TNAG-0768-FCO40-972-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 11

CONFIDENTIAL

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HONG KONG : THE NEW POWER STATION

1. Hong Kong's electricity is supplied by two privately- owned companies (The China Light and Power Company (CLP) and the Hong Kong Electric Company (HKE)) which are subject to Government over-sight. In 1976, CLP agreed with the Hong Kong Government that a new power station would need to be constructed in the early 1980s and Castle Peak, in the New Territories, was selected as a suitable

`site.

2. CLP has traditionally bought British equipment and the Chairman of CLP, Sir Lawrence Kadoorie, was keen to do so for the new installation. However, he was concerned that British prices would not be competitive. In March 1977 Sir Lawrence came to the United Kingdom and met the Prime Minister. Mr Callaghan was especially keen to be helpful because of the long term problems facing the heavy electric manufacturing sector of British industry; problems which are exacerbated by world-wide over-capacity in this field. A plan was therefore drawn up under which a package deal would be put together containing a substantial British Government subsidy in the form of free consultancy services of the CEGB and advantageous financing. In return, CLP would not put the project out to international tender, though they would, submit the British proposals to the scrutiny of independent consultants to ensure that the prices being asked were fair and reasonable:

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3. Following Sir Lawrence's visit to the UK, the Department of Industry coordinated and presented to CLP a comprehensive package for the supply of two 350 mw dual-fired generators (which can run on either coal or oil) and associated equipment. Under this proposal, GEC were to provide the actual generating sets, while Lazards (with the backing of ECGD) were to organise the financing.

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CONFIDENTIAL

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