TNAG-0949-FCO40-1168-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 175

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To form a company to own the nuclear power station would be of no advantage to KEC if they could obtain the necessary finance by way of loans under guarantee from the Bank of China. Whatever equity capital could be found would only provide a minimal contribution to the enormous expenditure that was necessary for its

construction.

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Profit must be paid on equity capital if it

if it was to be attractive, at between 20 and 25%, whereas loan finance, if guaranteed by the Bank of China should be available at approximately 8%.

The difference between the expected profit on equity finance and the interest payable on loan finance, say 15% must be added to the cost per unit generated as sent out from the nuclear power station.

Since it was very much to KEC's advantage to produce electricity as cheaply as possible, and to sell it to CLP at the highest price possible, whilst still making it attractive to the purchaser, the greater the difference available to KEC between the cost of generation and the selling price, the more profit the KEC would make.

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Since KEC was itself a Government body, why should they reduce that profit by paying a dividend to outside

shareholders?

have foreign it would be

If, on the other hand, KEC wished to partners in a PRC registered company necessary to form a Hong Kong

Hong Kong registered company (the shares of which would be held by foreign interests) for the purpose of holding the investment in the PRC registered company.

Cont'd

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