TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 160

From the Minister of State

Alan Williams

CONFIDENTIAL

Bryan Cartledge Esq

Private Secretary to the

Prime Minister

WHITEHALL

London SW1

10 Downing Street

Dear Bryan

HKQD

CLPC

ps/hord

Department of Industry

Millbank Tower

London SWIP 4QU

(W/228

Telephone Direct Line 01-211

Garonwy-Robart's

HKK 16x

PS/PU =

McCortazzi

INDEX

3688

Switchboard 01-211 3000

FNOW 77 31 October 1977

REGISTRY

PAA Indices fupps

Mr. Stewart

n/x

I have a wasty feeling that this is too optimistic

HONG KONG POWER STATION PROJECT

blu

As you know a Government/industry/merchant banking team, led by the Department of Industry, had four days' discussion in Hong Kong last week with China Light and Power/PEPCO. This letter sets out the main points which arose.

The discussions went as well as could have been expected. There is clearly a mood on all sides in Hong Kong to make a success of the exercise, and the main principles of our proposals appear to have been well received. CLP/PEPCO recognised that our proposals were not put forward as a basis för negotiation and that if additions to the package were proposed eg, an extension of the role of the CEGB the price of the package would be higher. During the discussions CLP/PEPCO agreed to allow their technical staff to come to the UK for detailed talks on the power station design with the CEGB and the companies mainly involved.

Nevertheless, it is clear that our hopes of obtaining a negotiated contract depend upon CLP and Exxon satisfying themselves that our proposals are broadly competitive when compared with the prices that might have been put forward by Japanese or German companies. CLP and Exxon have asked Electrowatt, a Swiss firm of consultants, to advise them by the middle of November on the competitiveness of the British package, including the CEGB services. During last week's discussions, this Department was given permission to make an informal approach to Electrowatt, in the hope of ensuring that the consultants make a realistic assessment of the value of the

If overall services which are being provided for this contract. the Electrowatt report is sufficiently encouraging, we hope to

I understand agree a Letter of Intent with CLP/PEPCO by Christmas. that the Exxon decision will rest with its US board. I shall, of course, keep you fully informed of developments.

CONFIDENTIAL