TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 138

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More favourable terms may ultimately have to be conceded in the light of terms proposed by our nuclear island partner or in the event that the appraisal of cash flow projections demonstrates that these are essential to the viability of the profit.

Equity Involvement

The Chinese are reported to be looking for direct equity involvement by the UK and Hong Kong Governments. Until Chinese views are known at first hand it is difficult to assess the signifi- cance of this. However for the Chinese it would no doubt have the attraction of ensuring the political and moral commitment of the UK to the venture. It would also provide a means of influencing the project and preserving the commercial, political and safety interests of the UK and Hong Kong. By the same token it would increase the obligation of the UK to the successful completion and operation of the nuclear station with possibly additional liabilities in the unlikely event of a nuclear accident. Nevertheless officials do not rule out the possibility of an equity stake of the order of $40m.

Liabilities

lays,

The responsibility for meeting the cost of construction accidents to the plant and personnel during the construction and operation of the station would rest with commercial interests. Any UK Government liabilities should be limited (apart from ECGD insurance and fuel provision) to those resulting from a severe nuclear accident. These would be: the probable loss of investment in the operating company; the cost of technically directing the cleaning up operation; and third party liability. There is no compelling logical or legal reason for HMG assuming the last. However, the Guangdong project is essentially a joint venture and the PRC is likely to insist on shared liability as part of the price for preferring equipment and other supplies from the UK. If this price has to be paid, officials consider that the UK should get the PRC to accept that:

a) the operating company should have strict liability

up to an agreed limit UK contractors should not be liable;

b) the PRC Government should accept all residual liability

for damage within the TRC and that in return, no claim would rest against their government in respect of damage in Hong Kong.

The above arrangements would need to be set out in a bilateral agreement between the PRC and the UK.