TNAG-0767-FCO40-971-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 142

BANK OF ENGLAND

Threadneedle Street

London

EC2R 8AH

12th May 1978

Miss J.Kelley,

H.M.Treasury, Parliament Street, London, SW1P 3AG

AKK 16411

RECEIVED IN PROIE NO. 51

15 MAY 1978-

ORK OFFIC

INDEX

?

PA

No of it

113

Jan from

Hong Kong: Kesco Units 3 and 4

104

Charles Birch wrote to you on 5th May seeking Section 2 authority to support two contracts which, with other potential business, could lead to a total Section 2 project liability of some £1,250 mn.

It seems to us that the total for Hong Kong is getting rather large at £1,250 mn.; and a sizeable chunk of Kesco 3 and 4 maturities falls uncomfortably close to 1997 - bearing in mind that, if no modus vivendi for the years after 1997 is announced well before that year, the resulting uncertainty may make the Hong Kong economy look less attractive than it does today.

However, provided the foregoing is recognised, we would support Charles' proposal.

I have four other comments:

(1) In paragraph 5 of his letter, five lines from the end, Charles

says "On past experience ...". We had not realised that ECGD had done any previous business involving Kesco;

this phrase mean, "In the light of CLP's previous cash flow position ..."?

We

(11) On the country assessment attached to Charles' letter as

Schedule IV, we are unhappy with the fourth paragraph. think this is too glowing in the way it is written up. The only available balance of payments figures come from the Hong Kong Government's GDP estimates (some of which are extremely crude). The last line of Table 8 attached (taken from these GDP estimates) suggests that Hong Kong is more often in the red than the black on current account.