TNAG-1059-FCO40-1309-Guangdong-nuclear-power-station-project-1981 — Page 87

CONFIDENTIAL

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Tender to Contract Cover

GEC have not yet asked for TTC, and it is not yet known in which currency

the project will ultimately by financed. ECGD have conformed they will say TTC is available, if approached, (though there are problems with the Bank)

but if an offer letter goes out to GEC without TTC it then because

impossible to negotate it, subsequently.

increase HMG's exposure DoI will now need to consider whether to establish

that GEC are aware of the TTC position.

Whilst not wishing to unnecessarily

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Cost Escalation Cover

This is not an immediate hurdle as it can be taken out by the exporter after

a buyer credit has been issued. However, CEC might not be renewed when it

expires in March 1982. Mr Biffen will. argue in favour of renewal.

Frenek worke

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Bank of China Guarantee

This is perceived as the biggest potential problem on the financial scene. The

Chinese are unwilling to accept virtually all the risk when the project is

planned as a joint venture and the generation of foreign exchange depends on

the sale of electricity to Hong Kong.

resse likely insist ECG) for their part must have 100% backing for any buyer credit arrangement (Ceface?)

~ 100% to

and unless acceptable alternative guarantees can be devised the credit package (and the UK bid) will fall on this issue.

for a

A formal guarantee from the HK Government to take power from Guanyong Xw suitable period of time (to 1997?) and, presumably, within defined pricing

parameters might increase Chinese confidence and thus the proportion of the

guarantee acceptable to the Bank of China. Other guarantees might have to

be offered.

The guarantee question cannot be fully resolved until the partnership arrangements are finalised. ECGD are of the opinion that to attempt to resolve the question in isolation might well unacceptably pre-empt the position

any eventual partner might wish to take.

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