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(ii) The stipulation that there should be no change of the parentage of companies during the life of the contract will present no difficulty for large groups such as the Japanese trading houses. But they could be difficult for some British companies eg. Beazer, now owned by Lord
Hanson.
6.
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We shall not know until bids are opened how they have been affected by these factors. It may be that the bids received will contain a substantial margin to protect companies from the many contingencies that may arise over the period of the contract that is what one would expect as normal practice. The Hong Kong Government are prepared to live with that. Some consortia may put in non-compliant bids, as well as compliant ones, to give HKG the chance to change tack if the price tag was too high. A non-compliant bid might, for example allow a company to submit a much lower tender, with suitable escalation clauses to share the risks more equally with HKG. But this approach has difficulties, and it is by no means certain that Trafalgar
House will do this.
Financing
7. There are two issues here: whether the banks will be
prepared to lend the sums involved in the present world financial climate: and whether there will be problems in lending for periods beyond 1997, for political reasons. The Hong Kong telegram points out that offers of finance are not
compulsory (though these have been strongly encouraged). They also say that they have indications that banks are willing to lend post-1997. HMG can play a crucial role here. We know that some of the national credit agencies are hesitating to commit the large amount of cover required. ECGD cover is made available for these projects, thereby demonstrating HMG's backing, this should encourage other
CHAAFT/3
If
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