TNAG-1059-FCO40-1309-Guangdong-nuclear-power-station-project-1981 — Page 97

5.

6.

6.1

Report by the Equipment Subcommittee.

It was agreed that the principles laid down in the selection of equipment were sound and that the choice of PWR was correct.

Report by the Economics Subcommittee.

The recommendations in the Feasibility Study Report in respect of equity participation by the two companies in the Joint Venture and the method adopted for the repayment of loans were reviewed and considered to be feasible.

Bank of China Guarantee.

The letter attached to the Feasibility Study Report had mentioned that 100% Bank of China Guarantee would be necessary if the loans as envisaged were to be obtained.

Mr. Chen advised that this stipulation had caused difficulties for the following reason:-

Since 90% of the project was financed with loans, the equity contributed by CLP and GPC would be 4% and 6% respectively. If the Bank of China was now asked to guarantee all 90% of the loan, it would effectively mean that all the risk, except for 4% equity put in by CLP, would have to be borne by China. In other words, for a 60% share in the Joint Venture, China would have to accept 96% of the risks while for 40% of the share, CIP would only have to accept 4% of the risk. It was felt that such an arrangement was not equitable.

The Reviewing Board advised that this was a question of principle and of major importance. If the Bank of China Guarantee was an

absolute requirement, then the project would be unfeasible as this guarantee could not be obtained.

Mr. Chen advised that if CLP could think of ways of overcoming this difficulty, then he would appreciate a letter outlining CLP's solution. From his previous conversation he understood that this would not be a major problem and it was verbally confirmed by the Attache in the British Embassy in Beijing. The Reviewing Board however felt that greater reliance had to be placed on a letter from the Chairman of CLP than on verbal messages,

The Central Government attached a great deal of importance to the letter attached to the Feasibility Study Report as it contained many questions of principles.

He said that CLP's assistance in resolving this matter would help greatly in easing the difficulty caused by the 100% Bank of China Guarantee requirement.