TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 180

242

(NOM LE

SECRETARY TO THE

TREASURY

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Treasury Chambers, Parliament Street, SW1P 3AG

The Rt Hon Alan Williams MP

Minister of State

Department of Industry

1 Victoria Street London

SW1H OET

30 September 1977

Mr Thompson

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30

INDEX

Dear Minister of State

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3079

HKGD

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PS/2 and G Rulients

US Mir Cortuni Mr Murray FED TRED

HONG KONG POWER STATION PROJECT

Thank you for your letter of 19 September on this matter. I was glad to hear that discussions on this subject are going well, including the possibility of offering a buyer credit in Hong Kong dollars, as the Chairman of China Light and Power Co so keenly desires.

The

I gather that since you wrote to me there have been further discussions about this project between our officials and GEC. latest position, as I understand it, is that GEC will submit a firm bid for stage one of the project for 2 generating units, and the power transmission equipment, at an estimated contract value of around £200 million, and offer to provide 2 further generating units costing a further £150 million or so in 1977 prices. The other important development is the intention to present the UK offer at whatever price finally emerges on a take-it-or-leave-it basis, as the best offer which the UK can make. I understand that No 10 have asked for an explanation of this strategy and that your office will be providing this.

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It is against this background that I have considered your proposals for handling the cost of the CEGB's services, and for the arrangements worked out since you wrote to me for providing ECGD cost escalation cover on a rather more favourable basis than usual. At 1977 prices, some £4-5 million (which would be met by your Department) involved under the first heading, and £5 million under the second. This amounts to proposing that the price to the buyer will be about £10 million lower at 1977 prices, than it otherwise would have been. These proposals are made on the understanding that there is no scope for the UK firms to further reduce the prices of the goods and services they are offering.

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