TNAG-0767-FCO40-971-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 173

From the Private Secretary

10 DOWNING STREET-

HKK ult.

*** INDEX

No

Sir

2 APR 1978

vrango Kadoc

190

Supp

&

нкад

98

svhdats

PS. LORD GERONWY Rdate

B Puo

Mr Cartazzi

- 19/4 Mr MURRAY

18 April 1978

TRED.

No Thompson

122014

Thank you for your letter of 14 April, with which you enclosed briefing for the Prime Minister's meeting with Sir Lawrence Kadoorie today. Sir Lawrence called on the Prime Minister at 1630: the following is a summary of the main points which arose on the subject of further UK contracts with China Light and Power, during a conversation which lasted half an hour.

Sir Lawrence expressed his warm thanks to the Prime Minister for the personal assistance which he had given during the negotiations for the power station contract. Sir Lawrence told the Prime Minister that without his help the contract would not have gone through. There were now two further contracts in prospect, on which Sir Lawrence handed the Prime Minister a note (I enclose a copy).

On the financing of the additional contracts, Sir Lawrence Kadoorie said that his original intention had been to make the overall package as large as possible so that he would not have to engage in two sets of negotiations. He explained that negotiated contracts were always unpopular with his shareholders, who preferred the open market. However, for reasons connected

with the structure of CLP, the contract for an EHV transmission line system had to be dealt with separately and a new negotiation was therefore required. A negotiated contract, Sir Lawrence said, would only be possible if the necessary finance could be obtained from the UK. BICC and GEC were the principal UK companies involved but the Japanese and the Swiss were waiting to step in if the negotiations did not get off the ground. The potential problem over financing was that, for this contract, the parent company (CLP) could not provide the necessary guarantee and this was causing difficulties with ECGD, where the matter was now under consideration at official level. Sir Lawrence Kadoorie indicated that if this problem could be resolved, there should be no difficulty in concluding a further negotiated contract.

/The Prime Minister