TNAG-2981-FCO40-1473-Guangdong-nuclear-power-station-project-1982 — Page 38

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2/3 YEARS OF OPERATION WHEN THE LOAN BURDEN WOULD BE VERY HEAVY.

TO MEET THIS WORRY, GEC HAVE AGREED TO CONSIDER AN EXTENSION (TIME)

TO THEIR NORMAL PERFORMANCE GUARANTEE.

3. ONE FURTHER POINT OF SOME INTEREST WAS THE CHINESE VIEW

EXPRESSED IN THE TECHNICAL DISCUSSIONS WAS THAT THE WHOLE

TRANSMISSION LINE FROM THE STATION TO HONG KONG SHOULD BE THE SOLE

RESPONSIBILITY OF CLP. ON FUEL, THE MINISTER NOTED OUR REQUEST THAT

BNFL SHOULD BE CONSIDERED AS A SECOND SOURCE SUPPLIER OF RE-LOADS.

WHEN WE SUGGESTED THAT CO-OPERATION BETWEEN CHINA AND BNFL ON FUEL

SERVICES MIGH BE CONSIDERED, THE MINISTER SAID (WITH A SMILE) HE

WAS PARTICULARLY INTERESTED IN THE UK'S CENTRIFUGE PROCESS. I SIMPLY

TOOK NOTE.

FINANCING

4. AS EXPECTED, THE CHINESE ASKED FOR AID TO REDUCE THE EFFECTIVE

INTEREST RATE ON THE LOANS, AND CAPITALISATION OF INTEREST. WE

EXPLAINED THAT AID HAD BEEN CONSIDERED BUT WAS NOT POSSIBLE BECAUSE

OF THE UK'S INTERNATIONAL OBLIGATIONS NOT TO OFFER AID ON NUCLEAR

PROJECTS. ON CAPITALISATION WE MADE PLAIN THAT WE KNEW WHAT THE

FRENCH HAD OFFERED (SUPPORT FOR LOCAL COSTS UP TO 15 PER CENT OF

FRENCH PROJECT CONTENT OR THE EQUIVALENT HELP FOR (PARTIAL)

CAPITALISATION. BOTH MINISTERS AND OFFICIALS SAID THAT CONSIDERATION

WAS BEING GIVEN TO CAPITALISATION BUT DECISIONS WOULD DEPEND ON THE

SHAPE OF THE TOTAL PROJECT I.E. WHETHER GEC SECURED THE WHOLE OF THE

CONVENTIONAL ISLAND PROJECT. THE MINISTER APPEARED CONTENT WITH

THIS RESPONSE.

EQUITY

5. THE MINISTER RAISED ON A NUMBER OF OCCASIONS CHINA'S CONCERN

THAT CLP'S WISH TO REDUCE ITS SHAREHOLDING FROM 40 PER CENT TO 10

PER CENT (WITH THE CONSEQUENT REDUCTION IN CLP'S LIABILITIES) WAS

AN INDICATION OF A LACK OF CONFIDENCE IN HONG KONG IN THE PROJECT.

DESPITE REPEATING OUR ARGUMENTS ABOUT THE ROOM FOR FLEXIBLE

INTERPRETATION OF CHINESE LEGISLATION, LI PENG REITERATED THE

REQUIREMENT UNDER CHINESE JOINT VENTURE LAW FOR A 25 PER CENT

FOREIGN SHAREHOLDING IN THE PROJECT. THE MINISTER SAID THAT PROVIDED

A 25 PER CENT FOREIGN SHAREHOLDING COULD BE ORGANISED,

TOGETHER WITH A SATISFACTORY OFF-TAKE AGREEMENT, THE BANK OF CHINA

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