TNAG-2409-FCO40-3503-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-Brit-1992 — Page 182

061247Z

REFERRED HKD//HD FOR DIST ADVICE (SUGGESTED AS REFTEL) LNMDAN 7730

CONFIDENTIAL

HMLNAN 7552

DD 06113OZ FCOLN

FM HKJLG TO FCOLN

06100OZ MY

GRS 424

CONFIDENTIAL

FM UKREP JLG HONG KONG

TO DESKBY 06113OZ FCO TELNO 198

OF 06100OZ MAY 92

INFO IMMEDIATE PEKING, HONG KONG

HKA 182/3

H. stor.

ne to metai 615-

W113

W

615-

PERSONAL FOR RICKETTS, HKD

YOUR TELNO 736: LANTAU FIXED CROSSING

Mr Rick の

Mr Store

1. THE SECRETARY FOR TREASURY BRIEFED HU HOUCHENG AND OTHERS ON THE CHINESE SIDE OF THE AIRPORT COMMITTEE ON 5 MAY ON THE HKG'S DECISION TO AWARD THE LANTAU FIXED CROSSING CONTRACT TO THE ANGLO- JAPANESE CONSORTIUM. PAUL (UKREP JLG) WAS ALSO PRESENT.

2. WE ARE FAXING TO YOU A COPY OF THIS SPEAKING NOTE, WHICH HE HANDED TO THE CHINESE SIDE.

3=

IN RESPONSE HU ASKED THE FOLLOWING QUESTIONS:

(A) HE HAD NOTED THAT HYUNDAI HAD BEEN RULED OUT BECAUSE OF THEIR UNSOUND FINANCIAL POSITION. THE HKG HAD ASKED HYUNDAI TO PROVIDE A HK DOLLARS 90 MILLION CONTRACT GUARANTEE AND A HK DOLLARS 330 MILLION RISK GUARANTEE. HAD THE OTHER COMPETING COMPANIES BEEN SUBJECTED TO THE SAME CONDITIONS? K Y YEUNG EXPLAINED THAT THEY HAD NOT, BECAUSE UNLIKE HYUNDAI, THEY HAD BEEN ABLE TO MEET HKG'S STANDARD REQUIREMENT FOR WORKING CAPITAL AND EMPLOYED CAPITAL.

(B) HE NOTED THAT IT HAD BEEN ASSESSED THAT THE PROBABILITY OF HYUNDAI COMPLETING THE PROJECT ON TIME WAS 65%. WHAT WERE THE CORRESPONDING FIGURES FOR THE ANGLO-JAPANESE AND FRENCH CONSORTIA? KY YEUNG REPLIED THAT THE PROBABILITY WAS ASSESSED AT 80-85 PERCENT AND 75-80 PERCENT RESPECTIVELY. THE FIGURE OF 100 PERCENT WAS UNATTAINABLE BECAUSE NO CONSORTIUM COULD MAKE PROVISION FOR THE

UNEXPECTED.

Pu

altached

(C) HU ASKED HOW THE HKG WOULD DEAL WITH THE 15-20 PERCENT POSSIBILITY OF LATE COMPLETION. K Y YEUNG EXPLAINED THAT THERE WOULD BE A PERFORMANCE BOND FROM THE COMPANY OF 10 PERCENT OF THE CONTRACT VALUE: THE PERFORMANCE OF THE COMPANY WOULD BE CONTINUOUSLY MONITORED TO ENSURE IT KEPT ON SCHEDULE: THE CONTRACT PROVIDED FOR HEAVY LIQUIDATED DAMAGES IN THE EVENT OF NON DELIVERY: AND THE HKG HAD TAKEN OUT INSURANCE TO COVER GOVERNMENT LIABILITIES ARISING FROM DELAY.

(D) HU ASKED IF THE HKG HAD TRIED TO GET THE ANGLO-JAPANESE CONSORTIUM OR THE FRENCH LED CONSORTIUM TO REDUCE ITS PRICE? K Y YEUNG SAID THAT ONLY HYUNDAI HAD REVISED ITS PRICE (UPWARDS). OTHER TWO COMPANYIES PRICES HAD NOT CHANGED.

THE

4. CONCLUDING, PAUL ASKED IF IT WAS THE CASE THAT THE ANGLO- JAPANESE CONSORTIUM HAD THE EDGE OVER THE FRENCH CONSORTIUM ON PRICE, TECHNICAL ABILITY AND PROBABILITY OF TIMELY COMPLETION. K Y