CONFIDENTIAL
While the contractors will assume certain liabilities as to completion, cost, quality etc there will still be residual liabilities for which the joint venture company will be liable given that the project is not to be proceeded with on a turnkey basis. It could be argued that the PRC should assume such liabilities itself given that the station is to be built on Chinese soil to
Chinese standards and with Chinese labour. In that event the Bank of China
might be asked to provide a 100% guarantee for the loans. The assumption of this element of risk by the PRC could however probably only be accepted if other risks were taken by other parties.
The commitment to purchase electricity under an off take agreement to be entered into by CLP and KEC relies for its implementation on the Hong Kong
Government and the Scheme of Control. The Hong Kong Government might accordingly be asked to underwrite that off take agreement and accept liabilities should it
not be implemented.
Operation failure can never be discounted but could be minimised through the supply of expertise from CEGB and the UKs nuclear partner.
The liabilities in the event of a nuclear accident have been discussed elsewhere
and it has been concluded that:
the UK could supply experts in the event of a nuclear accident
to advise the PRC on the clean-up operation;
the UK might be prepared to accept certain third party liabilities
in Hong Kong provided the PRC accepted similar liabilities in China.
In addition to the sharing of risks and liabilities in the manner noted above,
the UK might also inject value into the project by making available expertise.
All the above matters suggest that if UK and Hong Kong interests are to pursue the equity route the liability for promoters' risks should not be ignored and
therefore the amount contributed should be on a limited basis.
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