The Rt. Hon. Peter Lilley
Secretary of State for Trade and Industry
HKD
CONFIDENTIAL
APS
PS//word Caithness SiJ. Coles
165)
Stephen Wall Esq
Private Secretary to the Prime Minister 10 Downing Street LONDON
SW1A 2AA
29 November 1991
Dear Goplen,
1. CC
(immediate
>
Mr Seater, FED
2. Westone
AM 2/12
MRums
ms
ERD
Sydow 29/11
A couple of new points-
good stuff.
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3. M-F
HONG KONG AIRPORT PROJECT
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in
थं 2/x
LANTAU FIXED CROSSING CHINA
SHAJIAO C POWER STATION PROJECT
Department of Trade and Industry
Ashdown House 123 Victoria Street London SW1E 6RB
Direct line 071-215 4440
DTI Enquiries 071-215 5000
My Secretary of State has seen Nicholas Holgate's letter of 21 November to you about ECGD cover for the above projects. He is very concerned about a number of the points in this letter not least since indications could be given on both these cases without breaching any of the PMS guidelines.
The Secretary of State minuted the Prime Minister on 20 November strongly supporting an indication of ECGD cover for the Lantau Fixed Crossing. Whilst the compromise suggested by the Chief Secretary would permit ECGD to issue such an indication the condition, linking it with the Shajiao C power station in China is not acceptable. My Secretary of State has seen the Foreign Secretary's letter to the Prime Minister of 26 November in which the Foreign Secretary also objects to this linkage.
ECGD indications of cover on both these projects were discussed at the Export Guarantees Committee (EGC) meeting on 19 November and none of the other Departments represented were able to agree to the "package" proposed by the Treasury which would involve effectively refusing to indicate support for Shajiao since, as Treasury officials know, it is far from certain whether a finance structure involving a Borrower outside China eg Japan or Singapore, will prove possible or acceptable to the buyer (a Joint Venture between Hopewell Holdings of Hong Kong and the Guangdong General Power Company). The exporter, GEC Alsthom (GECA), is reported to be in a strong position against competition from Sweden and Japan but success will depend on the financial package which can be put together and should GECA fail at least to include a financing option based on Chinese risk, their chances will be
CONFIDENTIAL
dti
the department for Enterprise
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