EXPORT CREDITS GUARANTEE DEPARTMENT
PO Box No 272 Aldermanbury House Aldermanbury London EC2P 2EL
Telex 88360x
Telephone 01-606 6699 ext 331
M Hawtin Esq
HM Treasury
Parliament Street
London SW1P 3AG
Your reference
Our reference
Date
12 October 1981
+ EXPORT
GUARANT
CREDITS
DEPARTM
CHINA:
GUANGDONG
When we met at DoI on Monday 5 October we agreed that it would be useful to hare some assessment of the subsidy cost inherent on supporting the UK bid for this business.
I have not received figures on the possible Westinghouse involvement and have not sought a detailed breakdown from GEC of their probable expenditure profile. Moreover our tables do not readily provide for a carencia so the "authorised" figures below are based on the following assumptions:-
Currency of loan:
Cost of funds:
Rate of Interest:
Sterling 16.5%
72.9% (from 1bill will be 15%)
Drawdown by equal monthly instalments over 8 years.
SUBSIDY ELEMENT AT NPV ASSUMING
Length of Credit UK Goods only UK plus/locals UK only plus
capitalisation
UK plus locals plus
capitalisation
10
12
15
35.84 37.20 38.85
42.16
44.79
52.69
43.76
45.71
46.54 48.55
54.75
57.25
My own best estimate of the affect of an accelerated drawdown on the cost of capitalisation of pre-commissioning interest (assuming in each case a 15 year repayment period) is that drawdown by equal instalments over 6 years would add around 5% to the subsidy cost while drawdown over 5 years might add as much as an additional 7 per cent. In all cases I have assumed that interest would be capitalised up to commissioning. Capitalisation to delivery would obviously be less costly but would remain a relatively expensive option.
R A RANSON
* gup
between time wer drawing centes
+ Lefore repayments
start.
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