TNAG-0768-FCO40-972-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 12

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4. The DOI-GEC package was assessed by the Swiss firm of consultants Electrowatt, who, subject to some fairly minor adjustments, considered it to be fair and competitive. As a result, a contract worth about £100 million was signed on

8 April 1978 by GEC for the first two 350 mw generating sts. On the Hong Kong side the contract was signed not by CLP directly

but by a newly created company called KESCO, which had been set up jointly by CLP and the Exxon Corporation with whom CLP had gone into partnership to build and operate the new power

station.

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5. Additionally, GEC agreed to provide a proposal for two further generating sets (worth another £75 million). The GEC offer for these additional units is in very much the same form as their original proposal (ie including CEGB Consultancy Services and advantageous financing backed up by ECGD) and is open until November 1978. However, there remain a number of problems over this package which are currently the subject of negotiations and CLP have asked that the offer should be held open until May 1979. This proposal is causing some concern here, as it would involve an extension of the cost escalation

scheme contained in the bid. However, the DOI are now asking CLP to sign what amounts to a "letter of intent" which would overcome this problem (by retaining the same base date for cost escalation cover) without actually committing CLP to accepting

GEC's offer.

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6. In addition to the power station itself, CLP have asked the DOI to produce a package for a 400 kv transmission system to distribute electricity from the new power station to the New Territories. The DOI hae nominated Balfour Beatty as the main contractor and the latter have prepared a package, again in con- junction with the CEGB, worth roughly £130 million. This package was presented to CLP at the end of August and is currently being evaluated by Electrowatt who, we believe, have a number of alternative outline bids with which to compare Balfour Beatty's price. Overall, the DOI package appears to be

/reasonably

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