TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 106

C.S. 166

CONFIDENTIAL # #

XCC(77)86

Copy No .. Page 77

34

of 40

Financing of CLP's Capital expansion

19

The revised estimated cost of CLP's capital expansion between 1977 and 1987 is now $8,400 million (c. f. paragraph 9 of Annex A). In determining how CLP may meet this obligation there is a need to recognise the roles that the shareholders and the consumers have to play in supplementing such other sources of funds as long- term loans, bonds and debentures. Because of the importance attached to this it has been considered desirable to include a state- ment of procedures covering the initial financial plan, and subse- quent reviews, as an integral part of the Scheme of Control (Annex I to Annex B),

20

In accordance with the requirements of this statement CLP have developed their initial financial plan, that is, a plan covering the period from 1978 to 1983, and Honourable Members will be asked, in memorandum XCC(77)87 on the same agenda, to consider and approve this plan and its implications for tariff increases over this period. The financial plan is based on the assumption that Honourable Members will advise acceptance of the Scheme of Control. The reason for putting both memoranda before Honourable Members for discussion on 29th November 1977 is, again, because CLP need an early decision so that they can finalise negotiations with their suppliers, and also because it was felt that Honourable Members would wish to see the practical implications of the terms of the Scheme of Control.

Negotiations with Hong Kong Electric Company Limited

21

An initial meeting was held with the Chairman and Managing Director of HEC on 4th October 1977 at which arrange- ments for conducting the negotiation were agreed. A 'financial model', embracing the necessary assumptions as to growth, plant capacity, utilisation, capital expenditure, inflation etcetera will be prepared by the end of November 1977, after which a joint Working Party will proceed to consider the terms of a Scheme of Control for HEC that will give terms for HEC's shareholders and consumers comparable to those of CLP, having regard to the differing circum- stances involved. In due course, Honourable Members' advice will be sought on this Scheme of Control.

CONFIDENTIAL

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