TNAG-0949-FCO40-1168-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 125

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CONFIDENTIAL

ATTACHMENT THREE

Kwangtung Electric Company/China Light & Power Company Ltd. Joint Venture

The China Light & Power Company Ltd, Connection

1.

2.

3.

4.

5..

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There is no precedent for a joint venture for the construction and operation of a nuclear power station in Kwangtung Province,

The following special features applying to such a project make it unique.

(a)

(b)

(c)

(d)

(e)

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The KEC is a provincial government body which has to report to the People's Republic of China (PRC) in Peking.

Note :

The PRC is taking a direct interest in this project. Several Ministries are involved and it would be impossible to raise the necessary loan finance from international sources without the intervention of the Bank of China.

China is a Communist country and consequently is unused to our understanding of equity capital invested in a public company.

CLP is a public company whose directors are responsible to its shareholders for policy decisions and proper conservative yet progressive management.

The size of the project the cost of which would run into enormous figures US $4 billion or more takes it out of the private sector into the Government sector. In * fact, the financial risks involved can only really be

carried by Governments.

The same thing applies to regulatory procedures, insurance, political and public relations.

in the light of the above it is obvious to me that the normal rules as they have so far been adapted to commercial joint ventures between foreign and Chinese interests cannot be applied.

Since for a number of reasons already stated in our various deliberations, it is highly desirable both to the KEC and CLP to work together over this project, it is obvious that we must approach the problem from a different angle.

It is true to say that China is unpredictable, but to anticipate a complete change in basic policy and ideals is, to my mind, unreasonable.

6.

If a communist and capitalist society are to produce a "joint venture" which will work satisfactorily for any length of time, a new concept must be devised whereby the Chinese Government through the KEC, and the Hong Kong Government with the full backing of the British Government, working through CLP, can bring the project to fruition.