package to put to the CLP.

23 June 1977

Cc: Mr Cortazzi Mir Samuel (FED)

Letter ty issue

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CONFIDENTIAL

JB Stewart

Hong Kong & General Dept

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