TNAG-0768-FCO40-972-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 76

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OO BIC HONG KONG

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CYPHER CAT A

FM D T I 21191OZ SEP

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IN CONFIDENCE

DESK B Y 22010OZ

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HKK 1604/1

RICHNE

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REGISTRY Action Taken

7

TO IMMEDIATE BTC HONG KONG TELNO INDUS 216 OF 21 SEPTEMBER

FOLLOWING IS TEXT OF LETTER OF 21 SEPTEMBER:

SIR LAWRENCE KADOORIE

21 SEPTEMBER 1978

YOU WILL BE EXPECTING TO HEAR FROM ME ON YOUR RETURN ABOUT THE REQUEST IN YOUR LETTER OF 12 JULY FOR AN EXTENSION IN THE VALIDITY OF THE UK OFFER FOR UNITS 3 AND 4 FROM 30 NOVEMBER, 1978 TO 31 MAY, 1979. YOU WERE FRANK IN YOUR LETTER AND AT OUR MEETING IN EXPLAINING YOUR REASONS FOR NEEDING MORE TIME AND I, IN TURN SKETCHED OUT THE ONE OR TWO DIFFICULTIES AT THAT TIME STANDING IN THE WAY OF A STRAIGHTFORWARD AGREEMENT FROM OUR SIDE.

WE HAVE NOT BEEN IDLE SINCE THEN. WE HAVE, I BELIEVE, NOW FOUND A REALISTIC WAY TO MEET YOUR NEED NOT TO MAKE A DECISION BEFORE MAY OF NEXT YEAR, WHILE MAINTAINING THE BASE DATE OF JUNE 1977 FOR COST ESCALATION COVER WHICH IS SO IMPORTANT TO THE PACKAGE. BRIEFLY, THIS IS THAT KESCO SHOULD BY 30 NOVEMBER SIGN A DOCUMENT IN THE FORM OF A LETTER OF INTENT, WHICH WOULD NOT FINALLY COMMIT KESCO TO THE PURCHASE OF THE GEC SETS SHOULD THEIR EVENTUAL DECISION, TAKEN SOME MONTHS LATER, GO AGAINST THAT: BUT IT WOULD SUFFICE TO LET MA INTA IN THE BASE DATE OF JUNE 1977 FOR COST ESCALATION COVER. ALAN HAVELOCK WILL BE ABLE TO EXPLAIN WHY THIS IS SO MORE FULLY WHEN HE IS IN HONG KONG NEXT WEEK, AND CAN THEN DISCUSS WITH YOU A DRAFT OF THE SORT OF THING WE HAVE IN MIND.

THIS DEVICE ENABLES US TO MAINTAIN THE BASE DATE WHILE ALLOWING MORE TIME FOR A FINAL DECISION BY KESCO. THERE REMAINS ANOTHER QUESTION WHICH NEEDS RESOLVING BEFORE WE CAN KLLY AND FORMALLY AGREE TO AN EXTENSION OF OUR OFFER TO 31 MAY, 1979. THIS IS THE QUESTION OF THE COST ESCALATION SCHEME ITSELF. THE SCHEME AT PRESENT EXPIRES IN MARCH NEXT YEAR. IT WILL NOT BE POSSIBLE TO PROVIDE COST ESCALATION

INSURANCE FOR CONTRACTS SIGNED THEREAFTER UNLESS AND UNTIL THE SCHEME IS EXTENDED, AS IT HAS BEEN IN PAST YEARS. THIS REQUIRES THE APPROVAL OF PARLIAMENT. YOU WILL UNDERSTAND THAT I CANNOT AT THIS STAGE GIVE COMPLETELY FIRM ASSURANCES ABOUT A MATTER OF THIS SORT, BUT I SHOULD BE SURPRISED IF THIS PROVED AN INSURMOUNTABLE HURDLE, AND I AM PERSONALLY HOPEFULLY OF A POSITIVE OUTCOME. AGA IN ALAN HAVELOCK CAN EXPLAIN THE BACKGROUND FURTHER.

↑ LOOK FORWARD MYSELF TO SEEING YOU IN HONG KONG EARLY IN NOVEMBER.

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