TNAG-0638-FCO40-786-Supplies-of-electricity-for-Hong-Kong-1977 — Page 68

C.S. 166

CONFIDENTIAL #

XCC(77)87

(d)

(e)

(f)

Copy No Page 6

33.

of the combined operations of the companies would be the sum of:

(i)

(ii)

13.5% p. a. of the Average Net Fixed Assets in respect of assets acquired by China Light and PEPCO before 1st October 1978; and 15% p. a. of all other Average Net Fixed Assets of the companies, less 1.5% p. a. of (A) the increase in the opening balance of

the Development Fund over the balance at 1st October 1978; and

(B) the increase in the opening balance of

long term borrowed capital over the balance at 1st October 1978;

of 40

provided that the total permitted return would not be less than 13.5% p. a. of the companies combined Average Net Fixed Assets;

as the capital expansion programme in PEPCO has been completed, surplus funds generated in this company through depreciation would be utilised to repay ESSC and CLP in accordance with the arrange - ments agreed when PEPCO was established;

the CLP dividend would increase at an annual rate of 15.5%. For both PEPCO and the new generating company a dividend pay out of 100% has been postulated, although CLP will, of course, be reinvesting part of the dividends they receive from these two companies in their own capital expenditure and in that of the new generating company;

as to long-term borrowing, the ECGD financing arrangements would be taken up by CLF (and this would cover most of the long-term debt) but, for simplicity, the total borrowings by CLP are assumed to include any rights issues which CLP might make in the future to replace long-term borrowing. (The extent to which rights issues are made will depend upon the market climate and timing);

Financial Plan: Tariffs

14

Based on these assumptions, the financial plan in the Annex provides for tariff increases for the basic rate (that is without the fuel clause surcharge) in February of each of the following years (although

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