TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 204

CONFIDENTIAL

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RECEIVED IN REGISTRY NO. 51

FINANCIAL LIABILITIES RELATING TO THE GUANGDONG NUCLEAR POWERSR4985

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The financial risks relating to the Guangdong Nuclear would entail liabilities of both a commercial and governmental nature.

Most of the risks could be ensured against. Those which might fall to

Governments would need to be met either by the provisions of existing

international conventions, or by special agreements and arrangements to

be negotiated. This paper enumerates the main risks and considers how

best to meet those liabilities which the Hongkong and UK governments might

need to assume.

Delays in the Construction of the Project.

2 These could arise from a variety of causes: delivery delays, faulty

equipment, labour difficulties, etc. As all parties will need to be adequately assured that the project will be completed, they should make normal commercial insurance provisions to this end. The customer will doubtless require a performance bond to be provided by the contractor and

the latter will seek to limit his liability in the event of delays. The

contract should provide for an equitable settlement for termination of the

construction of the project from whatever cause.

3

A fundamental requirement of any support that the ECGD might provide for the financing of the UK element of the project, will be a guarantee of repayment from the Bank of China. It is possible that in recognition of the 40% Hongkong participation in the venture, the Bank of China will seek a counter-guarantee from Hongkong for a proportion of their commitment.

Accidents and Damage at the Site during the Construction Period

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4

During both the construction stage and the commissioning period, up

to the time when the station is handed over to the operator, liability for

any delays, accidents, damage etc on site would rest with the contractor.

In addition, the contractor would be liable for insurance cover for the

storage of fissile nuclear material, which would probably be on site for

about one year prior to commercial operation of the reactor. As this would

be in the PRC, a non-Convention territory, the contractor or the PRC might

look to HMG for support/indemnity.

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