TNAG-0949-FCO40-1168-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 151

CONFIDENTIAL

(c)

(d)

:

HKNIC investment and foreign bank loans will be for the purpose of paying for the foriegn equipment and services.

"

Domestic RMB loans will be provided by Bank of China and/or other Chinese Banks.

Foreign Bank loans will be provided by international and Hong Kong Banks, to be guaranteed by Bank of China and the

ECGD.

All loans are also to be covered by an electricity purchasing agreement signed between KEC, CLP and NPS for 25

years.

Loans are to be repaid in a minimum period of 15 years.

Interest rate for domestic loans should be identical that for foreign loans.

to

Profit, Taxation of NPS

(a)

Profit margin of NPS

}

!

(b)

should be no less than 25% on

shareholders' equity in order to be comparable to that in Hong Kong.

It is understood that taxation in China will be as follows:-

:

5%

35%

10%

15%

revenue tax

profit tax

dividend with-holding tax

import tax

•

In the opinion of CLP, these rates are far too high.

(c) CLP propose that the taxation rates should be such that the resultant cost of electricity of the NPS plant will not be higher than that of a similar nuclear plant in Hong Kong and, of course, should be substantially less than the lowest cost of production of coal-fired units in Hong Kong. Based on this principle and accepting the fact that Hong Kong's tax is calculated at 17% on profit, the following taxation rates for NPS are suggested:-

08

20%

10%

08

revenue tax

profit tax

dividend with-holding tax

import tax

CONFIDENTIAL

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