TNAG-1059-FCO40-1309-Guangdong-nuclear-power-station-project-1981 — Page 59

CONFIDENTIAL

Disadvantage

there is room to manoeuvre both on the length of credit

and the point at which capitalisation becomes operative

one of the more expensive options which is sensitive

to any fluctuations in the draw-down period.

OPTION 5 UK goods, plus locals, plus capitalisation

Subsidy 54.75% over 12 years and 57.25% over 15 years.

Advantage

Disadvantage

an extremely attractive offer

unacceptably expensive and still sensitive to

fluctuations in the drawdown period (which could take the subsidy element beyond 60%)

since locals were not included in the Hong Kong packages

we would be offering something the Chinese may not

expect and which might therefore set an unwelcome

precedent for ECGD.

RECOMMENDATIONS

1.

Subsidy Element

2. Length of Credit

- That it is recognised the subsidy element (at NPV)

should extend to (but not beyond) 50% at the limits

of negotiation, whatever the elements making up the

subsidy level.

-

That our opening bid should be 12 years but should extend to 15 years if severely pressed in negotiation

so long as the subsidy level does not exceed 50%

3. Capitalisation

4.

Locals

.....

That this should be offered and extend to the

precommissioning stage so long as the subsidy level does not exceed 50%

That locals cover should not be offered