TNAG-0637-FCO40-785-Supplies-of-electricity-for-Hong-Kong-1977 — Page 12

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Sir Sidney Gordon, deputy chairman, China Light and Power, to talk to him about the project. It can only be to our advantage that important financial figures in Hong Kong are indicating to CLP/PEPCO their interest in the British approach.

'7 I had two meetings with CLP/PEPCO. At the first, where Mr Birch, ECGD, was present for part of the meeting, I met Sir Sidney Gordon and Mr Barrett, general manager CLP. At the second, I met Hr Duncan (chairman, PEPCO, and the main Exxon representative), Mr Kadoorie (Sir Lawrence's son) and Mr Stones, CLP's deputy general manager. discussions the following points arose:

i

ii

At these

CLP/PEPCO still faces a considerable battle with the Hong Kong Government over its new Scheme of Control: the Hong Kong Government hopes to complete the negotiations by late September or early October. The present Scheme, which expires in September 1978, allows a return of 13 per cent on the net fixed assets of CLP and PEPCO. The companies are pressing for a return of 15 per cent on the assets of the new power station (from the moment capital expenditure is incurred rather than from the moment the power station is working) and for a fixed charge per unit of electricity sold to fund borrowing for the new power station. Exxon are now maintaining that the prospective return on its new investment compares unfavourably with the likely returns available elsewhere in the world. However, it is unlikely that Exxon will decide after all not to invest in the new power station;

Exxon remain anxious lest so much time slip by before the British package is presented that CLP/PEPCO is precluded from going to international tender. I was able to allay fears on this score: Ir Duncan, who has now gone to Houston for talks, appeared relieved that we would be presenting our proposals in September.. (I should also record, by way of an encouraging sign, that on the Friday before I arrived Mr Duncan told Mr Stones that he was "now getting a feeling that the British initiative7 was going to be alrightTM"