TNAG-0950-FCO40-1169-Effect-of-nuclear-exports-to-China-on-Hong-Kong-Guangdong-nu-1980 — Page 50

CONFIDENTIAL

- 2.

considerable concern to the Hong Kong Government and China Light and Power Compnay Ltd (CLP). Sir Lawrence Kadoorie has already told the joint feasibility study that any nuclear station must comply with general UK safety standards. The Governor of Hong Kong is receiving specific advice on safety matters from the UKAEA and this advice in turn will be compatible with that which may be sought from the Nuclear Installations Inspectorate (NII).

Framatone and Westinghouse will thus need to be able to convince the UK and Hong Kong Governments that their designs incorporate acceptable safety features in line with the general recommendations of the NII. Framatone in particular will need to provide assurances that their design pays adequate attention to seismic considerations. Design changes were required by the South African's but there is some doubt as to how far the designs were in the event changed. Given the seismic conditions in South China, there must be no doubt about the French ability to comply on this important aspect.

Contractual Relationships

Although the wishes of the joint client will be paramount, a turnkey project is not preferred by either party. Rather CLP would prefer the form of contractual relationship operating with the UK on the Castle Peak power station project.

Whatever contractual arrangements were decided, the UK would expect to have effective contractual leadership and would wish to lay off certain liabilities in respect of the nuclear island to its nuclear partner. Both Framatone and Westinghouse have expressed a preference for supplying the NS3 but are also will- ing to provide the whole nuclear island. They r accordingly need to clarify how far they need to employ an architect/engineer on their own account and give assurances that they would accept total liability for the nuclear island. They will need to clarify whether they see that responsibility resulting from their accepting joint and several responsibility for the whole project or liabilities as a sub-contractor to GEC but perhaps with a separate contract with the joint client. They will also need to consider how they can accommodate the UKs require- ment for the maximum amount of hardware including the supply of parts of the nuclear island itself. The UK, perhaps in the form of NNC, will be able to offer advice on UK suppliers of repute so as to enable Framatone to retain overall contractual responsibility for the nuclear island.

Fuel Supplies

Over a ten year period, the supply of fuel could be worth up to £220 million. The Chinese are considered to be cautious over entering into long term agreements with, the USA whose continuing political attitude to the PRC is in question. The USA also unilaterally broken off contracts with other countries. One of the basic Chinese principles on the nuclear project is that there should be a secure supply of fuel.

Accordingly, were Westinghouse to supply the nuclear reactor, there would be a good chance for British Nuclear Fuels Ltd to supply as part of the total UK package fuel and reprocessing facilities. ENFL is indeed a Westing- house licensee. Framatone will in turn no doubt wish to supply nuclear fuel and may be unwilling to accept contractual responsibility for the nuclear island unless at least the first fuel charge was supplied. The Framatone attitude on this against the UK's objective will need to be explored.