TNAG-0636-FCO40-784-Supplies-of-electricity-for-Hong-Kong-1977 — Page 36

COMMERCIAL IN CONFIDENCE

iii

iv

V

of Industry itself cannot sign such a contract. Nevertheless, he remains 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. Sir Lawrence is not interested in Balfour Beatty or any other private sector organisation taking on the development on a turnkey basis;

Sir Lawrence is 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 (following discussions between Government and the companies) 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. (I was given a strong hint that a price which broadly matched that which Parsons had recently quoted for Loy Yang in Australia would be acceptable);

since Sir Lawrence Kadoorie saw the Prime Minister in March, Esso (as 60% shareholder in PEPCO) had altered its attitude towards investment in the new company which will purchase the new facilities from one of scepticism to positive interest. The implications of this are twofold. First, as Esso's stated policy is to eschew negotiated contracts, it will 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 I had expected in the possibility, mentioned in your telex, of a British investment in the Hong Kong company which would purchase the new facilities. As Esso expect to do very well from their 60% shareholding in the new power generating company, they 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. In the light of Mr Gemmill's detailed discussions with Schroder and Chartered and with the Hong Kong Bank, we shall be pursuing this possibility urgently with ECGD and the Treasury.

.