TNAG-2408-FCO40-3502-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-Brit-1992 — Page 72

on a pure cover basis. The current Pre-Contract CIRR for US$ is 7.78% and 10.64% for Sterling. On this basis ECGD's liability would be in the region of US$229.2 (current sterling equivalent £133.6m) for a US$ loan and £143.2m for a Sterling loan. As any support that might be agreed would be on the basis of CIRR rates or pure cover the imputed subsidy will always be zero.

4 The requested cash type "consecutive" cover for the pre credit risks on the financed element of the contract amounts to £80,750,000. In the event that a commitment is issued then under the terms of the recent agreement with Treasury this would be logged at zero under the Amber Zone Budget. Cash type "parallel" cover for the pre credit and credit risks on the non financed element of the contract amounts to £52,250.000. This would be logged against the Amber Zone Budget at the agreed weighting of 25% ie £13,125,000. Finally Bond Risk Cover against the "unfair" calling of the 5% Advance Payment Guarantee and 10% Performance Bond is requested. This amounts to £21,000,000 which would be logged against the Amber Zone Budget at a weighting of 5% ie £1,050,000. No commitment will

will be required in the current financial

year.

5 The Borrower for this project will be the Highways Department of the Hong Kong Government and our indication will be on the basis of the Hong Kong Government acting as either Borrower or Guarantor. As mentioned to you in our letter dated 16 January 1991 in regard to Costain's site preparation for the airport platform, the Hong Kong Government has made it clear that the financing in relation to the overall PADS project must be compatible in the context of the UK/China MOU on PADS.

6 Any indication that we issue in

in respect of this business will stress its highly conditional

highly conditional nature and that support for the market is limited and is only available on a strictly "first come first served" basis. We have been requested to provide an urgent indication of premium rates in order that Trafalgar House can finalise their costings. We should therefore be grateful receive your authority to indicate by 7 April 1992.

7 I am copying this letter to EGC members as below.

Yours sincvely Navey Cance

A C Cowie (Mrs)

Asia Pacific Division

to

CC Mr T Downing

Bank of England

Mr B Seddon

C

ERD FCO

VA73.M3

Mr R Rogers PEP DTI

Mr P Casey

Mr P Rose

Mr G Jones

-

PEP DTI

CCAD ODA

MOD

Mr. D. Seddon,

Economic Relations

Department,

Foreign & Commonwealth

office.