TNAG-1059-FCO40-1309-Guangdong-nuclear-power-station-project-1981 — Page 150

MON

CONFIDENTIAL

GUANGDONG NUCLEAR POWER STATION PROJECT

EQUITY

1. BACKGROUND

The feasibility report, prepared jointly by the Guangdong Power Company (GPC) and China Light and Power (CLP) with substantial help from the UK, proposes the establishment of a joint venture company with assets of some 10% of the projected total station cost. The equity would be split as to 60% KEC and

40% CLP. The 40% to be injected by CLP interests would be handled through

a Hong Kong Nuclear Investment Company (HKNIC) and the equity that it is

proposed to be raised by such a company is some 4% of total estimated outturn projects costs, ie some US 160 million.

It is currently proposed that the equity be injected over the years 1982-88 and that dividends of 25% be earned on the equity over that time, ie before the

station became operational and generating revenue itself. Interest would be paid at 25% on the total equity involved with the equity being repaid after

twenty years when the station ownership would revert totally to KEC.

Equity has become an important factor in the project but the meaning and

implications attached to it by the Chinese are uncertain. It could for example

be a:-

1) means of finance

2) symbol of commitment

3)

method of proportioning risks and obligations.

Some of the attractions to the Chinese of equity being provided by the foreign

partners may be that it would:

a)

show evidence of the partners' political and moral commitment to

the project;

5)

provide partners of experience to share the promoters' risks:

Page 150Page 151