TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 29

&RS770 CONFIDENTIAL

CONFIDENTIAL

HKK1661

18 NOV TORO

DESKBY 171238Z

FM HONG KONG 171125Z NOV 80

TO IMMEDIATE F C O

INFO IMMEDIATE PEKING

I'm

Jit 11

INFO ROUTINE HONG KONG GOVERNMENT OFFICE-LONDON'

TELEGRAM NUMBER 1506 OF 17 NOVEMBER INDEX.

CER

PA

YOUR TEL 1017 (NOT COPIED TO PEKING): GUANGDONG NUCLEAR PROJECT.

WE HAVE DISCUSSED THE QUESTION OF EQUITY WITH DR. MARSHALL, WHILE HE WAS IN CANTON, DR. MARSHALL HAD A LENGTHY TETE A TETE WITH LU YING, A DEPUTY SECRETARY GENERAL OF THE GUANGDONG PROVINCIAL COMMITTEE, AT THE LATTER'S REQUEST. HE WILL NO DOUBT BE REPORTING TO YOU IN FULL ON THIS EXCHANGE. LU'S MESSAGE SEEMS TO BE THAT HE WANTED TO PUSH A UK PACKAGE FOR THE PROJECT PARTICULARLY BECAUSE OF

THE SPECIAL POSITION OF HONG KONG. HE WAS DISAPPOINTED THAT THE UK HAD NOT YET PUT ONE FORWARD.

2. ON A PERSONAL BASIS, MARSHALL FLOATED THE IDEA OF UK EQUITY PARTICIPATION. HE WAS THINKING IN TERMS OF THE FINANCING OF THE PROJECT BEING 90% LOANS AND 10% EQUITY. KEC WOULD HOLD 60% OF THE EQUITY AND BRITISH INTERESTS 40% WHICH WOULD AMOUNT TO £80 MILLION.

3. DR. MARSHALL LATER EXPLAINED TO US THAT HE WAS THINKING OF AEA PUTTING UP MOST OF THE BRITISH CONTRIBUTION TO THE EQUITY. THIS WOULD BE DONE BY USING FUNDS OBTAINED ON A BACK-TO-BACK BASIS FROM

THE SUPPLIERS OF THE GENERATING EQUIPMENT AND OF THE NUCLEAR FUEL. SEPARATELY CLP HAVE TOLD US THEY WOULD BE WILLING TO PUT IN SOME EQUITY AS A SIGN OF GOOD FAITH, BUT BECAUSE OF THEIR SUBSTANTIAL EXPANSION PROGRAMMES IN HONG KONG, WOULD WISH TO LIMIT THIS TO A MAXIMUM OF £8 MILLION.

4. WE SEE CONSIDERABLE ADVANTAGE IN THE MARSHALL PROPOSAL (ON THE ASSUMPTION THAT HMG WOULD FIND IT DIFFICULT TO PUT IN SUCH A SUBSTANTIAL SUM OF EQUITY DIRECT).

(1) IT WOULD BE TIED TO A BRITISH PACKAGE. IN PRACTICE IT WOULD BE ONE OF THE FINAL DETAILS TO BE SETTLED AS PART OF SUCH A PACKAGE ONCE THE FEASIBILITY REPORT HAS BEEN STUDIED AND THE

DECISION TAKEN IN PRINCIPLE TO GO AHEAD.

(11) PARTICIPATION BY AEA WOULD HELP TOWARDS SATISFYING OUR REQUIREMENTS ON SAFETY DURING CONSTRUCTION AND OPERATION OF THE

PLANT,

(111) PARTICIPATION BY CLP SHOULD ENABLE CLP TO HAVE A SIGNIFICANT SAY IN MANAGING AND RUNNING THE POWER STATION. THIS IS

MOST IMPORTANT IF HONG KONG IS TO HAVE A REASONABLY SECURE SUPPLY OF ELECTRICITY. WE DO NOT (RPT NOT) SEE HOW KEC COULD AGREE TO CLP PARTICIPATING IN THIS WAY UNLESS CLP AND BRITISH INTERESTS HAVE AN EQUITY POSITION IN THE PROJECT.

CONFIDENTIAL

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