TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 4

Dividend policy The proposed dividend policy of the Company is not considered to be out of line with the policies of other major undertakings in Hong Kong. The Company will retain a significant portion of its earnings in the business. It is true, that, except for some competition from gas, CLP has a monopoly. But it is unable to diversify and thus cover the risks peculiar to Hong Kong.

34f 80

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In order to show what effects modifications in these areas might have on tariffs, further runs on the computer have been made to measure the effect of the following variations to the assump- tions in the financial plan annexed to memorandum XCC(77)87;

(a)

rights issues of $100 million in 1980, 1981 and 1983 respectively;

(b)

reduction in capital expenditure of $300 million;

(c)

dividend policy as originally stated

(i. e. 15% increase per annum) with a second model showing an 8% increase per annum.

The results may be summarised as follows:

CONFIDENTIAL