TNAG-0769-FCO40-973-Supplies-of-electrical-power-for-Hong-Kong-Castle-Peak-power-1978 — Page 112

CONFIDENTIAL

RECEIVED IN BRASTRY NO. 51

- May 1978

DECK OFFICIA INDEX

V

REGISTRY Action Takan

291

Mr Cortazzi

HONG KONG : BRITISH CONTRACTS- C

GENERATION AND DISTRIBUTION

1. As you may have heard, Mr John Lippitt, the Deputy Secretary in charge of the Industrial Planning and Commercial Policy Division of the Department of Industry, is visiting Hong Kong this week for discussions on various follow-up contracts arising from the new power station.

2.

You should be aware of the latest developments.

You will recall that in April of this year GEC, strongly backed by the DoI, were awarded a contract worth about £100m for the con- struction of a power station for China Light and Power (CLP) incor- porating two 350MW generating sets. At the same time GEC offered to supply generating sets for the second phase of the power station. This additional contract would be worth a further £75m. Some prob-

lems have arisen but it seems likely that they can be sorted out.

3.

There is a much greater problem over the contract for the transmission system from the new power station. As with the power station contract CLP decided not to put the contract out to inter- national tender. Instead they asked the Dol to arrange a package

well as covering consultancy and financing services as/the supply of the equipment. The British firm selected by the Dol to supply the equipment, Balfour Beatty, have offered a package at a price of about £136m. This has been submitted for evaluation by a Swiss firm of consultants (the same firm that approved the GEC bid for the power station under similar circumstances). The consultants' view is that the Balfour Beatty bid is some £30m too high. They have reached this conclusion after considering unofficial tenders from other countries and CLP's own estimate. The DoI are convinced that a good deal of the discrepancy results from misunderstanding of what the UK offer involves. Nevertheless they recognise that

there will have to be some reduction in the UK bid.

14.

CONFIDENTIAL