TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 240

CONFIDENTIAL

Equity

The nuclear station would be owned 60% by the Guangdong Electricity Company (KEC) and 40% by Hong Kong/UK interests. The equity for the station is likely to be about 10% of total, project costs, making the total HK/UK investment about 160m.(V.S.). The Chinese are apparently anxious to see some equity part- icipation by HMG because of the political significance that would attach to such involvement. The Hong Kong Government have indicated that they might be prepared to make a token investment and a similarly small HIIG participation might be appropriate, although commercial interests in Hong Kong and the UK would subscribe the majority.

Safety and Liability

Safety considerations are obviously of prime importance to CLP, KEC and Hong Kong Government. The UKAEA and NII are therefore rightly devoting substantial effort to this. The degree of liability which it would be appropriate for the HK/UK Government to assume in the event of a nuclear accident is also a key issue to be considered by Ministers given the joint venture nature of this project. Absolute liability could be expected to rest with the plant operators, in this case KEC and CLP, but their respective Governments normally stand behind them in the event of a nuclear accident.

The Commercial Package

GEC is likely to be the main contractor if, as we hope, the UK lands the project. Their preference, quite rightly, is to place total contractual responsibility for the nuclear island on the supplier of the nuclear steam supply system, ie the nuclear core. The most likely contenders for this are Westinghouse and Framatome. Framatome are more likely to be prepared to accept total responsibility than Westinghouse. However, the technical and safety arguments appear to favour Westinghouse.

Credit Terms

Credit is likely to be offered by the countries supplying both the nuclear and conventional islands. We do not want to offer more than the Chinese might expect nor our nuclear island partner offer. Unfortunately neither of those factors is likely to act as much of a constraint since we understand that the French have already offered attractive terms. The credit period necessary will also in part depend on the financial and particularly cash flow projections for the station.

These are an integral part of the feasibility study.

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