TNAG-0770-FCO40-974-Construction-of-underground-railway-system-in-Hong-Kong-1978 — Page 51

Treasury Chambers

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Telephone Direct Line 01-233 8789

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RECEN

Your reference

OFFICER

INDEX

Our reference

C C Birch Esq MBE

Export Credits Guarantee Department Aldermanbury House

Aldermanbury

LONDON

EC2P 2EL

1

AEF3 17/48/02

Date

11 October, 1978

50

*O. 51

PA

REGIDTRY Action Take

148

HONG KONG MASS TRANSIT RAILWAY CORPORATION

GCHEGD

You wrote to Joan Kelley on 22 September commenting further on the terms of cover for UK industry to participate in Phase 2 of the Hong Kong MTRC's programme.

2. Assurance has already been given of support in either Hong Kong dollars or US dollars at MTRC's option for Phase 2 business up to £100m on the basis of 95% financing over 8 years from mean delivery at a fixed interest rate, provider that, in so far as the Hong Kong dollar option was concerned the currency continued to be available on terms comparable to those which obtained for the Metcam Option contract. MTRC continued to prefer Hong Kong dollars, thus ECGD support would be at the rate of 7%.

3. Since your letter was written Balfour Beatty have lost three of the four contract. mentioned at paragraph 4 (2) of your letter and in the event did not pursue the fourtr. so consideration of those terms of offer are no longer required. For the other contracts mentioned we agree that you should take them under Section 1, in excess of the £60m delegated authority for A markets, for so long as you are able to maintain the requirement for a Hong Kong government guarantee. Also, we agree to your continuing to offer support in Hong Kong dollars on the basis of no take-out and a margin over Best Lending Rate broadly comparable with those agreed for the option

contract.

i..

For signalling and control equipment, where Westinghouse have been awarded a etter of intent, the buyer is resisting a cash with order payment of more than 21% with a 10% retention (the balance of 21% presumably being paid on delivery). As have already told Richard Ranson on the telephone I should like to see cash with order with not less than 5%: although the cash with order for the Phase: contact was limited to 21% the buyer also met premium payments (not a feature this time, which together with the cash with order equated to a first payment of 5%. However, 11 during negotiation the buyer persists in this attitude I would be content, it secured the contract, for you to negotiate an acceptable alternative package, eg a further proportionate payment on shipment in addition to the two payments already mentioned.

For the supply of a further 150 railcars by MetCam I understand that we are not competitive and to ensure competition with the Japanese I agree to the capitalisation

uterest, an was the case with Phase 1. The position is I believe a little obscure, W in the Japanese possibly including some local cost from another contract, and I Aree to capitalisation for matching purposes in its wider sense.