TNAG-2413-FCO40-3515-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-fina-1992 — Page 195

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Peter F Ricketts Esq

Hong Kong Department FCO

CONFIDENTIAL AND PERSONAL

Mr Sox

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Dear Peter,

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AIRPORT FINANCING

43 M Broadbent,

Ora Adv.

RIEU ET

Office of the

British Senior Representative

M. Barns

Sino-British Joint Liaison Group

HKAanuary 1992

12 MAR 1992

Some aminous points here. You might live to probe Mh Alle at lunch

Bebetts 6/2

1. Raphael Hui told me on 24 January that the HKG had suffered a setback on the financing of the airport. It had now emerged from the Provisional Airport Authority's financial proposals (ie the PAA's Business Plan) that financing arrangements akin to those envisaged for the MTRC and the airport railway would now be necessary: ie, there would be post-1997 obligations for the Hong Kong SAR and full consultations with the Chinese would be required.

2. According to Raphael Hui, the main features of the PAA's financing proposals were:

an increase in the overall cost of the airport

construction (amount not specified);

a reduction in the HKG's direct equity injection; but

an increase in the provision of callable equity, some of which would extend beyond 1997; and

government guarantees in the event of serious delays in the construction timetable.

3.

Raphael Hui said that he hoped that the broad lines of the financial package would be ready by the end of March/early April; but the final detailed agreement between the HKG and the PAA would not be ready until June/July. Consideration would

therefore need to be given as to how and when to begin consulting the Chinese on the package.

4.

We

I urged that this should happen as soon as practicable. should discuss the outline with the Chinese in general terms at an early stage, making it clear that the final details would take longer. If we delayed an approach to the Chinese until we certain of the details of the agreement, ie, much later in the year, substantial delay would be inevitable. Raphael Hui took the point and said that he agreed with this approach.

/ 5.

CONFIDENTIAL AND PERSONAL

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