TNAG-1061-FCO40-1311-The-Kowloon-Canton-Railway-1981 — Page 30

CODE 18-77

173/2 HYGD

MISS KEVILLE ROLFE IDU

LETRO-CALKELL LTD

PKK

R.

1. Minister Res. 19

173 /2

inter

TRED.

དྷརྨཔÚེ

No, Moxa PCO 8/8.

Krolera | Cantin

Minister 1/5

Mr Menzie PS/Mr Baker PS/ Ridley, Mr Benjamin Mr Taylor

Er Palmer

Ir Friston

18

POF

ECGD

Dept o TI**

198.

Mr Butterworth Treasury

My Johnston

རི་ཡ་

Mr

IDU

Willyg/moon

Following our discussion yesterday afternoon with I Priston, I thought it would be helpful for you to have my views of the company's position as assessed following my visit to them on Tuesday of this week.

2. It was agreed that you would send a note of the situation to Mr Tebbit and Mr Priston is to incorporate a reference to Retro-Cammell's problems, in a briefing he is to prepare for Sir Keith Joseph's meeting with ir Norman Fowler, scheduled for 7 September.

3.

Hetro-Cammell have sought assistance on 3 counts:-

i.

They have the opportunity to negotiate a further contract for the supply of railway cars @ a price of £17.5m for the Kowloon-Canton railway (KCR). This is supplemental to and based on the price quoted for a previous contract value £45.4m negotiated in 1978. They have asked for retrospective Cost Escalation Cover in the region of £2/2.5m (estimated net cost to public funds £1.7m taking account of the premium payable). This has been declined by BOGD and although represen、ation has

bee

made to HM Treasury they also initially declined to hel, but subsequently agreed to reconsider this request in the light of requirements under item ii. CEC cover is necessary to achieve a break even position on the

contract.

ii. Metro-Cammell have been the sole suppliers of railway

cars to the Hong Kong Mass Transit Railway System (ITR). They have the opportunity to negotiate a further contract value £55.0m for the supply of cars to the new MTR Island Line. The MTR authority is however insisting that a condition of negotiation with Metro-Cammell is that the price is quoted in Hong Kong . There is no long term forward market in Hong Kong , rendering the arrangement of normal forward cover difficult and also precluding the use of the ECGD Tender to Contract Scheme.

STRICTLY COMMERCIAL IN CONFIDENCE

1

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