TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 38

DEPARTMENT OF INDUSTRY

INDUSTRIAL & COMMERCIAL POLICY DIVISION

1 Victoria Street London SW1H OET

Telex 8811074/5 DTIHQ G

Telegrams Advantage London SW1

Telephone Direct Line Switchboard

01-215 5091 01-215 7877

T Masefield Esq

Foreign & Commonwealth Office

King Charles Street

London SW1

Your reference

Our reference

HKGD

Date

7 December 1977

Mr Hayward. itay:

you ple comida, comm Hg Pelins and ither

with ACO

no cuisery

Jim

71x

Dear Masefield Main

CHINESE COAL FOR NEW HONG KONG POWER STATION

We should know towards the end of next week if we are going to get the

Hong Kong power station contract from CLP/PEPCO. If all goes well, our plan is that the order should be announced simultaneously in Hong Kong by CLP/PEPCO and by ourselves in Londen on Monday 19 December. It seems to us that the announcement provides a good opportunity to gain a little extra credit for the Chinese coal/UK coal mining m chinery deal which was agreed in principle during the Chinese visit here last month. However when I spoke to Ian Orr about this on Friday he suggested that the FCO should check with the Embassy in Peking that there will be no adverse reaction from the Chinese to the announcement.

It seems very likely that CLP/PEPCO will want to take a leading part in any triangular barter deal but we do not yet know how they envisage this working out in detail; it would of course be possible to have separate, but co-ordinated, contracts between the Chinese and UK mining machinery manufacturers and the Chinese and CLP/PEPCO. Our immediate objective is to secure the power station contract and at this stage we shall probably play along with whatever CLP/PEPCO want. The consequence of this is that we shall not be able to finalise the drafting until the last minute but we have something fairly bland in mind, on the following lines:-

1

"Substantial quantities of coal will be needed for the new power station; Xat the present time CLP/PEPCO estimate their initial requirements at about

million tons in 1982 rising to some 34 million tons per year in the second half of the 1980s. In addition to co-ordinating proposals for the power station, therefore, HMG has been discussing with the Chinese Government over the last few months an ewekange arrangement whereby Chinese coal is supplied for the new power station in exchange for additional isports of UK coal mining machinery, which enjoys a high reputation in China. Discussions were continued during the recent visit to the UK of China's Minister of Foreign Trade when an exchange arrangement was agreed in principle; the commercial terms of the arrangement will be worked out in due course."

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