TNAG-1059-FCO40-1309-Guangdong-nuclear-power-station-project-1981 — Page 41

12

CONFIDENTIAL

Add 4% to all figures for six year drawdown over 8 year construction period

Advantage

an extremely attractive offer

Disadvantage

unacceptably expensive and still sensitive to fluctuations in the draw-

down period (which could take the subsidy element beyond 60%).

See Recommendation 9.

RECOMMENDATIONS

1

That a negotiated contract be offered for this project.

2

Rate of Interest

short-term)

3

4

that if called to negotiate prior to end-1981 we should

offer an interest rate of 73%. A decision on this question

is urgent. The new Consensus rates become effective on

16 November 1981 and if this recommendation is to be

endorsed a decision needs to be taken no later than 11

November to allow for the ECGD offer letter to GEC to

be prepared, underwritten and despatched. The decision

should be taken in conjunction with the other elements

of the credit package and the selection of package options.

Rate of Interest

(longer term)

that if called to negotiate after end-1982 we should offer

an interest rate of 10% (the new Consensus rate operative

from 16 November 1981).

Rate of Interest

(relationship with length

of credit and capitalization)

relationship with the length of credit and capitalisation.

that any concessions on the length of credit and on

capitalisation should not be counterbalanced by upward

adjustment of interest rates.

CONFIDENTIAL